What Should be Done about the Fitness Industry in China?

personal fitness trainers giving sessions (source: shutterstock)

If you walk around central business areas in Beijing or Shanghai, you will likely be stopped by the nearby gyms’ hardworking sales team. Or better yet, you might get dragged to a halloween party by a friend, without realizing that it is hosted by a gym club trying to persuade you to sign up for a membership.

The sales team at these gyms are mostly well trained, with the same techniques and verbal tricks, “Today is the last day of the discount. Trust me, you don’t want to miss this opportunity!”

Even if you buy their 2,000 to 3,000 yuan membership card, the sales process does not end. Club employees would immediately cozy up to you. Disguised as personal trainers, they are more often than not salespeople with better pitching tricks. They would constantly stress that exercising without personal guidance would cause irreversible harm to your muscle groups. If they are successful, they will get you to pay for personal training, which usually varies from 300 to 500 yuan per hour.

Setbacks of traditional gyms

According to the Chinese fitness industry report by GymSquare, the average price for the annual membership card around the country is 2,200 yuan for fitness club and 2,933 yuan for studio. In terms of revenue ratio, personal trainers contribute to an average 52.2% of the total revenue for gyms and clubs.

Crystal, founder of a fitness product company called Bodytime who previously worked in the state public health sector said, “In fact, traditional fitness industry used to be prosperous, but has since been plagued with a lot of pre-charge techniques, and viral marketing on membership cards. For instance, recently we see the bankcrupcy of Haosha, and the acquisition of Wales. They are all under massive pressure of stable cash flow. What’s interesting about this industry is that the gyms have a large quantity of advances but limited cash flow. This makes sense because they are highly reliant on membership cards, which means that customers are committed to paying for the length of their membership, but usually just pay monthly. More often than not, when consumers buy a two-year membership card with 5,000 yuan, they treat it as a bathhouse membership.” The implication behind Crystal’s comment is that instead of going to the studios to work out, many Chinese consumers just go to take showers and use their amenities. Bodytime designs fitness apparel that utilizes the method of physiotherapy equipment in the hospital to help for urban white collar workers lose weight.

Not having the right operations model is hurting China’s fitness industry. Unlike in Europe or America where the industry is already rather mature, the penetration rate for Chinese people is still rather low. Apart from first tier cities including Beijing or Shanghai, the penetration rate in most cities is lower than 3%. Compared with an European Health & Fitness Market Report 2019 by Deloitte, the penetration rate in Europe is around 7.8 %.

According to insiders, by taking advantage of consumers who purchase membership cards but likely neglect their fitness goals, many professional salespeople could make as much as 100,000 yuan at one gym in a couple of months. Once successful at one gym, it is common for him or her to jump to another gym. Such a path means that the salespeople are not incentivized to build long-term relationships with the consumer.

Fitness instructors

As seen from the survey in the aforementioned fitness report, fitness instructors make around between 10,000 to 15,000 per month. In major cities, the highest monthly income could reach up to 30,000 yuan. For second and third-tier cities, fitness trainers make between 5,000 to 10,000 yuan.

Tempted by such high income, it is unsurprising that some college students or even white collar workers abandon their office jobs to dedicate themselves into a career of sweat and passion. Lola Lee, a coach at Le time network, a fitness platform founded by one of Alibaba’s former market director, told me she earned about 20,000 a month from personal fitness training sessions. Before that, she was an art student who was applying for master’s programs.

“The problem is that the industry is just too messy right now. Some fitness instructors were originally membership card salespeople, who then think he or she understands it all and is qualified to be a coach. In our recruiting process, I asked the candidates if they have a qualification certificate or any training experience. They often respond by saying, “I am a fitness enthusiast.” However, if you want to be an instructor, at least you should know anatomy, the sequence of muscles and the bones. And as a coach, you need to know about some common injuries while training and some professional stretching methods,” said Crystal. The lack of experience and technical knowledge cannot be solved in a single day.

“In China, fitness trainers could get qualification after only three months of trainings. For inexperienced fitness trainers, customers became guinea pigs for their unprofessionalism. But the threshold of trainers need to be meaningfully elevated and is currently lacking. That’s why celebrities spend a fortune to hire professional personal trainers,” Crystal told me in a worried tone.

Guavapass — a fitness retailer

A rising trend is that more professionals clubs prospered, with more specific categories whether it’s boxing, yoga, barre, salsa dancing clubs.

According to Eric Liu, the Beijing city lead of Guavapass, a platform that provides information on fitness studios and healthy-living experts in Asian Pacific regions. He himself is also a fitness enthusiast. “Yoga seems to be the form of exercise most similar to Chinese culture, and also the most successful category in China. Others categories, such as Crossfit or boxing, has three to five top quality studios in first-tier cities. Consumers are not yet familiar enough with the categories. A lot of people can’t tell the difference between pilates and yoga, or between boxing and jujitsu.”

In 2016, Singapore-based fitness app Guavapass received Series A funding of $5 million from Vickers Venture Partners. In January 2019, GuavaPass was acquired by New York-based competitor ClassPass for $4.2 million. Interestingly, ClassPass founder Payal Kadakia, a dancer, had this idea of building an integration platform because she failed to find a satisfying dancing studio.

The Guavapass model allows fitness newbies to try out different types of fitness activities without being tricked into investing in expensive membership cards. More personalized package choices include two, four, eight or twenty courses, dependent on the users’ needs. Right now, according to Liu, they have partnerships with over 350 studios in Beijing and Shanghai. Travelers could book classes while commuting between Asian cities including Beijing, Shanghai, Hong Kong, Bangkok or Singapore.

“In this sense, we are actually in retail business. We help consumers spend according to their needs, in hopes that everyone uses up the courses they buy. We are not in the business of persuading users to pre-purchase for the whole year and betting that they just wouldn’t show up.”

New types of studios

In the 1980s, Americans are already enthusiastic about group courses. Back then, a majority of Chinese people are still struggling to make a living. Talking about the development of the global fitness industry, Liu said, “There is still a big gap here. Of course, the west have this idea of bodybuilding first. I think the trend in China starts from the 2008 Olympics, during that time going to the gym for exercise is seen as luxury.” It is not until the campaign of Mass Sports Go with the Olympic Games in 2008 that people started to pay attention to bodybuilding.

Liu mentioned one of the top boxing studios in Beijing called JPEG Boxing, rated No.2 on Dianping.com, one of the trusted rating platforms in China, “It is a very modern boxing club. It’s not for professional fighters, but intended for everyday gym-goers who want to feel relaxed and who want to improve their cardiovascular health. It is the kind of trendy and cool club that we like to work with.”

Traditionally, if you talk to a Chinese person about boxing, the image of David Fincher from Fight Club comes to mind. It contradicts the more peaceful and spiritual Chinese way of exercise that is shown in activities like taichi. Yet, the sport is becoming popular among young fashion chasers in China.

Echo He, a 25-year-old white collar worker who recently enjoyed boxing classes said, “Boxing is an intense sport, much more fun than traditional fitness activities such as jogging. In the beginning, I just wanted to lose weight, but later on, I found it super cool. And it’s not easy to learn. I need many more training sessions to really grasp it.”

Liu estimates that in Beijing, 20% or 30% of gyms and clubs have gone bankrupt or are on the way of refining their management model. In order to survive, they do need some new tricks to attract young consumers with peculiar taste.