Deloitte Catalyst | Tel Aviv

Fitness Market Overview Post COVID-19

September 2020
Table of Contents
3 Greetings

4 Global Fitness Industry Overview

5 COVID-19 Impact and Industry Response

6 The Virtual Revolution

7 Israeli Fitness Club Sales Took Massive Hit

9 Summary and Future Outlook of The Fitness Industry

11 Introducing Deloitte Catalyst

12 Report Authors

© 2020 Deloitte Israel & Co. 2

Foreword, Report Contributor:
With an increasing awareness of the importance of a ‘balanced lifestyle’ and the traction that
healthier food and wellness is getting over the last several years, it is not surprising that the global
fitness market is on the rise. In addition to greater awareness, digital platforms, social media and
Omni-channel capabilities also contributed to the worldwide increase in trainees.

As highlighted by this report, 2019 was a record year for the fitness market,
demonstrating a continuous increase in market volume. Unfortunately, the Arbox is an easy-to-use business management
momentum has been greatly affected by the outbreak of COVID-19, which has platform for boutique gyms and fitness studios.
changed the rules of the game in the fitness world. With more than 1 million active users and a
focus on community-based fitness businesses,
This report covers global fitness market trends, with a deep dive into COVID-19 implications and
Arbox is uniquely positioned to collect and
suggestions for the future. Although this “new normal” is still very new, the phenomena of a sector
analyze data on the impact of COVID-19 in order
coming to an almost complete halt, motivated us to address the situation in real time.
to provide key insights into the future of the
The data gathering and analysis for this report was done in collaboration with Arbox, an Israeli fitness industry.
startup active in the fitness market, which serves 40% of the total Israeli fitness market.

We hope you find this analysis interesting and informative, and welcome any feedback, questions
or suggestions.

Stay safe and healthy,

Catalyst Team

© 2020 Deloitte Israel & Co. 3

Global Fitness Industry Overview
Total # of Fitness Clubs
The global fitness and health club industry generates over $90 billion in Worldwide (M)
revenue per year1. The United States is the largest market worldwide, not
225
only in revenue (estimated at $30B) but also in sheer number of gyms and 201.2 202.1
201.1
fitness clubs. 200 186.8
183.9

The growing awareness for a more balanced lifestyle is a major factor 175 165.3
153.6
contributing to the growth of the global fitness market. Consumers are
150
engaging with fitness and wellness companies more than ever before in an 133.7

attempt to adopt healthier lifestyles and build supporting communities. 125

100
Global Fitness Market Overview2 2011 2012 2013 2014 2015 2016 2017 2018

Global Market Size of Health

U.S.A Club Industry ($B)
36%
Rest Of 95 91.77
World
39% 90 87.23
84.32
85 83.22 83.18

80 78.18
75.75
75 72.75
France Germany
3% Japan China UK
7% 70
4% 4% 7% 2011 2012 2013 2014 2015 2016 2017 2018

1Source: Statista.com, 2019, 2Source:Future of Fitness, 2019, Business Insider © 2020 Deloitte Israel & Co. 4
COVID-19 Impact and Industry Response
As gyms, studios and fitness centers became an “immediate suspect” for COVID-19 infection, they were forced to close
abruptly, while adopting new and innovative solutions and processes to survive

Financial Losses & Uncertainty Brick-and-Mortar Vulnerability

Small studio Cancelled/paused Negative cash flow Increased need for Equipment is Larger than
shutdowns memberships hybrid model (online stationery and heavy necessary workforce
+ in-person) in addition to cost of
space

Expanded Online Offerings

Virtual Pre-Booking At-Home

Online classes and streaming Fitness booking mobile Increased popularity for
fitness services applications at-home fitness programs

© 2020 Deloitte Israel & Co. 5

The Virtual Revolution
COVID-19 forced all players in the fitness industry, including boutique gym owners to face a stark decision: adopt virtual training
options or risk having to shutdown permanently. With the rise of online-only players and COVID-19’s role in shattering the myth
that location and facility are irreplaceable, the evolving market features new opportunities to capture the attention and loyalty of
members in an already competitive market.

As the fitness industry pushes through these uncertain times, it is evident that digital transformation has, and will, continue to play
a major role in the future. The collected data shows that companies that have embraced this digital transformation long before this
pandemic have found themselves in a formidable position compared to their competitors who were slower to adopt digital practices.

Additionally, businesses that have offered online classes during the shutdown have been able to withstand the sharp increase in
frozen memberships. Gyms and fitness studios that offered online sessions had 7% fewer frozen memberships than businesses
that didn't offer a virtual alternative.

COVID-19: Public Opinion on In-Person Gym Attendance (April 2020)1 Online Offering Usage Rate (Israel)3
50.0%
80% 68% 38%
37.5%
60%
40% 25.0% 15%
20% 11% 12.5%
9% 9% 2%
1% 2%
0% 0.0%
Much more likely Somewhat more Neither more nor somewhat less Much less likely Don't know/No Before the During the shut- After the 1st
likely less likely likely opinion
Pandemic down shut-down

1Source: Statista.com
2Source: “The $94 billion fitness industry is reinventing itself as Covid-19 spreads”, 2020, CNN Business
© 2020 Deloitte Israel & Co. 6
3Source: Arbox data base, 2020
Case Study: The Israeli Fitness Clubs Market
In Israel, the enforced closures led to a devastating 90-95% decrease in contract value of new subscriptions and renewals; an
enormous hit to the market, resulting in a permanent closure of 5% of all fitness businesses. Similar to other markets, both large
and boutique fitness companies developed new offerings, including online classes and training sessions and renting out their
fitness equipment.

