The unused gym membership has long been the bottomless pit of lost funds. Given shifts in working behavior, especially for millennials, the ability to maintain regular workout schedules has been difficult, particularly\u00a0when it comes to instructed classes. Enter ClassPass, a marketplace for fitness classes. For $99\/month, ClassPass offers users the opportunity to try as many classes as they\u2019d like at multiple studios within their city (up to 3 classes per month at a given studio), without having to commit to a specific gym in the process. ClassPass has launched operations in over 30 cities around\u00a0the world.<\/p>\n
ClassPass\u2019s marketplace dynamic benefits from strong network effects. ClassPass initially signs up studios and gyms offering classes within a specific city, which then begins to attract customers who may be interested in those classes to the ClassPass network. From there, the growth of customers attracts more studio partners, both in terms of additional classes from existing partners, as well as adding new studios altogether. Now that it\u2019s taken off, ClassPass has over 4000 partners around the world.<\/p>\n
Value creation<\/strong><\/p>\n From this two-sided marketplace, ClassPass creates value for studios and gyms, as well as end users. Gyms generally operate with\u00a0excess capacity, meaning they don’t absorb\u00a0fixed costs at full utilization. Any additional customer for a specific class therefore directly impacts a studio\u2019s bottom line, holding all else equal. ClassPass serves as a way for studios and gyms to better utilize their existing class offerings by featuring open classes on the ClassPass site and allowing one-off individuals to attend, in addition to their monthly subscribed customer base. ClassPass then pays the studio a portion of what it would have charged a normal customer, with estimates suggesting studios may be paid anywhere up to 50% of what a traditional customer would be paid. While the studio is technically making a loss relative to a full-blown customer, it\u2019s still able to monetize on an otherwise empty class spot. Additionally, ClassPass brings in new customers to studios, providing new avenues for customer acquisition. The one caveat is that studios often need to siphon off class spaces for ClassPass, which potentially may take away spots from traditional customers who would be willing to pay full price for that class. This requires that studios pay attention to their sell-out rates to ensure they don\u2019t cannibalize their existing revenue streams.<\/p>\n For users, ClassPass creates convenience; it allows people with busy schedules to still get in their workouts at multiple locations across a city, and also allows users to use their membership in other cities as they travel. ClassPass also features a variety of offerings, including classes covering yoga, Pilates, cycling, barre, etc., and provides users with an opportunity to try new classes they would have otherwise been unable to experience with a traditional lock-in gym membership. And finally, ClassPass offers a heavy discount on traditional pricing for active users. A traditional studio class may cost an upwards of $30 per class. With the $99 monthly subscription, ClassPass effectively pays for itself for any customer who attends 4+ classes a month. All of this, combined with an elegant mobile app for on-the-go booking and seamless integration with desktop accounts, and continuous feedback loops around user experience and studio performance, provides a flexible and simple end-user experience for ClassPass subscribers.<\/p>\n Value capture<\/strong><\/p>\n ClassPass captures value from users through their monthly subscription fees, and also offers users the ability to put their account on \u201chold\u201d for only $19, while still receiving access to one class per month (which is still cheaper than the average cost of a single class). While it does share revenue with its partnering studios and gyms (an expected $100M will be transferred to partners in 2015 alone), ClassPass has already hit a $60M run-rate revenue as of earlier this year, and currently holds a $400M valuation.<\/p>\n <\/p>\n Sources:<\/p>\n With A $60M Revenue Run Rate, ClassPass May Be The Next Uber<\/a><\/p><\/blockquote>\n