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Ray Algar - Lowcost Gym Sector

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Ray Algar - Lowcost Gym Sector

  1. 1. 06/10/2010A strategic look at the emergence of thelow-cost gym sectorFIA Seminar October 2010Ray Algar My perspective neutral towards the sector www.oxygen-blog.blogspot.com MINIMUM OF 50% LOWER THAN SIMPLICITY SIMPLICITY INDUSTRY PRICE SUPPORTING SUPPORTING INFRA- INFRA- STRUCTURE AFFORDABILITY STRUCTURE AFFORDABILITY SCOPE TO HEAVY OPERATE 24 TECHNOLOGY HOURS AND WEB USE MY MARKET MARKET DEFINITION DRIVERS DRIVERS OF A LOW- COST GYM CONSUMER CONSUMER CONSUMERS ARE CONSUMERS ARE SENTIMENT SENTIMENT CHANGING CHANGING TOWARDS CLUBS TOWARDS CLUBS ABILITY TO OPERATE CLUB GYM-ONLY SPORADIC SPORADIC WITH A SINGLE PROPOSITION ATTENDANCE ATTENDANCE PERSON 1
  2. 2. 06/10/2010I Care Consumers now have considerable experience of low-cost services 2
  3. 3. 06/10/2010 “More of our shoppers are using us for their whole shop instead of top-up shopping”“Fly for the price Group MD Aldi UK & Irelandof a pair of jeans” “Spend a little, live a lot” 14 13 Think of a sector…you will find low-cost “Look good, pay less” 16 17 3
  4. 4. 06/10/2010300million unitsannually by2013 “Quality up, cost down … way down” SIMPLICITY SUPPORTING INFRA- STRUCTURE AFFORDABILITY MARKET DRIVERS CONSUMER CONSUMERS ARE SENTIMENT CHANGING TOWARDS CLUBS SPORADIC ATTENDANCE 4
  5. 5. 06/10/2010 5
  6. 6. 06/10/2010 SIMPLICITYSUPPORTING INFRA-STRUCTURE AFFORDABILITY MARKET DRIVERS CONSUMER CONSUMERS ARE SENTIMENT CHANGING TOWARDS CLUBS SPORADIC “I can join online – no pushy ATTENDANCE sales staff to deal with!” SIMPLICITY SUPPORTING INFRA- STRUCTURE AFFORDABILITY MARKET DRIVERS CONSUMER CONSUMERS ARE SENTIMENT CHANGING TOWARDS CLUBS SPORADIC ATTENDANCE 6
  7. 7. 06/10/2010 SIMPLICITY SUPPORTING INFRA- STRUCTURE AFFORDABILITY MARKET DRIVERS CONSUMER CONSUMERS ARE SENTIMENT CHANGING TOWARDS CLUBS SPORADIC ATTENDANCE Word of mouth Word of mouth on steroids on steroids40 7
  8. 8. 06/10/2010 SIMPLICITY INFRA-STRUCTURE AFFORDABILITY MARKET DRIVERS CONSUMERCONSUMERS ARE SENTIMENT CHANGING TOWARDS CLUBS SPORADIC ATTENDANCE “Why am I paying “Why am I paying for a club I £50 just to use What do low-cost gym occasionally use ?” a treadmill?” consumers say? 8
  9. 9. 06/10/2010 “I have never been to a gym that is £15 before. I“It is almost free” thought I would walk in and find a lot of broken equipment” 54 9
  10. 10. 06/10/201055 56 5758 10
  11. 11. 06/10/2010 McFit Financials 2007 Euros % turnover (millions)Turnover 86Staff costs 3.4 3%EBITDA 28 32%Interest charge 0.1 -Net assets 34Clubs 88 61 “Perhaps the biggest threat we face is that someone from outside our sector, with a huge war chest of cash and proven customer-centric business model, will build 1,000 shiny new facilities, and offers budget-busting membership deals” Fred Turok, Chairman, FIA (statement from 2007) 11
  12. 12. 06/10/2010 Operational excellenceCustomer Productintimacy leadership budgetgymresearch.ning.com oxygen-blog.blogspot.com Google: “Ray Algar” 12

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