Discover the disruptive forces within a changing global economic culture that have presented the perfect storm for boutique studios. Learn what market forces contribute to the innovation and success of boutiques. Find ten practical strategies to leverage the power of boutiques in traditional settings.
The following is a summarization of an education session from the 2016 IHRSA Convention, produced with full permission from IHRSA. The full-length video is available for purchase at ihrsastore.com.
About the Speaker
Stephen Tharrett and Mark Williamson are co-founders and principals of Club Intel.
Convergence of Market Forces Create the Perfect Storm
It goes without saying that the world is changing faster than we’ve ever witnessed before. Economists refer to this period as the Fourth Industrial Revolution, a time of “profound creative destruction.” This is a term originally coined by Joseph Schumpeter in the 1940s, who believed, “The process of creative destruction is the essential fact of capitalism.”
Creative destruction is innovation and disruption brought together to affect change. And today, it is happening more quickly within industries and to business models. Companies forced to adjust rapidly to these dynamics are either thriving or succumbing to the storm brought on by creative destruction.
Boutiques have discovered how to leverage this Fourth Industrial Revolution. Is your fitness business ready to take on the storm?
Five Market Forces Shaping Consumer Behavior
- Internet of Things – We hear more and more about the IOT, Internet of Things. What is it? Simply, it is functional human connection with equipment and devises through the “cloud”. Or, all things “smart” – smart devices for our homes, our cars, and our health and fitness. Classpass is part of the Internet of things; it a smart app that connects people to their lives. Boutiques are doing a better job of leveraging the IOT than the traditional fitness industry.
- Sharing Economy – We are part of a dynamic change in how we conduct business. The two traditional business models are Business-to-Consumer (companies who manufacture to or retailers who sell to customers) and Business-to-Business (businesses selling to other businesses). The new Sharing Economy creates a third model, Consumer-to-Consumer. A peer-to-peer exchange of goods and services, it began with Craigslist and today we have Airbnb, Uber, and Lyft, to name only a few. Boutiques take advantage of the sharing economy.
- Crowd Sourcing – The greatest barrier to enter for any business is having the capital to start and the capital to stay in business. Traditional avenues of financing for entrepreneurs and business owners are SBA loans, friends and family, or venture capital. Through crowd sourcing those avenues are expanded. The “crowd” is over 7 billion people, where entrepreneurs can find people passionate about their vision to help fund their cause. Examples of crowd sourcing include Kickstarter and GoFundMe. Equity funding companies, which arrange investments, also offer boutiques the chance to get capital easily.
- Tribal Consumerism – Chris Anderson in his book Long Tails said, “We’re no longer in a capitalistic society, but a mass of tribes.” It’s not simply the function of putting out a product or service that appeals to the average consumer. But rather, creating a product that appeals to a group of like-minded individuals, a tribe. Can you find the tribe, build the tribe, and create products and services for the tribe? Do you appeal to a tribe? Are you a CrossFitter that can speak about the WOD? Are you the cult of LuLu? Tribal consumerism is in the DNA of Boutiques.
- Craft Consumerism – It emerged with the creation of craft beers. Once less than one-half of 1% of the market, craft beers now own 12%. The phenomenon of craft consumerism is that it creates products for tribes and not the masses. Craft describes the characteristics of local, authentic, real. It reflects a company that is relatable; a company who cares about people. This market force drives the boutiques.
The Millennial Effect
42% of fitness consumers go to boutiques. Boutique fitness studio clients spend nearly $1 billion more on a monthly basis than spent on traditional fitness clubs and multipurpose facilities. Boutique studio users seek multiple experiences. 77% of boutique participants attend another studio or are also members of a club. It isn’t that they are not loyal, but they want to align with their different personal life experiences. They are loyal to what is of value to their life.
The success of boutiques is driven by millennials. The term “millennial” is not just about a demographic group, but a mindset. It’s a lifestyle. It is considered a psychographic and not particularly a demographic. As described by Club Intel, the millennial effect is “The conscious desire to have their brand experience align with their lifestyle value.”
