POV 18 - (Dis)connected fitness

Connected Fitness

Training hardware such as stationary bikes, treadmills, rowing machines and weight & cable stations have long been the center of home gyms as they enabled exercisers of any performance level, to work out, conveniently, anytime.

The integration of technologies like computer vision and features like virtual coaching elevated outdated analog training hardware to the age of connectivity in which virtual training sessions, personalized & real time feedback and gamification were possible.

Facing Hurdles - Connected fitness companies have multiplied and thrived during lockdown, but many are now struggling to maintain their active user base, revenue and valuation.

Examples abound of companies forced into restructurings, lay-offs, down rounds and bankruptcies. Here are some of the most notable :

• Peloton quick rise to fame, fall(s), pivots and restructuring - amounting to a 97% stock drop since its IPO in 2021.

• Mirror, first bought by LULU as a key to penetrate the digital fitness market, was cut loose at a value worth less than a third of its initial value.

• Shares of Forme, a smart training screen maker, fell by almost 100% since its 2023 IPO.

• Xponential fitness divested from Row House.

• Tonal pivoting from a 300% valuation drop - more below.

• Nautilus, restructuring into BowFlex before filing for bankruptcy.

• Hydrow, once the connected rower figurehead, recently acquired Speede in a move to diversify their offering into strength training.

• Forme acquired Clmbr - the Peloton of climbing machines - to add to its smart cable systems

As observed, aerobic trainers - notably stationary bikes - are among the verticals most affected by such disengagement from at-home fitness.

What went wrong ? - Leaving certain company-specific factors aside, the main factor responsible for the success of the segment - lockdown, which isolated and forced entire populations inside - was temporary, but had a lasting effect on how people now perceive their (free)time & interactions. The majority of remote workers have more free time and scheduling flexibility, have a need to disconnect from screens and are seeking healthy, in-person social connections.

Return to Gyms

Alongside the connected fitness space facing hurdles, gyms & boutique fitness are in the fast lane and have quickly returned to pre-pandemic attendances.

In-gym training has many benefits on both the body and the mind as it brings a stronger sense of accountability and belonging to a community, increases engagement, and is more enjoyable.

See and be seen - In-person training is also not immune to the wave of specialty apparel taking over many sports, which satisfies the need for personality (and brand)-signaling.

Strength training and lifting return en force - Strength training and the importance of building & maintaining muscle mass brought forward by the unfortunate GLP-1 lean-mass loss is one main driver of the return to gyms. The quest to healthspan is also no stranger to strength training popularity, as it is an important pillar of longevity.

Connected Strength flexing its muscles - The strength equipment vertical of the connected fitness space, such as cable stations and smart weights, is not experiencing the same hurdle.

Not only about counting reps - Strength equipment manufacturers like Tonal are taking advantage of the trend and are dedicated to creating an even smarter strength by leveraging AI on their large proprietary database of biometrics tied to strength outcome and are soon to introduce mobility assessments and corrective exercises.

Community

Among the fastest growing sports & activities stand disciplines characterized by common denominators such as being accessible, gender & age equal, being played outdoors, having low-barrier to entry, and fostering a sense of community. Racket sport alternatives like Pickleball and Padel, trail & road running, and gravel biking offer one or a few of these ingredients, but one activity combines them all - Hyrox.

Community fitness - Hyrox perfectly exemplifies the current zeitgeist. Hyrox races put solo contestants, (mixed) doubles or relay against each other over 8 different strength & ballistic exercises interspersed with short 1 km runs. Races are accessible to all fitness and agility levels as movements are safe & easy to learn and rewards athletes of all ages.

Hyrox is experiencing international growth, regularly increasing the number of events, having just unveiled its bound-to-be iconic NYC race and soon awarding its fifth World Championships.

Community wellness - The social and almost spiritual aspects of sauna and ice batch group experiences like Othership and Sweathouz are also largely responsible for their quick growth and branch expansions.

A Silver lining

All is not grim for connected fitness. Companies that will innovate and adapt to the changing dynamics are more likely to thrive.

In our opinion, successful connected fitness platforms will

• find the perfect balance between software experience, hardware quality & feel, and content insightfulness.

• interact with the community and seamlessly capture and distill data.

• consolidate with existing services and elevate their offering.

Connected to communities - Brands are starting to recognize the importance of community. For instance, Tonal revealed a partnership with Spartan to create dedicated training plans and Tonal smart cables are actually becoming one obstacle on the Spartan course. Hydrow connected rowers offering an online Zwift or Strava-like social community and branching-out into in-person events and lakeside retreats reflect how important organic connections will be moving forward.

The reverse synergy is also true. Thriving community events such as Hyrox are also recognizing the benefits of technologies and launched Hyrox365 - their virtual platform, partnered with Fiit, CENTR and Puma for training plans & virtual sessions, weights and apparel. No connected equipment manufacturer has, to our knowledge, entered a partnership with Hyrox or the likes yet. We believe an announcement is imminent.

Connected clubs - If you cannot beat them, join them.

Omnichannel fitness - namely the possibility to have at-home and in-gym training sessions - is still a preferred option for many exercisers, but the weight of in-gym sessions is growing. All the while, connected equipment is becoming commonplace in a wider range of facilities, from premium boutiques to budget gyms, to meet customers’ demand for advanced hardware.

Made-for-gym connected equipment and tailored virtual training sessions are valuable to operators & coaches as effort means to attract and acquire customers and pass on their ethos.

A shift in manufacturers’ main sales channel from B2C to proactively seek partnerships with gyms is underway, as evidenced by GymTech receiving a growing share of Fitness Tech deals in the past quarter.

Connected wellness - As gyms are going beyond aerobics & strength and blur into clinics, connected equipment companies should also consider addressing aspects of motion & gait, recovery routines, nutritional advice - to become all-around-wellness platforms. Connected wellness is expected to grow at a rate that should more than double that of connected fitness in the next 5 years [CG Capital markets - Health, Wellness and Lifestyle Industry Update].

Our Outlook

The future will be challenging for connected fitness, but opportunities should come to companies embracing partnerships and integrating wellness aspects.

We remain open to ongoing innovations and signs of adaptations, but the changing tide emphasizing community events and user data tracking fatigue leaves us skeptical about the long-term growth potential of many connected fitness options.

Meanwhile, we will favor minimally invasive technologies & AI-elevated FaaS compatible with real-life sporting events and more in-tuned with our core investment theses of elevating all aspects of performance and wellness for a broader audience.