• 7 – 10 April 2022
  • Exhibition Centre Cologne

18.

 

18 October 2021, by Andreas Bechler

Start-ups in the fitness industry: how to analyse the local market

Anyone looking to open a new fitness studio must think through everything carefully. Studying the local market is an important step for any start-up project. Here is an example of what the market analysis might look like. 

Launching a new business has always been a popular move in the fitness industry, because it has generally combined excellent prospects with the chance to pursue one’s passion. While the coronavirus pandemic temporarily put a damper on these start-ups, the outlook for the future continues to be good. In fact, the DSSV believes that 15 million members by 2025 is a thoroughly realistic goal – more than enough reason for people to continue considering their own start-ups in the fitness industry.

 

When people launched new fitness studios in the past, they really did not need to give too much thought to the matter – customers showed up almost as a matter of course. It goes without saying that the situation is much different today. The decision to launch a start-up must be properly thought through, and a wide range of steps must be taken to ensure that one doesn't end up with egg on their face. One of the first – and most important – steps is an in-depth analysis of the market. 

Market analysis

Fundamentally, market analysis means studying the market within a specific region (e.g. the catchment area of your future fitness studio). The goal is to determine whether your start-up concept has potential for the local area, whether changes are necessary, or if the market might already be saturated. The methods used for these market analyses may differ markedly – that is why there is no single right way to do it. Market analysis must always be tailored to the project at hand. 

In order to give you a feeling for how to proceed when analysing a market, I would like to sketch one possible approach for you here. We generally undertake our analyses in four steps: catchment area, market, competitors and potential – in the following, I will offer you a brief explanation of each. 

 

Catchment area 

Before the local market can be analysed, it must first be defined. The catchment area is “a specific area from which customers would generally be willing to frequent a commercial establishment.” For a fitness provider, it is generally worthwhile to define the catchment area according to the time it takes to travel to the location by car – generally as much as 15 minutes (for conventional fitness providers in urban areas), or as much as 20 minutes (special-interest providers, conventional fitness providers in rural areas). Depending on the local market, however, the area might also be smaller. Here, the starting point is the potential location for your planned fitness centre. 

Andreas M. Bechler is an author, consultant, lecturer and podcaster in the fitness industry. Andreas is also the Spokesperson of the Fitness Industry Working Group of the VSD (VSD – Verband für Sportökonomie und Sportmanagement e.V.) association for sports economics and management. You can get in touch with Andreas via LinkedIn:  https://www.linkedin.com/in/andreasmbechler/

→ In concrete terms: Define your catchment area and research all locations within the corresponding area

 

For better visualisation, it is worthwhile to create a graphic depiction of your catchment area. This can greatly assist your personal assessment of the catchment area that was initially defined solely on the basis of travel times. Standard maps programs usually make it possible to delineate these areas either manually or automatically. 

Market

Once you have determined the precise market that you wish to analyse, you can proceed to the “How?”. If you would like to study a local market, you have to deal with the fundamental question as to which factors are relevant for the regional fitness market. This is also very dependent on your start-up concept. This means that you must always think carefully about the local factors that might influence the market for your start-up. 

 

As part of a general analysis done in 2017, I used linear regression in an attempt to define market factors that would influence the local potential for a fitness market (without a special area of focus) Here, I was able to define the following factors that you should always take into account: 

 

  • Population: Areas with more people have a larger percentage of trainees, as do areas with lower average ages
  • Urbanisation: Cities of all sizes have a higher percentage of trainees, while rural areas tend to have lower percentages of trainees
  • Size of the economy: Greater purchasing power leads to a higher percentage of trainees

 

→ In concrete terms: Research the market for your catchment area to obtain the necessary market data – particularly the number of inhabitants, age distribution and purchasing power

 

Competitors

Now we come to what I believe is the most fascinating part of the process – this is when you take a look at your local competition. Here too, you must begin by ‘searching’ through your entire catchment area to find any existing providers. Any standard search engine is a good place to start here. Local business directories might also serve as a good source of information. Be sure to be thorough – you do not want to overlook any of your competitors.

 

Whenever you find a competing provider, you’ll naturally want to take a very close look at them. To ensure that you can proceed systematically, it is a good idea to begin by determining the criteria on which your competitor analysis will be based. In other words, draw up a profile containing the criteria you will be using to evaluate your competitors. A good starting point is offered by the ‘Anlagenstruktur’ (Facility structure) chapter of the ‘DSSV-Eckdaten’ publication, which offers a compilation of key facts and figures. Typical criteria might include:

 

  • General data such as addresses, contact details etc.
  • Information on their service portfolio, such as existing training offers, additional services and programmes etc.
  • Information on contract and pricing models
  • Information on membership figures and structures

 

Once you have drawn up your template, it is time to flesh out the profiles of your competitors. Today it is possible for you to find out a great deal about these companies simply by visiting their websites. Even so, you may not find all the necessary information there, making further research necessary. Another option might be to use ‘mystery calls’ – this involves phoning competing providers to find out more information about them. However, personnel are generally trained such that whenever they field phone calls, they will always try to set up a consultation with you, meaning that you will get little or no information over the phone. As a result, another option involves ‘mystery shopping’, whereby someone goes on site to visit each competitor. You have to decide here just how much time and effort you would like to invest in these measures.

