Interview: Fitness Expert On The Evolution Of The Boutique Gym Experience

Interview: Fitness Expert On The Evolution Of The Boutique Gym Experience
Brand Activation & Immersion

Bryan O'Rourke, a fitness industry veteran and president of the Fitness Industry Technology Council, gives PSFK his inside insight on the explosion of boutique fitness, the technology and diversifying consumer behavior driving it, and how it will continue to transform in the future

  • 6 december 2018

PSFK’s report Boutique Fitness as Personal Lifestyle Ecosystem examines how fitness brands are engaging their consumers’ larger lifestyle needs with innovative services and experiences, primarily through personalization, convenience and community-centric offerings. By integrating mobile apps, artificial intelligence and sensor-enabled technologies into the core fitness experience, as well as offering support outside of the gym, brands are cultivating a holistic fitness and wellness-oriented experience for customers.

As a result, these brands are transforming themselves from fitness providers to holistic lifestyle partners. To support our research, PSFK spoke to Bryan O’Rourke, a fitness expert and president of the Fitness Industry Technology Council, and Board director of the International Health Racquet and Sportsclub Association, on the evolution of the industry and the trends shaping its future.

PSFK:  Let’s start off by talking about fitness industry. How has the fitness experience evolved over the past five years?

Bryan O’Rourke: There’s so much that has evolved, and some things that have stayed the same. Like all consumer industries, one of the big factors is bifurcation of the marketplace when it comes to fitness from a bricks-and-mortar perspective.

What you’ve seen is this split that has been going on for a number of years in fitness, probably a good 15 to 20 years, where you have affluent consumers moving to the higher end club and boutique side, going to higher and higher pricing and luxury. Then you have the budget offerings, a basic experience at a really good value price.

Now that’s from a bricks-and-mortar perspective. Just as an aside, if you look at industry research, what you’ll see is in the early ’80s, you could buy a membership in certain forms for a club in the $30, $4-a-month range, equivalently.

That really hasn’t changed that much from the early ’80s, until just not that long ago. But the cost of operations and construction have gone up over 400% during that time. You’ve seen this bifurcation trend happen in many consumer market places where business models had to realign to be sustainable, given these kinds of dynamics, where the middle of the market is under siege.

Another thing that’s changed a lot is of course the aspect of digitization, and technology providing more and more solutions for consumers to experience fitness in a variety of ways. Think about Peloton, DailyBurn, the Apple watch.

Would you say technology is driving the change, mostly?

It’s not just technology, although that is a big part of it. It is a combination of consumer behaviors that are intertwined with technology. It’s also economics, and some of that is intertwined with tech.

Consumers are diversifying. This dizzying diversity involves age shift and different cultural and behavioral dynamics. The whole millennial construct, which is a very popular construct in research, is really, I think, a big misunderstood dynamic that has to do with consumer change in general, rather than just consumer changes associated with age. Hyper-personalization, convenience, omni-presence—these are all trends impacting all consumers no matter their age or income.

A bigger trend around fitness in the last ten years is fitness really being a status symbol from a consumer perspective, and health as the “wealth dynamic.” This is big even in the boomer market.

A shifting of consumption patterns amongst millennials is a big trend as well—shifting expenditures out of automobiles, out of certain historical purchases like homes, and instead spending on services and experiences. Also, from a mega trend perspective, fitness is really a component of the larger sphere of “betterment.” Some people call it “wellness.”

Things like sleep, meditation, hydration, flexibility—the whole wellness community and marketplace. Those are intertwined dynamics of life quality. You’re going to see new business models addressing these trends. They aren’t purely about fitness alone anymore.

You also see, like in a lot of consumer industries, just a plethora of choices. Because of the digital revolution, because of the bifurcation trend, because of these different new combinations of business models and markets that are emerging now, there is huge surge in the number of available options for consumers. At home, in club, in studio and anywhere via an app, the consumer can experience fitness and betterment in so many new ways.

Given a highly diversified base of users and ways that they can experience things, there is just a broadening of the market overall. Rising tides lift all boats, but at the same time, there’s a tremendously complex marketplace, with a company like GymSharks or Bandier in New York City, which are apparel brands that are really in the fitness industry as well.

