Industry: Survival of the fittest

This article first appeared in Enterprise, The Edge Malaysia Weekly, on July 13, 2020 - July 19, 2020.
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Boutique gyms and yoga studios have become popular in Malaysia, especially in the Klang Valley, where many seek personalised classes.

The services range from specialised gyms for boxing and spinning (cycling on a stationary bicycle indoors) to those that focus on yoga and Pilates. Prior to this, it was common for Malaysians to join commercial gym chains.

However, the growth of these boutique gyms and yoga studios has been impacted by the stringent measures taken to contain the Covid-19 pandemic. As the gyms and studios stayed shut for almost three months during the Movement Control Order (MCO) period, their owners have had to adapt quickly to survive. Most of them started offering free classes on social media.

“Initially, everyone was a bit naive, thinking that the MCO would be for just two weeks. But before we knew it, three months had gone by. While we were shut down, we were still incurring expenses but did not have any revenue,” says Tiffany Yow, founder of The Flow Studio, a yoga and Pilates studio in Bangsar.

“Some boutique studios, like us, are not in a mall. A lot of private property landlords did not provide tenants with the same degree of rent relief as public-listed or government-linked corporations. In that sense, it was tough for boutique studios. We tried very hard not to cut the salaries of our management and staff. So, we turned into a virtual studio and that has involved more work.”

As the MCO period was extended, the gyms and studios began to build their own online platforms and started charging for online classes. This was done either through live online classes or on-demand video classes via a website, app or Zoom.






“We did not have an online platform prior to the MCO. But all we heard during that period was that gyms must move online. This was new for Malaysian fitness players,” says Carlos Villa, founder of Union Strength, a boutique gym in Hartamas Shopping Centre.

“Within two weeks, we put together Union Go, an online platform that you can access using a browser. It has more than 100 workout videos and tutorials.”

Fortunately for Villa, he already had pre-recorded workout videos. The gym posted some of these on social media for its members. “But it did not really take off at that time,” he says.

So far, the response has been good for these gyms and studios, with many of their live online classes meeting full capacity. But for many, the in-studio experience is part of their unique selling point. The lighting, music and personalised attention of instructors is crucial to the experience.

Were the business owners worried about losing this edge when they went online?

“Yes, we are aware that it is a completely different experience. Some of our members do not want to do online classes or shadow box at home,” says Mark Douglas Choo, co-founder and CEO of Tribe Boxing Studio, a boutique boxing gym in Mont’Kiara.

“But [by introducing online classes] we have acquired a lot of new members who had never attended our classes. We also have people joining from Australia, Hong Kong, the UK and other countries. People who have never tried our workout can now do so via live workouts on our online platform.”

Gaining new members from outside the Klang Valley or Malaysia is a benefit that many of the gyms and studios cite as an added advantage of going online. It is also something needed as these businesses are expected to continue experiencing financially tough times.

Although these businesses can now open their doors, they are only allowed to do so at a reduced capacity. Many have had to extend their customers’ packages for another three months to make up for the MCO shutdown period.

“We basically have no new revenue for another three months. The struggle for fitness businesses occurred not just during the closure but after that as well. This means we need to cater for our existing members as well as find new customers to survive,” says Yow.

Low Wai Fun, founder of Bangsar-based Urban Spring Pilates, found the last few months challenging as she had to adapt quickly and set up online classes while maintaining a sense of community among its members.

With the social distancing requirements, the class capacity of the gyms has been reduced by more than 50%. The gyms also have to be cleaned more thoroughly and frequently, which pushes up the cost of operations. These cleaning activities, which need to take place between classes, increase the intervals between classes as well, which means fewer classes per day.

“After such a long break, clients may feel that it is no longer necessary to work out at the studio. They will either find an alternative fitness app to use to work out at home or simply stop their fitness routine. While this is going on, our fixed costs remain unchanged and revenue is minimal,” says Low.

“The funds received [from online classes] were insufficient to cover the operating costs of the studio, but it was our way of engaging with clients and providing our instructors with a source of income.”

 

Are virtual workouts the way to go?

As boutique gyms and yoga studios begin to reopen for business with new standard operating procedures in place, the online services are expected to stay. This is not just for clients who are still uncomfortable about exercising in public but also to chart a new way forward for these businesses.

