Australian startups are bracing for the imminent launch of large US subscription fitness service ClassPass, with some saying there is only room for a handful of local competitors and the smaller ones will be squeezed out.
The prominent US startup allows users to sign up for classes at a range of venues instead of being locked into a single gym contract, and is expected to launch in Australia within a month.
It is currently advertising for a regional general manager to head up operations in Australia.
ClassPass’s success in the US, where it has raised $US54 million and is on track to reach $US60 million revenue, led to many copycat startups trying to offer the same service in Australia.
Teaming up to stay alive
One of the biggest local rivals to ClassPass is Malaysian-based KFit, which has just swallowed two smaller startups in the same market, Classhopper and SweatPass in an effort to gain size before the US giant sets up shop.
Hoffman, who founded Classhopper and has now joined KFit, says it’s undoubtedly going to be difficult for the Aussie startups.
“It’s very much going to be a case of the big fish being able to drive the market, and the smaller guys will at some point fade out,” Hoffman says. “It’s about survival in the market.”
The recent merger was a way to ensure this survival, she says.
“We were doing really well and getting a lot of traction, but the local competition was absolutely rife,” Hoffman says. “We recognised there was probably only room in the market for two or three major competitors.”
“At the time there were ten or so smaller startups trying to do the same thing. It was clear to me that they were the guys to partner with.”
“It’s a way of streamlining operations,” she says. “It will definitely be tough for the smaller startups in the same field. There’s a lot to be learned from the bigger players, and the smaller startups can leverage some of the industry learnings.”
KFit has enjoyed rapid growth since launching in April, Error! Hyperlink reference not valid. and expanding to ten cities in seven countries across the Asia-Pacific region.
It now has over 600 partner fitness studios in Melbourne, Sydney, Perth and Auckland.
In a further consolidation of the sector, fitness subscription business BodyPass has acquired Melbourne-based competitor Hello Flexi.
A BodyPass spokesperson says having the local knowledge is very important.
“We’ve taken what they’ve done and tweaked it for Australian purposes,” the spokesperson says. “We’re owned and run in Australia, and the founders are industry veterans.”
“It’s all about the studios, and we’ve got the studios. Knowing the studios, being there for the studios and having those one-on-one relationships are why we’re here.”
Going it alone
While these startups are partnering with their competitors to ensure survival, others are going it alone.
Sydney-based AnyClass launched in April with the aim of getting the first mover advantage over the packed competition. The nationwide service allows users to book casual group fitness classes online, and charges $25 per week to attend up to three classes at any one studio per month.
AnyClass co-founder Elena Torriani says she isn’t concerned at all about the ClassPass expansion.
“They are a bit late, they’ll have to catch up,” Torriani says. “We’re an Australian company run by Australians; we understand the local market.”
The AnyClass team has actually travelled to the US and met with ClassPass, Torriani says.
“When we were first exploring the market, our team went to the US and spoke to ClassPass itself,” she says.
“We have a good understanding of what the model is, and an understanding that plunging a US model into Australia wouldn’t work.”
The fitness subscription model has become increasingly popular in Australia of late, and the startup market is looking oversaturated.
“It’s booming, and it happened quickly,” Torriani says. “It was about time.”
The ‘next Uber’
Startups like BodyPass, FitSessions, FitnessCalendar and Classium are all delivering very similar offerings around this disruptive model, and things are about to get much more competitive once Classpass arrives.
The US startup has been called the “next Uber” by some, and now has over 7000 partnerships with fitness studios in North America and the UK.
Hoffman says KFit isn’t concerned about the international startup’s imminent arrival.
“It’s definitely not something we’re afraid of,” she says. “Having healthy competition in the market is the best thing, and there’s definitely room in the market for two or three major companies.
“It’ll be exciting to have them here. There’s an element of consumer education. There’ll be another voice in Australia that will help us communicate what we’re trying to do and make it more acceptable.”
Although the main offering is near-identical, Hoffman says there are some important differences between the two.
“At the core of it our business model is quite similar, but our message and what our brand stands for is very, very different,” she says.
“KFit is a mass-market product, we’re for everyone and we’re very, very accessible. There’s a massive variety of different activities available that other companies may not necessarily have or be looking at.”
There’s also the matter of pricing, with ClassPass be charging Australian users $99 per month.
“By no means do we want to be seen as low end, but we want to be affordable for everyone,” Hoffman says.
KFit charges a $69 monthly fee, compared with a $99 monthly BodyPass subscription for boutique fitness studios in Sydney, and a $100 fee for FitSessions, which focuses on outdoor exercising and boot camps.
ClassPass has already shown that it is willing to acquire competing startups, and Hoffman says this hasn’t been ruled out for KFit, however unlikely it might be.
“Anything is possible, that’s the beauty of the startup industry, there’s so much flexibility,” she says.
“We certainly wouldn’t rule anything out. We’ll just see what happens. As we continue to grow exponentially anything is possible.”
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