There’s that bread and butter that has been around for a while. Then there’s what’s really happening in the market and with customers. There are great opportunities now and increasing risks for legacy fitness businesses.

How would you generally describe today’s modern fitness consumers? What are they seeking?

They’re diversifying quite a bit. There’s dizzying diversity and different cohorts. The popular notions are people seeking experiences more and more. Interestingly research is showing 40% of traditional health club members also attend boutique studios. A large percentage of these same consumers use digital offerings as well.

Basically, you can look at the consumer model. You can look at the delivery model. What are people getting out of this? The facts are that the use of fitness tends aligns with income and education. Affluence is still a big driver. All the stats show that, either psychographic stats or other industry stats . Consumption is highly aligned to disposable income.

When you’re looking at it in a very broad stroke, people with higher incomes work out more. They have the money and time to do it. Most fitness consumers are affluent.

I think a huge growth market is the boomers. Wealth preservation and health preservation are the two key drivers of your life decisions in your mid‑50s to early 60s. Fitness and health solutions are a massive growth market in this segment.

For the millennial marketplace, it’s about self‑expression, about a notion of fitness as a status symbol, about a realignment of what is valued in a brand and experience being an extension of their persona. Community, the tribe, that’s very much a millennial factor.

Putting that aside, I still believe that our concepts of age and generation are being impacted significantly. For example, as a 55‑year‑old man I test as a pure millennial using the Pew Research website. We are seeing female body builders on Instagram in their 70’s. Some of our biases about age and generation are really going to be challenged.

What you’re seeing also is this cross‑pollination of behaviors. The last I saw, the largest cohort of selfie‑takers in Instagram was women at 47.5 years of old age. That was the median.

What you’re also seeing is this shift age‑down shift. As people are getting older, they have more choices to be fit and healthy. Their behaviors are shifting and they are acting much younger than they might have 20 years ago.

Health, wealth and fitness have become forms of status, and self‑actualization. For people who are getting older, health and fitness become a high priority because they want to be well and not feel ill. In the commercial fitness space, those are big components of the drivers for the marketplace. It is going to be a huge area for growth.

How do you see the modern fitness experience integrating into these people’s lifestyles? What role is it playing in their lives?

Health and fitness have become a lifestyle. We have to keep in mind that fitness is really a segment of the bigger market which is betterment. Weight Watchers right now is repositioning around wellness. Healthy is the new skinny.

It’s similar to the food industry where you have people who are foodies. You know New York. You’re doing Vietnamese one time. You’re doing fusion another. It’s like what do you feel like? I think from a fitness perspective, a lot of choice, a lot of different options tied to a sense of self‑expression, and experience are what we are seeing when it comes to a lifestyle.

There are other utility users who just want to get a basic workout in. They’re doing it to keep their weight in check or to be generally well. If you start breaking those cohorts down, there’s a lot of reasons people use fitness solutions in a variety of ways.

Both the delivery point and the experiences are becoming more and more diversified in their offering. You have streaming. You have apps. Still a lot of people work out for the notion of losing weight. That’s very common.

If you’re looking at the super user though, it’s much more like an equivalent of being a foodie where you want to try a lot of different things and experiences. You’re spending a disproportionate amount of money compared to the median. It’s truly a lifestyle dynamic.

Thinking about how people have access to YouTube videos or ondemand live streaming services, what do you think is the appeal of boutique fitness studios? 

Streaming content represents a lot of different things and models. You can stream content through apps. You can stream content on bikes. You could do group classes at home. You can do all kind of things in all kind of ways. I think that again it’s a function of a continuum of options where people participate in different ways.

By the way, when it comes to consumer trends, convenience is a huge driver, because going to a club or even a boutique, there’s a function of convenience in that. You’ve got to get in the car, go somewhere, go in the door, deal with people, then get in the car and go home.