 

→ In concrete terms: Research your local competitor providers and analyse these according to clearly defined criteria. 

 

Potential 

The final step is the key to the process. This is when you must determine just how much untapped market potential there is within the catchment area. The mathematical calculation for this appears to be quite simple:

 

Number of inhabitants in the catchment area 

* Local response rate 

= Local market potential

– Members of competitor providers in the region 

= Untapped market potential 

 

You will probably have obtained most of this information in the previous steps, meaning that all you have to do here is plug this into the equation. The local response rate is potentially the most difficult factor, i.e. determining the share of trainees in my local market. Here, it is necessary to derive this rate. 

 

In the “Markt” (Market) chapter, you learned which factors typically impact the local fitness market, and therefore its response rate. One possible approach might be to take the response rate for your Federal State as defined in the ‘DSSV-Eckdaten’ key facts and figures publication as your basis, and then adjust this figure according to the criteria discussed here. If the age of the inhabitants in your region is higher than average, it may be necessary to lower the response rate. If the purchasing power is above average or you find yourself in an urban region, on the other hand, you may need to raise the response rate. As you have certainly noticed, this is not an exact science by any means. That is why you should be conservative in your assessments, to ensure that your final results are not overly optimistic. 

 

And once you have used the local response rate to calculate the untapped market potential, there is no firm rule for whether this potential is good or bad. A discount provider, for example, would need to have a much higher untapped market potential than would a premium provider. In other words, the untapped local market potential can only be interpreted in conjunction with your specific project. 

 

→ In concrete terms: Determine your local response rate and use the formula shown above (or an expanded/improved version) to calculate the untapped local market potential 

 

It goes without saying that the procedure shown here has been greatly simplified. Good, in-depth market analysis takes time, and this means that a comprehensive depiction of the process could fill books. You should therefore always go beyond this basic framework and figure out what forms of further analysis could be beneficial for your project. 

 

Tips for market analysis

It is not easy to conduct market analyses. There is a lot of potential to make mistakes, and you are continually faced with the problem of not having all the information that you need. It simply isn't possible to know everything, nor it is easy to obtain all the necessary information through research. With these thoughts in mind, I would at least like to leave you with a few basic tips, to make things a bit easier for you when you conduct your own market analysis. 

 

Tip 1: Request statistical information from local authorities

It is generally in the interests of local governments for new companies to set up shop in their areas. That is why you should not hesitate to simply ask them for any market information that you are unable to obtain through your own research. They will usually be happy to assist you. 

 

Tip 2: Take advantage of external assistance

Particularly when it comes to the analyses necessary for a business launch, obtaining an outsider’s point of view can be a good thing. Having someone check your own findings or even carry out a comprehensive analysis helps to prevent you from seeing your project through rose-tinted glasses. 

 

Tip 3: Be aware of the fact that there is no such thing as a perfect analysis

There are two big problems with market analyses. For one thing, there is no way you can ever obtain all the information you want for a reasonable amount of effort, so it is not possible to conduct a perfect analysis or obtain exact findings. You will always have to make compromises due to incomplete information. In the same way, as soon as it is completed, a market analysis becomes obsolete, because it can never offer you more than a momentary snapshot of the situation. It is not possible to foresee every single development (e.g. the unexpected opening of a new fitness provider). This means that you must continue to keep a close eye on the market even after you have completed your analysis.

 

Conclusion

Market analyses are very complex, and this means that they have to be conducted with the greatest possible care. Any mistakes made at this early stage of launching a new business can have far-reaching effects on the entire undertaking. No matter how complex the process, never take your eye off the ball. After all, perhaps your analyses will uncover some entirely unexpected findings that could prove to be extremely useful later on in your project.

 

 

About Hashtag Fitnessindustrie

Hashtag Fitnessindustrie is the podcast dedicated to every aspect of the German fitness industry and of the people in it. It aims to facilitate knowledge transfer amongst interview guests and listeners – to the benefit of the entire industry. The podcast covers not only the latest trends and developments, but also fundamental strategic issues in the daily business of fitness providers. For more information: https://hashtag-fitnessindustrie.de