With laymen opening more than 1,200 gyms, how does Leke find super opportunities?

This article explores how Leke Fitness successfully used Internet methods to transform the traditional fitness industry by using strategies such as low-priced monthly packages, solving user pain points, and optimizing operating costs. Leke attracted the general public with small stores, self-service reservations, and an environment without sales pressure, breaking the high threshold image of traditional gyms and achieving sustained profitability and large-scale expansion. This article analyzes Leke's success factors, as well as the challenges and room for improvement it faces, and provides useful inspiration for the future development of the fitness industry.

I've been working out recently and have been researching the fitness industry. There is a very powerful company that has transformed the fitness industry by eliminating card sales.

The company is called Leke. I guess some of you have this gym near your community. The area is only 200-300 square meters, which is one-tenth of the traditional gym. As early as 2015, Leke opened its first store in Hangzhou, hidden in an office building and not conspicuous. So far, there are more than 1,200 stores across the country, attracting nearly 10 million members and nearly 1 million monthly active users.

This is a pretty good result. Leke has found a great opportunity in the traditional gym industry. Today we will talk about how Leke uses the Internet to transform traditional gyms.

1. Find a large enough user base

Leke has taken a wild approach. Its monthly subscription price of 99 yuan broke through the industry's bottom line and overturned the prices of traditional gyms that often cost thousands or tens of thousands of yuan. Why did Leke start with a low price? ‍‍‍‍The target users it targets are not the audience of traditional gyms at all. ‍‍‍‍‍The business model of traditional gyms is to open a store in either a large shopping mall or on a certain floor of an office building. The space must be large enough, the equipment must be advanced enough, the decoration must be luxurious enough, and the level must be high enough to attract relatively professional people. However, Leke's user group is relatively general, and most of them are even novice fitness people, who do not have high requirements for professionalism. ‍

Leke's target audience is a larger group of non-professional fitness people generalized from a professional fitness group.

Including the majority of people with social phobia: when they go to the gym, they are often most afraid of private trainers selling classes, and they also worry about whether their movements are standard, whether they will be despised if they lift the barbell too light, etc. Leke said, if you come to me, I will not sell you anything, you can make an appointment by yourself, you can train however you want, just be happy, and there is no psychological pressure.

Leke's route is to earn money from 80% of the non-professional population. ‍It only needs to meet 80% of the needs of 80% of the people. ‍The remaining 20% ​​of professional fitness are not their target users and can be ignored. Therefore, Leke's user groups are essentially two different groups from traditional gyms. By cutting into new groups and sinking the price range, it can seize a larger market.

The low price of 99 yuan, on the one hand, lowers the threshold for fitness and increases the penetration rate of the fitness industry. On the other hand, it is equivalent to attracting customers with low prices. The effect of price reduction is to bring in a larger user group. Leke's strategy is actually the same as that of Lefen hair dryers. It lowers the price of a 110,000 rpm hair dryer to 199-500 yuan. After two years of being online, the user scale has reached 3-4 times that of Dyson.

By seizing a large enough user base and finding a new group of people, the ceiling will be opened immediately .

2. Find new supply that can generate long-term competitive advantages

The three characteristics of traditional gyms are: low repurchase + heavy assets + high customer orders. If you want to open a gym, you have almost no chance of winning if you follow the traditional model, as the homogeneity is too serious.

In a traditional industry, the long-standing pain point of users is a starting point: What is the biggest obstacle for the public to go to the gym? Distance! Whether the gym is close to home becomes the most important decision factor.
The customer acquisition radius of traditional gyms is 2-3km. In fact, I think it’s too far if it takes more than 15 minutes to walk there. There is a gym near my home, but I don’t want to go there because it takes more than 15 minutes to walk there.

If the gym is turned into a small shop of 300 square meters and the customer acquisition radius is reduced to 1km, and it is opened downstairs of my office, I will be motivated to go there because it is convenient.

In addition, the reputation of traditional gyms is getting worse and worse, with running away, crises, and store closures becoming the norm. The mentality of the public has been broken and they are afraid of being cheated.

Leke dispelled users' concerns with a low price of 99 yuan. If users pay monthly, they will only lose 99 yuan even if they run away. Traditional gyms rely on sales channels for profit, and their main income comes from two sources: membership card + private training, which account for more than 80% of the total income. Leke's income relies on using content and services to expand user scale and increase repeat purchases. It is the application of Internet thinking and strategy to physical stores.

In my opinion, fitness, like learning, is an anti-human business. The reason why Leke can find super opportunities is that it has insight into human nature and understands users.

The reason behind Leke’s business is that it solves the real pain points of users: low price, low threshold, no need to travel, small burden, and short distance.
Leke has reduced consumers' decision-making costs and brought repeat purchases through convenience, low prices and self-service. The new supply has penetrated the industry and formed a long-term competitive advantage.

3. Achieving large-scale expansion

How does Leke expand on a large scale?

Low-cost operation enables replicable profitability of a single store.

According to Leke, if they have 250 membership cards a month, they can cover the rent and the store will basically not lose money. If they have 500 membership cards, they can live well.

Why can Leke do it? ‍‍ He crushes traditional gyms in terms of cost, reduces the area, and lowers the requirements for coaches. There is no shower room in the store, saving water and electricity costs. There is only one store manager, and reservations are made independently. ‍The equipment is only simple treadmills, dumbbells, barbells, and Smith machines. There is no large locker room, only lockers.

This will pull down pricing, equipment, rent, and labor costs, ultimately lowering prices and attracting a larger consumer base.

Gyms, like restaurants and tea shops, are essentially a floor space efficiency business that maximizes the profit of a single store at the lowest cost.

For Leke's business model, the unit price cannot be high. The only way to start is to increase sales volume, which means attracting more people to Leke and make repeat purchases.

Therefore, Leke cut off the two most profitable businesses of traditional gyms and started a 99 yuan monthly subscription to lower the consumption threshold. Another point is that traditional gyms have large spaces with high rental costs, many staff and high labor costs, and single-store profits are not good. A traditional gym that can expand to more than 50 stores is considered a relatively good one. Leke can open more than 1,000 stores because its single-store profit model is well done, overcoming the anti-scale gravity.

We have mentioned this concept in the previous article "How to expand tea brands on a large scale, sharing the successful experience of Bawang Chaji's start-up". Only when the single-store profit model is good can large-scale expansion be possible. In 2019, Leke polished a profitable single-store profit model and began to open up franchising and scale expansion.

According to the underlying logic of the Internet platform, as long as Leke's user base continues to expand and it can operate at low cost, and single stores continue to make profits and franchisees can make money, there will be a basis for scale expansion, and Leke's scale will have the possibility of continuing to expand.

Leke also has some shortcomings of its own: some franchisees have low service levels, and the equipment maintenance and site hygiene are poor.

There are differences between offline products and services and online ones. For online Internet companies, once a product or service reaches a certain scale, its marginal cost will drop significantly. However, if a physical store wants to maintain a high level of products and services, it needs to invest more costs. Therefore, if an offline store does not want to lose money, it must use good products and services to ensure repeat purchases.

Finally, let me summarize the core point: the fitness industry is very traditional and seems to have no opportunities on the surface, but Leke Internet has come up with a strategy. Another similar case is Beike. The general fitness group is generalized from the fitness group, thereby expanding the user group, and then using low cost to establish high-quality single-store profitability, overcome the constraints of anti-scale gravity, and achieve large-scale expansion.

Author: Han Xu

Source: WeChat public account: "HanXu (ID: kenengyouxihanxu)"