Convenience is a big factor here. As industry information research I’ve seen shows, when it comes to boutique and big-box, fully 30, 40% of the users of boutiques also have a big-box gym membership. You’re seeing this cross‑pollination. Yes, some people go to Walmart to pick their commodity products or they’ll order it over Amazon, yet they’ll go shop at the farmer’s market for their produce. Variety and convenience are substantial influencers over consumer decisions.

It’s this mash‑up of different dynamics of utilitarian versus boutique, this continuum of: where do I need value and what do I perceive as being the thing I’m going to spend more money or experience different ways depending on what I want and what suits me.

What you’re seeing in the dynamic is a very interesting thing as to how these business models actually monetize what they do. There’s a lot to that as well that’s coalesced in all this. If I’m safe to committing to $100 a month with a year contract and then I can stream something over here and I can do a single-day pass over there for one class at a Pilates studio, that’s another aspect of the value paradigm.

I think there are consumers that are experiencing all those things. They’re experiencing digital. They go to a generic club being on a treadmill. Then I’ll go to a boutique every now and then to experience a class. There’s no big commitment to the experience.

Those things all aligned a lot of different industries because of choice, because of the availability of people to do all these things. Class Pass is a platform that took advantage of this dynamic. They’ll mix and match.


Can you identify one strength and one weakness for boutique fitness studios and big-box gyms?

First off, not all boutiques are created the same. People make labels for things because they’re new. Those labels get applied broadly, covering a lot of different delivery options and business models with a term.

By my estimation, many boutiques in the United States are not profitable today. Because they have historically had a lower barrier to entry, it’s an economic dynamic. There is a sustainability issue where I think a lot of folks jumped in and we’ve seen the boutique phenomenon take hold in an era of unprecedented economic expansion over a period of a long time. How long this lasts is a question.

You have to look at what a boutique really is. I’ve called SoulCycle a guru brand of our era for many reasons including their omni-presence delivery and the successes of the female founders. The bottom line is the term boutiques is like the term social media. People use terms for things. Boutique is a bad term. People just don’t know how else to term it. They had to put everything in one room and just label it.

When it comes to “boutiques,” one of the bad aspects from a consumer and competitive perspective is you’re going to do one thing mainly. When people get tired of that thing, there’s really nowhere else to go. You’ve seen this in the restaurant industry, these cool, little very narrow‑minded concepts. The appeal can only be so broad for so long.

If you’re putting all boutiques under an umbrella or category, obviously they’re a force and have been in the market. Their dynamic has had an impact. It’s out there. It’s good. It can be a singular thing. The question is around the shelf life. What is the sustainability for the overall market? They will be around no doubt but I think there will be a period of maturation where some will succeed while other fail.

A positive is the fact that they’re convenient for a customer. They can provide a unique experience or deliver higher customized service at a higher profit. That makes the model very viable, but they’re narrow and they’re a lot of them. That’s a challenge.

In the last couple of years, the cost of real estate, construction, leasing, that’s all gone up substantially. A lot of these boutiques are not dealing in the same financial market that they used to, not the same economic market. Those are simple pros and cons.

Another pro for them is the integration of technology. What SoulCycle did very well is frictionless transactions, very well‑thought‑out app, simplicity in user experience. It’s easier to deliver those things in very defined offerings where you don’t have a lot of complexity and you’re not burdened by legacy. These are some of the general things there that were to their advantage.

In the bigger boxes, there’s a wide variety of bigger boxes. You have Life Time Fitness, a luxury lifestyle brand that is more expensive. Life Time could spend 40 to 60 million dollars on a singular project, they are very robust in both their capital, human capital requirements. Harder to execute in this model. You offer a lot of things. If you’re in the right spot, you’ve got probably a longer shelf life. There is a high barrier to entry.

Other boxes like Planet, which is the largest and fastest growing budget model, there are advantages where they’re going into certain markets. They’re penetrating a lot of seed markets now. They’re staying out of overly competitive markets. They have got a very good model in what they’ve done, very profitable.

Their advantage is low cost, not a lot of labor. Human capital is going to become a bigger and bigger issue in delivering on execution of these things under new models. Very low labor, very low cost so they can get high penetration. The counter to that is that you’re only going to build so many of these things.

