MINDBODY VIDEO

Are On-Demand Services Killing Your Business?

Summary

In-home and on-demand services like Peloton are growing rapidly, but are they killing your business? Find out by watching Dr. Amaya Weddle and her the State of the Industry and MINDBODY Data Insights session from BOLD 2019 in Anaheim, California.

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So one of the things that I do at MINDBODY is I lead a team of researchers and we are constantly trolling the news wires we're reading in the latest industry reports and we also have the opportunity to dig deeper doing our own research which gives us access to data and insights that possibly no other company has. We often use this data and insight to set forth our product roadmap make decisions about where to head as a business maybe enter a new market, new country.

But what we also know is how valuable these data and insights are to you as business owners, trying to figure out how to consciously evolve your business. And so, what we're going to be looking at today is more or less things that we think you guys will find valuable as you're moving forward.

So how many of you guys are tech trend-watchers?

Yes, a few guys out there are awesome. Well, maybe I'll learn some things from you. I'd love to have you come chat with me after the talk. And how many of you guys just kind of want technology to work? Yep. Yeah. We've got all types here. Exactly. Well, at the end of the day, as business owners, we're going to still have to, no matter how much we love technology, we have to anticipate what's coming next. And we have to consciously evolve our business, and we see a lot of things out in the news especially as wellness is getting bigger wellness technologies getting bigger. What's hype versus reality and how do we know. And you know, if there is a change coming how do we deal with it as business owners. And I want us to take a minute and think about what technology most scares you.

Maybe it's artificial intelligence. Maybe it's social media and how it's tearing apart the fabric of our communities. Right?

You know those are the things that we need to dig deeper into. And one of my personal philosophies about fear is that it encourages me to actually get curious. So those things that make us the most fearful are the places where we need to dig in, go deeper. And a great place to start is with data and facts. So, we're going to break down some of the hype that's out in the industry about technology and we're going to take some different journeys together and I'm going to make two promises to you as we do this.

Number one: any claims that I make I’m going to back it up with data and evidence, totally just the facts. And number two: although I work for MINDBODY I'm not going to specifically talk about our products or sugarcoat the data. I'm really just going to share with you an objective point of view in terms of what we're seeing.

So let's get started.

Let's talk a bit about the wellness market dynamics. Well, the great news is that the global wellness industry is booming. It's now a four point two trillion-dollar global market. This is a stat from the Global Wellness Institute. And it's massive. We're seeing continued growth year over year so that's great news. And you may ask yourselves, well why? Why are we seeing this? One simple answer is millennials.

And another is that people are continuing to invest more and more in experiences. And we see this in our own consumers, our own consumer base. In fact, we recently did a survey over the summer asking our consumers how much they're spending monthly on wellness services and what we see is that it's massive. Right? Our consumers are spending over two hundred or two hundred ninety-seven dollars on average on wellness services. And this doesn't include things like expensive Lululemon yoga pants and hair ties which you end up having to buy every time you go to class, right? This is just those wellness services and we're seeing it in fitness as well as beauty and integrative health. When we looked at this number compared to last year, it's actually 8 percent up. So people are continuing to spend more and invest more in those experiences.

So online shopping has killed the traditional retail store. I recently learned last year, in 2018, that over 16 major retailers filed for bankruptcy or are significantly reducing than their number of stores. These are stores that I used to go to as a teen. Claire's! You remember Claire's Boutique? Get me some three-dollar earrings. Toys ‘R Us is shuttering its doors. Many, many traditional retailers are being killed by online shopping and online shopping habits. And so, you can ask yourself why is this happening why is retail contracting so much? And as I mentioned a lot of it has to do with millennials. The millennials hold most of the buying power in the US spending over 600 billion dollars annually. And the thing about millennials is that they prefer to spend on experiences.

So, a survey recently indicated that 75 percent of millennials say that they would rather spend on experiences over things and that's what you guys are, you’re experience-based businesses.

Welcome to the experience economy. This is y’all! Right? Yes!

More and more stores from Sydney to New York to L.A. are capitalizing on this reduction in the traditional retail store. People still want to go out and experience their community. They're just not that interested in only buying things.

So, what's hot in fitness?

Well, I'd be remiss if I didn't tell you that it's boutique. Boutique is hot and so is franchising. So, what we see with fitness franchises is that there's actually quite a bit of growth with fitness franchises year over year, 44 percent growth. That's massive in that specific industry. And when we compare this to the overall U.S. Gym and Fitness Club market, it's quite a bit more, quite a bit more rapid expansion. But one thing you might ask yourself is how is it that I can survive if I'm just a single owner/operator business with so many franchises coming in, and you might start to think about it the same way that Starbucks made craft coffee experiences something that people were much more willing to pay a higher price point for. That may be what we're seeing here as well. And actually, when we looked at our own data and our MINDBODY visionary category, we found something really exciting. Our visionaries are actually growing faster than these top boutique fitness franchises. So there's plenty of room for growth, right? That's a great stat.

