Is China's Booming Fitness Industry a Blueprint to Follow?
By Jocelyn Richards
As recently as 10 years ago, ‘working out’ in China meant spending a few leisurely minutes on a zero-resistance elliptical in a public park. Gym memberships were novelties for young urban kids with money – not calories – to burn, and most fitness centers catered exclusively to men.
Fast-forward just one decade, however, and the scene looks entirely different. Women, not men, are leading the ‘sweaty selfie’ fitness craze in China to the delight of brands like Lululemon – a high-end Vancouver athletic wear company that’s selling out of sports bras on Taobao listed for RMB550, or about one-eighth of the average monthly salary on the mainland.
Going to the gym is no longer merely about face, either: obesity rates in China have skyrocketed since 2005, and the World Health Organization reports that about 230 million people – or one in five adults – now suffer from cardiovascular disease.
“More and more Chinese people are experiencing health problems like high blood pressure and diabetes. Going to the gym can help that,” says Gordon Li, a sales employee at Total Fitness, one of the oldest fitness companies in South China founded in 2001.
The latest push for exercise, encouraged in large part by the government, has led to rising numbers of gym attendees – about four to five million more people each year in 70 major cities across China, according to Xinhua News Agency. Gym and health club revenues, unsurprisingly, have doubled in that time.
Those numbers have also translated into profits for a host of related industries, from basic wearables to organic produce. Even amateurish, start-up fitness apps are now seeing their projects backed by major overseas venture capitalists hoping to cash in on the trend.
Chinese consumers and businesses alike appear infatuated with their newfound runner’s high, but the reality facing the industry – as the recently shuttered California Fitness clubs can attest – is a bit more complicated.
In June of this year, China’s State Council approved the 2016-2020 National Fitness Plan, which strives to introduce a “new national consciousness of health and fitness” on the mainland, encouraging citizens of all ages to incorporate physical exercise into their weekly routines. The scheme aims to develop a kind of ‘sports facility network,’ in which there will be a fitness or sports center within one mile of every resident, both in cities and in the countryside, with at least 1.8 square meters of public exercise space allotted to each citizen.
That’s a lot of fitness centers. It’s also a great incentive to open a gym for the first time – even if on a whim – since any government-backed industry can expect plenty of complimentary public service announcements during its five years on the national agenda (if you’ve ridden in a Chinese taxi lately, you’re familiar with the nonstop instructional workout videos).
Exactly how much financial support Chinese fitness centers receive, however, is still unclear, with some claiming the benefits include tax breaks; others say funds are available but a company has to apply, and the process is relatively troublesome.
But the red tape hasn’t stopped thousands of locally owned gyms from rushing to set up shop. On Nonglin Xia Lu, a prominent street in Yuexiu District of Guangzhou, the number of gyms has quadrupled since 2015, with some turning a blind eye to unhealthy workout conditions in the race to sell more memberships.
“Don’t go to that gym,” a man distributing flyers for V-Fitness whispered to passers-by a month after Total Fitness opened a second branch down the street. “They just finished renovating and the fumes are unbearable! I can’t believe they let people work out there.”
Poor conditions aren’t the only consequence of China’s rapidly evolving fitness market: uncertified, inexperienced personal trainers are also proving to be a serious problem.
Earlier this year, a female exerciser in Jing’an District, Shanghai, revealed that her male fitness coach had sent flirtatious words and pornographic images to her mobile phone soon after she commenced training with him. When she asked to cancel the lessons, however, her ‘coach’ – who, it turned out, wasn’t certified – refused. Fitness trainers in China are required to pass a series of tests before they can legally instruct the public, but a 2016 study conducted by the State General Administration of Sports revealed that less than 30,000 people have passed the official national physical and mental examinations for sports training so far.
“People easily find ways around that [stipulation],” admits Gordon Li of Total Fitness. “Some pose under the name of a certified trainer when they apply for the job.”
In the case one’s trainer turns out to be unqualified, however, it’s often impossible to wiggle out of an annual membership, since many contracts charge fees up front and refuse to issue refunds.