At some point, they’re like a Walmart because they’re good at some key things and their economics are strong as a low-cost provider. At some point, you’re a commodity. You’re faced with that dynamic. You have to drive by cutting costs as much as you can. That’s what they’ve done. There’s not a lot of stickiness in the diet chain. Where do they go? You’re a pure commodity. As competition comes in, their power and leverage might be diminished. It might get harder for them to compete but their brand and scale is pretty powerful.

You also have this middle market big box, like Gold’s Gym. They’re trying to offer group and other things. It’s hard to execute and find good people and make money with costs that have gone up so much without a lot of pricing power. Those economic models are really under strain. I think they’re all under some strain in the middle of the market.

Like in all these consumer markets, personalization is big. Hyper‑personalization is big. Facilitating transactions very easily, being convenient, being very strategic. I think content and digitization is a big thing in the way of experience and omnichannel delivery.

You’ll see that SoulCycle just created its own digital division, a whole media division. They’re making a play for content and talent. I think this crosses brands. It’s not a boutique versus big-box anymore when you start doing that. When you look at the Gymshark phenomenon, which is a U.K.‑based apparel brand for millennials, their play is young and they are a hybrid model.

The GymShark founder is a young entrepreneur, it’s $100 million micro‑apparel brand, £100million I think. They have these tiers of models who are their buyer personas and they’re real people. They basically go to a couple guys who are bodybuilder types. One guy was a functional training guy. They’re attractive guys.

You have a couple women. They do their thing. They have very well‑followed Instagram and YouTube channels, each of them. Basically, they’re modeling the apparel when it comes out. They go to pop‑up shows in different spots around the world. They are pursuing brilliant marketing and its about lifestyle.

They are a fitness brand that’s pure digital fitness around these individuals. They happen to sell apparel. They tell stories about how their nutrition’s working, what workouts they’re doing. It’s all life stuff.

I think that arena, like where GymSharks is, this whole new era of digital content entertainment—because a lot of the fitness market as it moves into lifestyle becomes a combination of apparel, nutrition, and beauty. It becomes entertainment. It becomes these things that aren’t really a part of the traditional gym or health club marketplace or delivery system. These new hybrid business models are going to become an increasing part of the fitness lifestyle landscape.

I know that Peloton has its interactive aspect that enables people to feel connected. How do you see the ondemand inhome streaming platforms being able to cultivate the same?

First there’s a broad set of offerings here. It takes many different forms. People are going to love to be in groups in a place. Some of those people are going to like that all the time, the physical in-club experience. Some people are going to like that some of the time. Some people are going to like that none of the time.

By the way, the delivery of group fitness is not all the same either. Some delivery systems are going to be far superior to others. There’s a lot of really bad group delivery out there. We owned one of the largest distributorships featuring. Les Mills in the United States. Our team did this for a decade, so we know a little bit about group fitness.

Again, people put labels on things, but then look at the digital space. The idea of community is great. You know, affinity, personal connection, aspiration, the sense of humanity, the sense of community. These are good things in groups and physical places that offer quality group fitness have an advantage delivering experiences. We will see that extend to the home and on the go in many different ways.

To the extent that people were surprised by Peloton, I think there’s going to be a continuum of experience, some that is purely physical in nature, some that is partially physical in nature, and some that is purely digital in nature, and some that partly digital in nature. I think there’s going to be all kinds of combinations around those, some of which we can’t even fathom at this moment.

I think that people are going to get to choose what they want to choose. Some are going to be satisfied by that and what is available now in programming be it in a club, boutique or at home. It depends on the person. Throw in the notion of convenience, and well different delivery systems will be designed with for different users.

When I go to have certain experiences, be it in a restaurant or be it in a hotel, like the Four Seasons, I don’t want to even deal with a person at times. I check in with my app. I want to get in my room. I don’t want to talk to anybody. I want to get what I want.

Then sometimes I want to be convivial in a group. Again, it’s the era of infinite choice. For some people, they’ll be predisposed to certain deliveries. Other people, other dispositions that will be more relevant to them. What I hear from a lot of folks in the group fitness industry is we that create this experience with people that can’t be replaced by technology.