We had the opportunity recently to ask consumers what are the hottest things. What are the most popular things in terms of fitness modalities and what we see is that yoga continues to be the number one choice for boutique fitness followed by high-intensity interval training and weight training, also popular. When we ask those consumers what they're most interested in trying next, we're seeing an interesting resurgence in Pilates and then also things like dance and barre, and then new emerging trends like aerial workouts and stretch.

What about beauty and grooming? Well, one super interesting trend that we've been able to pick up on in our data and our research is an emergence of a category of beauty and grooming businesses that involve kind of unbundling of services. So, these are hyper-specialized businesses that are creating really compelling experiences for consumers and also leveraging technology in order to connect and create that consumer experience. These are the specialized boutique beauty and grooming services like the blow dry bars, brow bars, and facial and lash bars of the world. In fact, we learned that some of these industries are growing much, much faster than the overall salon industry. I also learned that lash services are now a one-point eight-billion-dollar industry. That's a lot of lashes!

 

So, when we asked people what they're most what they're doing now in terms of a beauty and salon services, not surprisingly haircutting, manicures and pedicures, and hairstyling are those top things people are doing now. In terms of what they're interested in trying next, what we learned is that facials are popular and then also some of those other boutique beauty and grooming service that I spoke about before. Things like the lash extensions, waxing, and laser facial treatments.

So, let's talk a bit about integrative health. This is another modality that's definitely experiencing growth as people are talking a lot more about mental wellness. They're increasingly stressed out, maxed out, and needing to do more to take care of their mental well-being. So, when we ask people about the kinds of integrative health services they're seeking out, the most popular service by far continues to be massage, followed by chiropractic care, and then things like nutrition counseling. And what people are interested in trying next, interestingly, are some of these new modalities like acupuncture, acupressure, and then other service offerings like hydrotherapy and float therapy are also growing in popularity. There’s images of float therapy and things like stretch services. I also learned that, though the private and group meditation market is a one point one-billion-dollar market, it's about 7 percent of the alternative care market, which is really awesome. And I also learned that 45 million Americans are meditating regularly. That is awesome, right? That's over for 14 percent of the American population, so much growth, so much benefit to the population. So, let's shift gears a little bit and talk about technology trends.

You know a lot of technologies out there are looking to capitalize on the wellness market.

And like any good entrepreneur looking to become the next best unicorn, I had to have my gratuitous unicorn slide in the deck. Yay! So, what we've done is we've pulled out some of the most important tech trends that we're seeing in the industry with regards to wellness technologies. And we're going to talk a little bit more deeply about these. At first blush, some of these topics may seem like threats to your business. They're things you may be hearing in the news or things that are concerns. But on the flip side of the coin, they could present opportunities for your business to grow and evolve. So, let's first start with digital video. Digital video is something we're seeing lots of press about. It's actually something that we had the opportunity to ask some of you what you're most concerned about with regards to threats to your business. So, this is something that was shared by Brendan Lentz on MINDBODY One. One item of concern is potential clients who are using online videos to practice at home. One trend that could be really beneficial if we use it right, is the same thing. So, seeing the benefits of streaming of classes. Stephanie Stackhouse of SLO Yoga Center talked about Peloton and the potential threat of Peloton indoor cycle and these machines that include digital video components. Maybe people are going to want the flexibility of in-home rather than the community of coming to a studio.

So let's dig deeper on some of this. Well, we know that there's a lot of industry investment in Global Digital Fitness. It's predicted to be a twenty-seven-billion-dollar market by 2022. We've also seen companies like Peloton file for IPOs. And we even learned last week about Equinox that's actually releasing its own in-home competitor with Peloton cycle. So, is this really a threat to that to our business?

Are we at risk of losing customers? Let's dig a little bit deeper.

So, we also see a lot of usage of these digital fitness apps and apps services. So, we're seeing things like consumers using or choosing to use apps like Aaptiv, Daily Burn. And what I want to know is, what's different this time? Right? You guys remember Jane Fonda videos, those crazy leotards. And you know in-home equipment isn't new either, right? You know many of us may have these types of pieces of equipment. Maybe it's just ending up being a fancy coat rack in your living room. One stat I recently learned is that less than 50 percent of people who own in-home equipment use it on a weekly basis. So, what's the big deal with Peloton and other services like this? Well, we recently did a survey over the summer, MINDBODY research conducted a survey with Peloton consumers. These are people that own Peloton bikes and treadmills. And what we learned from them is that, before they bought the equipment, ninety-three percent of them said they were attending in-person classes. After using the equipment or getting the equipment, 88 percent of them are still doing this on a regular basis. So, some attrition. It was minor. Five percent of people saying that they gave up their memberships because of the bike. We also learned that 75 percent of them are still working out at a gym or studio on a weekly basis and seventy five percent say that the equipment is more of a supplement to in-person classes than a direct competitor. When we asked our own MINDBODY consumers about their use of things like video and audio training apps, what we learned is that 25 percent of them use these and 10 percent of them are using them one time a week or more. So somewhat infrequent use.

We also asked them about whether they own equipment with video streaming, and what we saw is that 10 percent of them own some kind of equipment like this. And only 2 percent of them are saying that they decreased their attendance at fitness studios once using that equipment.