Psychographics of Boutique Users
- Seek Inspiration and Adventure
- Uniqueness and Novelty
- Authenticity and Transparency
- Crave a Tribe, not just a Community
- Covet a Local Feel
The List of Ten Disruptive Forces
Here are 10 themes which play a role in the success of boutiques and leverage creative destruction.
- Specialize – Create an expertise by focusing on one form of workout. This is seen in the multitude of studios which offer one discipline, e.g. barre, trampoline fitness, Pilates, CrossFit, etc. A complete singular dedication motivates interest, appeal, and an attraction to an expertise.
- Offer an Ideology to Foster Tribes – Studio owners promote certain values or ideology that persuades or influences like-minded individuals and gathers them together. This is essential to create the bond or relationship between members. This builds the tribe within and around your studio and is a large factor in member retention. Develop activities that perpetuate member-to-member relationships, such as challenges, in social media, with events, or fundraising for a worthy cause. Create a private Facebook page group only for your members where they can share their experiences.
- Customer-Centric and Results-Driven Coaching – Boutique members are uniquely cared for. They are never left alone within the boutique environment. Make the effort to know each individual member. What are their fitness goals? Demonstrate your accountability. Work closely with members and make sure they know you recognize the importance of their contribution.
- Local Leverage – Boutiques master familiarity, which translates to authenticity. Studio owners know their members, address them by name, and relate to their personal story. Studio owners go outside of the gym walls and “show up” in the community to lend support. These actions in turn breed trust. Familiarity and trust create the emotional loyalty and build retention back into the gym.
- Real-Time Convenience – Boutique owners look for ways to simplify and make use of their studios easy with the goal of trying to lessen a person’s time commitment. People want to get in, work out, and be on their way. Provide the convenience and mobility for class sign-ups or cancellations online. Maintain continuity in class schedules. Save people time from having to always check to make sure a certain class is offered at a given time.
- Have an Iconic Leader – Behind any boutique you’ll find an individual who’s sought to communicate a compelling story – a narrative perhaps of their accomplishments, certainly a workout protocol. And, they’ve built their business around this story. What effect does this have? It’s aspirational. It motivates people and they become inspired by the boutique’s story, its programming, and its message.
- Agile and Quick—Boutiques can act, and often do, to implement programs or changes which capture the momentum of trends. Studios have the capability to quickly respond and build a program within two to three weeks once they spot a trend, whereas most big box gyms or clubs take a longer time to react, or they may not even identify a trend soon enough to take advantage. It is critical that you, as well as your staff, are constantly scanning the marketplace to recognize trends and quickly act upon them.
- Intuitive and Fun – Studios pride themselves on their creativity and fun factor. They want what they offer to participants to not only have a novel appeal, but offer a light-heartedness, an escape from the world outside their walls. Think about how to create an element of fun in and around your experience.
- Ease of Market Entry—Boutique studios have relatively lower startup costs than do traditional gyms and fitness facilities. Therefore, it is easier to enter the marketplace. You’ll often find studios tucked away in strip malls and near small commercial centers. Boutiques are not equipment-intense and are on average around 3,500 square feet. They are, though, more people- and technology-driven.
- Pricing – The key to boutique pricing is not specifically the cost, but transparency and customer-friendliness. Pricing is straight forward and people can easily access prices on a studio’s website.
5 Essential Takeaways
- Find and cultivate a specialty. Determine what your company does best. Know what your customers want most. Then focus on where these two areas converge. This will define your specialty.
- Think and act with a tribal mentality. Live by a mantra. What refrain best describes your tribe? Create a brand and presence around this distinction and use the platform to spread the word.
- Engage the right people who generate a sense of ownership.
- Respond quickly to innovate. Your facilities should swiftly jump on opportunities. Foster a team of trend watchers. Empower staff to look for trends outside the fitness industry, in coffee shops, stores, restaurants, and on websites.
- Lead, don’t follow.