However, that’s not necessarily true for everyone. t’s not one or the other thing. It’s a combination. It’s this continuum. That’s what all the experiences are going to be. Fitness is no exception.

Just like a lot of places now are broadcasting digital classes in rooms with people that don’t even have an instructor. In some places because they’re spending a lot of money on effects, sounds, smoke, lighting, and music that they deliver a pretty cool experience without even having a human in it. It’s a mash up of physical and digital.

What do you think is the most effective way for consumers to be educated on fitness? Does it have to be in person, or could it be a onetoone, appbased virtual assistant, where expert instructors can educate people? Do you think that that’s effective, just as well as it would be in person?

Yes, I do, and I think digital is going to become more and more effective. I believe in education and had the chance to sit on the American Council of Exercise Advisory Panel. I love the people at ACE, I work with accreditation bodies and our team has worked and trained tens of thousands of fitness professionals through our own company, and we are still doing it today. So we believe in education.

Increasingly, just like the question you had about group fitness, you’re going to see many combinations, through pure digital, partial digital, pure human, and partial human guidance and service of users. Education is information, but it’s also motivation. It’s also accountability. When you talk about coaching, there’s information, and then there’s taking information, and helping people make it actionable.

There’s education in its general form, and then there’s education in the practice of doing it. When you think of fitness, and you construct it in the context of you’re talking about lifestyle management, and you’re talking about the benefits for your general health, it’s how you look and feel.

Few people get to have a trainer like Gary Vaynerchuk follow them around for days on end, and make sure that anything he puts in his mouth is fitting the regimen. When you contextualize that in the sense of business opportunities, I think that there’s a blend of digital and physical, even pure digital, and all physical delivery of education, training, motivation and guidance to help people get results.

I think it’s a combination of all of the above. I think that for the most part, a giant arena will be in digital coaching. I wrote a book on this with other colleagues in Europe, called “Essentials of Motivation and Behavior Change.” The chapter on technology perspective addresses the possibilities of digital coaching for lifestyle change.

The idea that people will have health coaches digitally, not just in theory but in practice, is going to be a real thing. You have all these different apps that are still in their infancy but will continue to evolve to the point that motivation, guidance and education around behavior change will be delivered via digital tools. Taking data, combining it, helping people in these different ways, it’s going to be a very big deal.

How do you see the future of fitness evolving? What do you think will contribute to the boutique fitness bubble bursting?

The future of fitness is terrific and I would keep this statement in mind when considering it: “The greatest products and services in the fitness and betterment industry have not been created yet.”

Like with all consumer industries, there’s going to be tremendous growth in the market with convenience, new business models, experiences, omni-presence, and hyper-personalization being keys. Also the active aging marketplace where health preservation will be so important is going to create a lot of growth with fitness being part of the larger wellness or betterment marketplace. While this is great news a significant number of the existing players sadly won’t participate in that future because they will be challenged to redesign their models to meet the changing consumer.

With the boutiques, they are going to have a place, in general, with different styles of boutiques emerging along with new hybrid models. I do think that the ready availability of capital, the newness of the market, the low barrier to entry, all this led to a rapid expansion that will not be sustained.

I think boutiques are here to stay. They’re going to be a component of the marketplace, but just a segment. Remember the greatest products and service models for the space haven’t been invented yet. There is a lot to look forward to.

Bryan O’Rourke’s insight is just some of the content available on the evolution of the boutique fitness industry. For more information, see PSFK’s report Boutique Fitness As Personal Lifestyle Ecosystem.

PSFK’s report Boutique Fitness as Personal Lifestyle Ecosystem examines how fitness brands are engaging their consumers’ larger lifestyle needs with innovative services and experiences, primarily through personalization, convenience and community-centric offerings. By integrating mobile apps, artificial intelligence and sensor-enabled technologies into the core fitness experience, as well as offering support outside of the gym, brands are cultivating a holistic fitness and wellness-oriented experience for customers.

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+store experience & design

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