So some degree of threat but potentially there's more to it. It's more of an opportunity. When we asked you guys in a survey that we conducted recently about how many of you are investing in video technology, what we learned is that a small percentage of you are starting to invest in live streaming video concepts and a small percentage of you are using video and audio training as part of what you offer to consumers to engage them when they're outside the studio.

We also asked what your plans for investment are in the future. And we learned that quite a bit more of you intend to look into some of these technologies. These are business owners sitting around you in the room. Perhaps some of them are using video and perhaps some of you are interested in it. I look at a lot of data for MINDBODY and what I found really surprising the first time I saw this was how many businesses not in fit fitness are using video.

Look at how many spas and salons and integrative health practitioners are finding use cases for video, and I was surprised at first but then talked to a few customers and the use cases came out that are really endless. Think about when you go to a salon and you leave this salon and you want your hair to look great the next day. Maybe you could send a video to a consumer so that they can know how and learn how to do their own hair or makeup. For an integrative health, you can use video for doing all kinds of things: nutrition training, other things outside of the studio. So, when we look at all of this data, I think what our perspective is, is that this is actually much more of a complementary than a competitive technology. We don't believe that video can really replace that feeling of blissful exhaustion when you're at the yoga studio with your community or that hard driving feeling of intensity when you're in a spin studio. I really love this quote from Stephen Intille, he's a professor at Northeastern University who studies technologies like this for positive lifestyle improvements and he said, for him, digital video is not that different than how people haven't stopped going to movies because they can stream them at home. So, let's talk a little bit more about on demand and mobile ready. How many of you guys are beauty service providers out there or massage therapy providers? Yes! Awesome! OK! Well, you guys aren't off the hook. There's another disruptive technology coming for you. That's the on-demand market

So let's dive in here. Well, we all know that mobile is here.

Mobile is now. Consumers are more and more increasingly expecting to get services given to them on their own time, in their own way, through a mobile device.

Forty-eight percent of all global internet traffic is mobile. 50 percent of people who are using a smartphone expect to be able to make a purchase in real-time and 81 percent of consumers who search for a business on mobile call or go to that business within 24 hours.

We also learned a little bit more about the on-demand economy. So, these are people who are working in a capacity where they can kind of have flexibility and be on demand. About 24 percent of that economy is comprised of home services some of whom are providers that are able to come to homes to provide beauty or wellness services to consumers. And about one-third of the entire American workforce is engaged in contract and on-demand work, which is the gig labor force. We're seeing the rise of businesses like Soothe, Instaglam, Zeal, and Glow that are providing in-home services.

So, are these really a threat to your business?

Well, the data indicates that these are pretty small businesses currently. They are primarily located in major metro areas. And when we look at all of this data, one of the things that we believe is that on-demand is more of a complement or a potential for new labor than a direct threat. So, this is just an example of how a traditional retail store is capitalizing on the on-demand economy. CVS bringing in the Glamsquad in order to get more of that experiential basis and to revitalize their store.

Pretty interesting. And finally, radical personalization.

Well, what we know about human psychology and what drives people towards positive lifestyle change is that wellness is deeply personal. What's your cup of tea might be somebody else's kick-butt kickboxing workout, and at the end of the day having discrete choices are what's going to make a big difference for people. Even our individual motivations to work out are very diverse.

Some people may just want to lose weight. Others work out to have social connections. Some people work out to really just have the mental benefits like Kristen just spoke about earlier today.

So, we're diverse. We're also seeing huge growth in the health tracker industry. It's a one-point eight two-billion-dollar global industry and we're able to track things like heart rate movements and maybe in the future we can track things like hormonal cycles and, you know, even make predictions about people's stress levels and how they fluctuate over the day. We're also seeing the rise of new apps and technologies that are leveraging the computational power of artificial intelligence to engage consumers on a highly personalized basis.

So, at the end of the day, the way we think about artificial intelligence and the coming of technology is that there can be a really powerful synergy between things coming together.

Technology can help us offload those complicated computational tasks or maybe those boring, mundane, repetitive things that are part of the administrative burden of running a business or a studio. And the more we can offload these tasks to technology, the more we will be able to work on the things that humans are discreetly and especially capable of doing. The emotional connections, the social connections, and building that truly human experience that so many consumers are seeking. In fact, a recent survey from Price Waterhouse of over 15,000 American consumers indicated that 75 percent of them are actually looking for more human connection in their retail experiences than less. So, I'm going to leave you with this thought from Jeff Bezos which I think really captures a lot of what I've been talking about today. What we need to do is always lean into the future when the world changes around you and when it changes against you, when what used to be a tailwind is now a headwind you have to lean into that and you have to figure out what to do because complaining isn't a strategy.

So, thank you very much.

I hope you come and visit us at the research station.

I'll say one more thing and that is that the way we innovate at MINDBODY is from listening to you. So, please come visit us. Please come talk to us, ask us questions. We have tons more data. We'd love to share with you about the industry. We'll do a deep dive just for you on your city or industry. Come visit us at the station. And thank you again. Have a great BOLD.

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