06/10/2010

1

A strategic look at the emergence of the

low-cost gym sector

FIA Seminar October 2010

Ray Algar

www.oxygen-blog.blogspot.com

My perspective

neutral

towards the

sector

MY DEFINITION OF A LOW-COST GYM

MINIMUM OF 50% LOWER

THAN INDUSTRY

PRICE

HEAVY TECHNOLOGY AND WEB USE

GYM-ONLY PROPOSITION

ABILITY TO OPERATE CLUB WITH A SINGLE

PERSON

SCOPE TO OPERATE 24

HOURSMARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

06/10/2010

2

I CareI CareI CareI Care

Consumers now have

considerable experience

of low-cost services

06/10/2010

3

13

“Fly for the price

of a pair of jeans”14

“Spend a little, live a lot”

“More of our shoppers

are using us for their

whole shop instead of

top-up shopping”

Group MD Aldi UK & Ireland

1617

“Look good, pay less”

Think of a sector…you will

find low-cost

06/10/2010

4

300 million units

annually by

2013

“Quality up, cost down

… way down”

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

06/10/2010

5

06/10/2010

6

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

“I can join online – no pushy

sales staff to deal with!”

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

06/10/2010

7

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

SUPPORTING INFRA-

STRUCTURE

40

Word of mouth

on steroids

Word of mouth

on steroids

06/10/2010

8

MARKET

DRIVERS

SIMPLICITY

AFFORDABILITY

CONSUMER SENTIMENT

TOWARDS CLUBS

SPORADICATTENDANCE

CONSUMERS ARECHANGING

INFRA-STRUCTURE

“Why am I paying

for a club I

occasionally use ?”

“Why am I paying

£50 just to use

a treadmill?”

What do low-cost gym

consumers say?

06/10/2010

9

“It is almost free”

“I have never been to a

gym that is £15 before. I

thought I would walk in

and find a lot of

broken equipment”

54

06/10/2010

10

55 56 57

58

06/10/2010

11

61

McFit Financials 2007

Euros

(millions)

% turnover

Turnover 86

Staff costs 3.4 3%

EBITDA 28 32%

Interest charge 0.1 -

Net assets 34

Clubs 88

“Perhaps the biggest

threat we face is that

someone from outside

our sector, with a huge

war chest of cash and

proven customer-centric

business model, will

build 1,000 shiny new

facilities, and offers

budget-busting

membership deals”

Fred Turok, Chairman, FIA

(statement from 2007)

06/10/2010

12

Customer

intimacy

Operational

excellence

Product

leadership

budgetgymresearch.ning.com

oxygen-blog.blogspot.com

Google: “Ray Algar”