“This MCO has taught us that whether you are a big or small player in this industry, you should have an online presence. Although the gym brings in most of our revenue, to bulletproof our business, we really need to have online classes as well,” says Villa.

“Even if it provides a small amount of revenue now, it is something I want to grow as it has huge potential. There are very successful businesses elsewhere that only provide online services like Union Go.”

For instance, in the US, it is a growing trend for members to use wearable technology such as heart rate monitors to track their performance as they follow a live workout video from home. One example is Peloton Interactive Inc, which sells spinning bikes and offers users live workout sessions. The company was listed on the Nasdaq in September last year.

“If you can tie tracking devices such as the Fitbit or Apple Watch to your workout, gamify the experience and create a virtual community, that would be something that could create long-term stickiness for an online platform,” says Choo.

Like Peloton’s business model, another trend among gyms is selling equipment to members so they can use it at home. During the MCO period, some boutique gyms and yoga studios have leased spinning bicycles and Pilates reformer machines to their members.

“We want to be able to sell our home boxing bags. People are now shadow boxing at home,” says Choo.

However, the online space can be more competitive for gym operators. “Competition is greater online compared with physical studios, especially as we are located strategically in Jalan Bangkung, Bangsar. Clients can gain access to global classes offered via social media or video conferencing apps, and many local instructors were offering complimentary classes [during the earlier stages of the MCO period],” says Low.

Regardless, these players still believe that physical gyms and studios will remain popular among Malaysians.

“The expensive part of maintaining an online presence is the ongoing cost of hosting videos. We need enough subscribers to sustain this. I think the Malaysian market is still not like the US market, where a lot of people do online classes. Malaysians still prefer the in-class experience,” says Yow.

 

The landscape

Most of the big gyms in Malaysia are owned by corporations. The biggest is probably Evolution Wellness, which owns Celebrity Fitness, CHI Fitness and Fitness First. It also acquired boutique gym FIRE Fitness in recent years. Another big gym chain, Anytime Fitness, came to Malaysia in 2014.

With so many commercial and boutique gyms in the Klang Valley, can these companies survive?

“Back then, there was no such thing as a boutique gym in Kuala Lumpur. Everyone went to commercial gyms. But the demand for having a workout community and getting personalised services was huge [which led to the rise of boutique gyms],” says Villa.

“I think the opportunity for growth is massive. It just goes to show that we are in the early stages [of tapping the fitness industry]. We are also seeing commercial gyms grow. There is space in the market for both kinds of gyms.”

Boutique gyms have been trending in the US over the last few years. According to the International Health, Racquet and Sportsclub Association, membership at boutique studios in the US increased 121% from 2013 to 2017, compared with the 15% growth at traditional studios.

However, there have been concerns about the oversaturation of such brands and whether these companies, which have pricier memberships than traditional gyms, can weather a potential recession.

As competition increases in the Malaysian market, those that offer high-quality and unique services will survive, observes Choo. That is why some boutique gyms are offering limited but specialised services.

“The local market is not that big. In the long term, gyms and brands that are focused on what they do and why they do it will become market leaders, like how we are known for boxing. I think it will be the survival of the fittest,” he says.

Choo and his co-founder started Tribe in 2018, when there were few boxing boutique gyms in the country, much less one that had a heavy focus on music. Tribe offers workouts that allow customers to exercise to the beat of the music.

“We did not even know if it was possible, so we took a chance. Now, it has kind of paid off. We are focused on boxing now, but we may add more stuff in the future,” says Choo. Tribe had plans to open a new studio in Tropicana Gardens Mall this year, but these have been put on hold due to the MCO.

Meanwhile, Yow believes that there is still room for yoga studios to grow in Malaysia. “Many people have turned to yoga as a means of checking in with themselves and relaxing. Mental health is more important now than ever,” she says.

“Yoga is a form of low-impact exercise that is good for your joints and the risk of injury is lower than high-intensity interval training workouts. We were seeing a growing market pre-MCO.

“Our Pilates classes were always packed. Yoga and Pilates have been around for a long time and I think they are here to stay. Now that people can do these at home, there are a lot more opportunities to grow.”

Another growth area is the higher demand for private classes, Yow observes. “A lot of people are coming to the studio for private classes, whether it is for reformer Pilates or yoga. This allows them to focus on their goals and have a workout tailored towards helping them achieve their goals or recover from injuries.”