California Fitness, which closed all of its branches on the Chinese mainland as well as in Hong Kong and Singapore this July after owing millions in rent and operating costs, was notorious for pressuring members to sign up and then denying them a refund. After closing indefinitely this summer, the chain failed to reimburse 27,000 members owed USD20.8 million.
Though the 20-year-old club had been struggling to make ends meet for years (which partly explains its forceful marketing tactics), word of its demise shocked members, who, like everyone else, assumed the fitness industry was booming in China.
“California Fitness operated in the most expensive part of town, maybe that’s why they went bankrupt,” offers Xie Xiang, a sales manager at We Young Fitness Club in Guangzhou. “There are so many cheap new gyms opening here, you can’t survive in Zhujiang New Town charging RMB10,000 a year… the competition is too fierce.”
An average gym membership in China fluctuates between RMB3,000 and RMB10,000 per year, depending on the city, location, facilities and your bargaining skills.
“California Fitness initially listed the annual membership fee at RMB10,000. I was able to talk them down to RMB6,000, but a friend of mine paid RMB7,000,” says Mandy Qin, an avid runner who lost her entire deposit when the company closed this summer.
Six thousand yuan (USD892) is still not cheap when compared to costs overseas, where budget gyms like Planet Fitness or Bally Total Fitness in the US charge between USD260-630 for an annual membership. It’s even pricier when you consider how much money is wasted due to underutilization. A 2005 study, Paying Not to Go to the Gym by economists Stefano DellaVigna and Ulrike Malmendier, claims average gym attendance is lower than 4.8 times per month. The report estimates that almost 67 percent of a gym membership fee is wasted, on average, when people pay up front only to spend most days sitting at home.
The shortfalls of traditional brick-and-mortar fitness centers have inspired some (i.e. Chinese app developers) to propose a solution: move workouts online, and make them free.
Social workout app Keep, founded by 26-year-old Wang Ning and backed by GGV Capital, has wooed millennials from overcrowded, musty gyms to an online platform where they can compete with friends, share post-workout selfies and follow free exercise routines.
“I prefer Keep over the run-tracker Codoon because it actually encourages you to keep going during your run. I always feel like stopping around the second kilometer until I hear a voice in my earphones scream, ‘jiayou!’” laughs Jessica Lin, a 20-something from Foshan in Guangdong.
In an interview with Bloomberg Technology, Wang said he developed the idea for Keep as a student who “couldn’t afford to go to the gym or hire a trainer.” At the time, he recalls, China didn’t have a good app to lose weight or stay fit.
Now, dozens of health and wellness applications exist for users to find group workouts, record training regimens or monitor eating habits. WeChat, though not a fitness-specific app, is still a key platform that connects users in workout group chats or on WeRun to compare daily steps with friends.
It’s also the online-to-offline portal that SuperMonkey – a fitness brand with studios in Shenzhen and Shanghai – employs to let mobile users sign up for a workout slot at the company’s 24-hour, self-service ‘gymboxes.’
After registering via the official ‘Supermonkey-Fitness’ account, a user receives a passcode that grants temporary access to the 60- to 120-square-meter gym, which allows no more than six people to work out at a time. Every session is paid for separately through WeChat. There are no binding annual fees, deceitful trainers or crowds, and hardly any rules other than ‘visitors should not exercise naked.’
“As a typical white-collar worker you often have to work overtime, so coming off work my gym would always be closed, but I also didn’t want to run outside in the middle of the night because I was worried it wasn’t safe,” says Liu Shuting, one of the founders of SuperMonkey. “I wanted to open a 24-hour gym that operates like a vending machine, which you could also share with others.”
Liu and her team admit the process hasn’t been easy. Friends in the industry claim the concept of pay-per-group classes is an “unrealistic ideal” that “might fail.” So far, however, the approach is gaining momentum and support from athletes fed up with traditional gyms.
Will this kind of O2O model take over the fitness industry in the future? Liu can’t say for sure, but she does believe gyms will need to offer more freedom and flexibility to customers in order to stay competitive going forward.
“A successful fitness regimen is ultimately one that makes you feel good about yourself,” says Liu.
And between luxury athletic apparel, social wellness apps and 24-hour gyms, when it comes to exercise, Chinese consumers certainly have their choice of indulgences.
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