Problem: Doing anything from home (working, going to the gym, cooking, etc.) requires specialized equipment that individuals wouldn’t naturally buy. This idea focuses on the problem of gym equipment (the bulkiest).
Solution: One of my resolutions for 2021 is to spend every weekend reading the philosophies and mindsets of those smarter than me through investigating their public letters and private emails. This past weekend, I started with activist investor, Dan Loeb. Loeb is the CEO of Third Point LLC (a hedge fund with $14.8 billion in assets under management). I came across his October 15, 2020 Investor letter and found it fascinating.
During the Third Quarter, Third Point returned 11.7% in the flagship Offshore Fund, putting us back in positive territory for the year [compared to 8.9% for the S&P 500 at the time of publishing]… The behavioral and business changes that surged during the COVID-19 lockdown have, by now, been well-mapped: work (and exercise) from home, online retail, multiplayer gaming, video on demand, online payments, and an explosion in biotech research and drug development… These shifts were only possible due to an exponential increase in broadband capacity, cloud computing infrastructure, artificial intelligence, VOIP communications, rapid semiconductor innovation, cybersecurity hardening, and the collaborative technology and business tools to bring it all together.
You can read the full letter here.
What I find extremely interesting about Loeb’s letter is the focus on not just work from home, but also the need to mention exercise from home as well. Of course home fitness stocks have seen huge returns in this industry (Peleton had 7x growth in 2020), but how could this continue after the pandemic?
This business would focus on turning any gym’s membership and gym’s infrastructure into a Peleton competitor through “From Home” workout packages that are included with regular gym membership. These packages would feature “at home workout equipment” (yoga mats, adjustable weights, monitors, etc.) and the recording and video tools to live broadcast classes to these gym membership subscribers. The true crux of the business wouldn’t be in enablement, but instead would lie in owning this huge content library. Hopefully, this would help the business to grow a replicable, re-sale-able library of information at warp-speed to compete with other companies through using a distributed network.
As usual, here are some interesting statics on the gym membership industry:
Americans spend more than $35 billion per year on gym memberships with more than a fifth belonging to at least one gym. [IHRSA - 2020]
Gyms make an average of $517 dollars per year per gym membership. [Wellness Creative - 2020]
Health club memberships have grown by 28% over the past decade and by 5.5% since 2018 [IHRSA - 2020]
Nearly a quarter of Americans went to a gym in 2019 (24.3%) [IHRSA - 2019]
45.70% of gym members pay less than $30 dollars per month [Finder - 2018]
10.5% of gym members live with someone they met at the gym. [Nuffield Health - 2019]
People who go to the gym are more likely to indulge in chocolate bars than people who don’t [Market Research World]
52.3% of gym members also have their own gym equipment at home. [Finder - 2018]
Among UK millennials, only 19% of gym-goers prefer an annual membership, while 17% only avail of a pay-as-you-go scheme. [Go Cardless]
Of course, the hope of this business would be to never have it’s users “go to the gym again.” Instead, the hope would be to “bring the gym home.” One barrier this business would have to overcome is the space concern: many people have gym memberships not because they enjoy the space of the gym, but because they don’t have space in their homes. This would call for specialized packages based on size and individual user need.
Once the business starts developing specialized packages for different gym clients, the next logical step is to develop specialized packages for every type of “from home” need: Cooking from Home, Working from Home, Reading from Home, Working out From Home, and more.
Monetization: Percentage of sales from gyms for pulling together and reselling these packages to consumers. Gyms would act as a distribution network.
Contributed by: Michael Bervell (Billion Dollar Startup Ideas)