While the pandemic has taken a toll on the “service providers” of the fitness industry, gym and fitness equipment companies have
seen a surge in sales. This increase suggests that the recent isolation has led people to begin at-home physical activity thus explaining
the influx of online equipment orders.

CONTRACT VALUE OF NEW SUBSCRIPTIONS AND RENEWALS

$10,967
( PE R H ALF MONTH IN TH O U S AND S )
$10,565
$9,484

$9,335

$8,237
$8,076

$6,246
$776

$470
$425
1ST HALF 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF 1ST HALF 2ND HALF
JANUARY JANUARY FEBRUARY FEBRUARY MARCH MARCH APRIL APRIL MAY MAY

PRE-COVID19 LOCKDOWN REOPEN

Source: Arbox Data Base, 2020 © 2020 Deloitte Israel & Co. 7
 Case Study: The Israeli Fitness Clubs Market
Customer Reaction
% of Memberships Put on Hold in IL Membership Cancellation Rates in IL
(per 2 weeks) During COVID-19 (Per 2 weeks)

20 4
3.5 Covid-19 Effects
15 3 Begin
2.5

%
10
%

2
1.5
5 1
0.5
0 0
Early Late Early Late Early Late Early Late Early Late Early Late
March March April April May May March March April April May May

Why did membership cancellation rates decrease during COVID-19?

• Customers who attend smaller gyms and fitness clubs have strong connections to their fitness communities and felt a responsibility
to help them survive through this challenging and uncertain time.
• Many fitness clubs managed to adapt and continued training with customers through an online format.

Source: Arbox Data Base, 2020 © 2020 Deloitte Israel & Co. 8
Summary and Future Outlook of the Fitness Industry
There are two key factors separating success and failure when trying to overcome the costly consequences of
COVID-19 in the fitness industry, and during the initial months of the pandemic, three impactful trends emerged.

Fitness businesses based on classes were vastly more successful than equipment-access only gyms

Online presence before and during the shutdown was extremely essential in maintaining memberships and cash flow

Decreased Gym Volume Digital Transformation Innovative Solutions

Number of holds have dropped
significantly, but are still greater
than “normal” times. Many gym
goers will opt for virtual
solutions or a different form of
exercise (e.g., running) that does
not subject an individual to the
same health risks as a gym.
The sector is evolving in the digital
era and developing different ways
for members to stay active
anywhere, anytime. The industry is
experimenting with “digital fitness”
by offering online classes and
incorporating fitness based apps
for at-home exercise.
To stay above competition, fitness
and health clubs must develop
innovative solutions and exercise
models to retain and grow customer
bases. COVID-19 massively disrupted
this industry, but business savvy
clubs can capitalize on this and pave
the way for the future of fitness.

Lower Overhead Expenses Virtual Offerings New Fitness Models

Gyms and boutique studios that proactively adopt new creative ways to retain customers and transition to a more digital fitness
practice are best positioned to succeed moving forward
© 2020 Deloitte Israel & Co. 9
 About Deloitte Catalyst

© 2019 Deloitte Israel & Co.

© 2019 Deloitte Israel & Co.
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 Report Authors

© 2019 Deloitte Israel & Co.

© 2019 Deloitte Israel & Co.
Authors
• In his role as Managing Director, Amit Harel is the
Israeli leader of Deloitte Catalyst Tel Aviv.
• Amit has a vast experience in the fields of Innovation,
Technology and Disruption.
• Amit works closely with top stakeholders,
entrepreneurs and startups in the Israeli eco-system,
building bridges between innovative Israeli technology
companies and global leading organizations.
Amit Harel
Deloitte Catalyst
aharel@deloitte.co.il
• Ariel Fox (CPA) leads the Food-Tech, Agri-Tech and
Sports-Tech domains in Deloitte Catalyst Tel Aviv.
• Ariel has five years of experience in marketing and
business development in the Sports business sector,
including as a business development manager for the
biggest sports channel in Israel.
• Prior to joining Deloitte, Ariel worked in the Start-ups
audit department of PwC Israel.
Ariel Fox
Deloitte Catalyst
arfox@deloitte.co.il
• Michal Tagrin (Adv. And CPA ) leads the growth-stage
startups team for the Deloitte Catalyst Tel Aviv.
• Michal is also a senior manager with Deloitte's
Financial Advisory Services practice, where she
provides M&A transaction services to clients.
• Prior to joining Deloitte, Michal worked in the M&A
department of S. Horowitz& Co., Advocates, one of
Israel leading law firms.
Michal Tagrin
Deloitte Catalyst
mtagrin@deloitte.co.il
• Alen Debensason - Co-Founder & CEO at Arbox.
• As a former soccer player and a founder in Arbox, Alen
has years of experience in fields of fitness, sport,
business, and everything in between.
• Before founding Arbox, Alen has been working as a
data analyst and software developer in various
companies, the last of them was Salesforce.
Alen Debensason
Arbox
alen@arboxapp.com
© 2020 Deloitte Israel & Co. 13
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