Traditional industries are being disrupted by digital-first companies. That’s not new. However, driven by trends in at-home fitness and food delivery on the back of the 2020 stay-at home orders, the evolution of the wellness industry might be particularly pronounced.
The Amazon playbook may provide a guide for traditional players in the wellness space, but to compete well, they would would be wise to play Amazon’s game together. And their aim? Increasing retention rates. Why?
Improving retention creates “money out of nowhere.”
Within the wellness ecosystem, gyms are most at risk. Trends in the at-home fitness trend will be sticky. Without a competitive response, Peloton, Tonal, Whoop, Strava and others yet to be built will take meaningful market share away from traditional gyms.
For those customers who are eager to return, gym owners must focus relentlessly on increasing retention rates. To do so, owners will be tasked with creating additional value for their customers. But how? They could add products and services within their four walls. Create a smoothie bar? Stock more protein and meal supplements? Offer personal training, yoga, sauna’s etc.? Maybe, but the value opportunity is a function, partially of their square footage. And as Amazon has shown, a company that competes with cheaper real-estate (i.e. cheap warehouses vs expensive stores) is hard to contest. In wellness, the real-estate advantage for at-home fitness products versus traditional gyms are even more conspicuous. The real-estate costs to the wellness platform is almost zero. Instead, the “rental” cost is entirely borne by the customer through their mortgage or rental payments. Specifics aside, what’s clear is that with these dynamics, gyms must look for opportunities outside their four walls to compete effectively.
By building a platform that connects a gym’s customers with products and services they demand, gym owners may be able to compete against their asset-light competitors. Imagine a gym platform that connects members to a network of nutritionists, fitness consultants, and telehealth physical trainers along with a network of associated wellness products. Overnight, the gym membership becomes more valuable to the customer. By increasing the value of the gym membership, churn rates should decrease, increasing value for the gym owner, even without take rates. In other words, money is created out of nowhere.
From the consumer’s perspective, it will also be critical to build features for (1) community sharing and self-expression and (2) personalized metrics and tracking. Both improve the frequency of use and could create network effects overtime.
Here’s another example: the food industry. Consider the dynamics of grocery stores, restaurants, and nutritionists in a partnership-technology driven ecosystem. In fact, consider not. We have glimpses of innovation already. Trends in at home food delivery have changed dramatically as a result of COVID as powered by Instacart, Doordash and Grubhub among others. Ghost kitchens, large restaurant chains, and grocery stores are investing heavily in their own mobile/ online ordering, pick-up in store, and delivery options.
The increase in convenience in online food ordering, however, lacks personalization. To enable personalized choices, smart grocery stores could partner with ghost kitchens, nutritionists, and delivery services. Together they could deliver an integrated, personalized dining experience to each consumer based on each customer’s nutritional needs and preferences. Imagine. You log on to an application and are paired with a verified nutritionist. The nutritionist performs a consultation via Zoom. Your diet for the week is outlined and automatically routed to the grocery store, wholesale distribution center, or farm who sends the necessary ingredients to the ghost kitchen. The kitchen prepares your meals and a third-party delivery service delivers it to you next day, all tracked, managed, and analyzed for the consumer through a mobile platform.
For the product suppliers (grocery, farms, etc.), the customization creates operational leverage within the system through an increase in predictability, which leads to improved purchasing power and/ or less spoilage. For the service providers (nutritionist, coaches, gyms), the system reduces churn and therefore, increases a customer’s LTV.
In short, traditional players in the wellness industry may be on the brink. However, if the system leans into innovation, technology, and partnerships with a focus on increasing customer value, like Amazon, these players will be able to maintain and grow a base of high-value, loyal customers.
