{"id":983,"date":"2015-12-04T18:26:51","date_gmt":"2015-12-04T23:26:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/soulcycle-spinning-towards-success\/"},"modified":"2015-12-04T18:39:02","modified_gmt":"2015-12-04T23:39:02","slug":"soulcycle-spinning-towards-success","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/soulcycle-spinning-towards-success\/","title":{"rendered":"SoulCycle: Spinning towards Success"},"content":{"rendered":"

Introduction<\/em><\/p>\n

SoulCycle is a rapidly growing boutique fitness brand whose studios offer indoor cycling classes.\u00a0\u00a0 In the last two years, the Company has opened a total of 24 studios and grown revenue and EBITDA at compound annual growth rates in excess of 75%.<\/p>\n

SoulCycle has garnered a highly dedicated following and observers have marveled at the brand\u2019s \u201ccult-like\u201d status, despite the fact its indoor cycling class is a relative commodity.\u00a0 The New York Times commented, \u201cof course, as any committed SoulCyclist will tell you, SoulCycle is so much more than the free indoor cycling class you can take at your local gym\u2026SoulCycle does seem to offer something unique: a sense that what it sells is more than a workout.\u201d<\/p>\n

SoulCycle operates in the highly fragmented, competitive fitness industry and therefore its business model must deliver a differentiated value proposition for customers. To create and sustain a competitive moat, SoulCycle has oriented its business around the following tenets: (i) rapid studio growth to serve its customer base; (ii) a differentiated consumer workout experience; and (iii) customer loyalty for its offerings. \u00a0These three business goals are supported throughout every aspect of SoulCycle\u2019s operations.<\/p>\n

Site Selection and Studio Profitability <\/em><\/p>\n

In order to continue to grow its studio presence, SoulCycle must carefully structure its site selection and build out process.\u00a0 Given the Company\u2019s growth trajectory, its studios must be capital efficient and reach profitability quickly.\u00a0 Per the Company\u2019s S-1: \u201cwe target an investment of approximately $2.3 million per studio, annual revenue in the year of maturity of approximately $3.5\u00a0million, Studio Contribution Margin in the year of maturity of approximately 46% and payback periods of approximately two years.\u201d<\/p>\n

SoulCycle\u2019s operational site selection is incredibly flexible to achieve its studio growth trajectory.\u00a0 The Company often selects ground-level retail space, with limited visibility aside from a SoulCycle logo facing the sidewalk.\u00a0 Because the cycling rooms are dark, the majority of the studio is located behind street-level, allowing the Company to pick more affordable spaces other retailers might pass on.\u00a0 Moreover, the studios are frequently bare in design: they feature a front desk and small locker room with limited shower space.\u00a0 The predominant capital expenditures are related to soundproofing the cycling room and purchasing new bikes.\u00a0 Finally, because the Company sets up each cycling room to its space, it can often adapt its layout to oddly shaped formats, making its site selection incredibly flexible.<\/p>\n

\"\"\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\"\"\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\"\"<\/p>\n

Class Booking and In-Studio Experience<\/em><\/p>\n

The class booking system drives repeat customers and sustains the cachet of the brand.\u00a0 Bikes are released for the week on Monday\u2019s at noon.\u00a0 Users log on to the website and can select a particular bike in each class.\u00a0 This limited release creates hype over the booking process and guarantees demand for classes: \u201c30% of our weekly rides are reserved within the first 15 minutes of availability in the frenzied \u201cMonday at noon\u201d experience.\u201d\u00a0 If \u201clocked out\u201d of a particular class, customers can use one of their purchased classes to reserve a bike on the waitlist.<\/p>\n

The differentiated experience is augmented by the operations of its front desk staff.\u00a0 When customers arrive for a class, they sign in at the front desk at least four minutes prior to class starting.\u00a0 During the check-in process, they are offered shoes and water for purchase, incremental revenue streams.\u00a0 Free amenities (gum, hair ties) and the \u201cconcierge\u201d aspect of the check-in experience differentiates SoulCycle\u2019s fitness offering from other fitness classes.<\/p>\n

Proprietary Bike and Workout Experience <\/em><\/p>\n

The company\u2019s recent S-1 categorizes its mission as: \u201cempower[ing] our riders in an immersive fitness experience.\u201d\u00a0 SoulCycle\u2019s operations and sourcing support its goal of offering consumers a \u201cdifferent\u201d spin class experience.\u00a0 All classes are taught on the Company\u2019s proprietary spin bike which it developed with Villency Design Group.\u00a0 First, their bikes extend the distance between the handlebars and seat to support the Company\u2019s \u201cfull body\u201d workout.\u00a0 Second, the bike is 10-30% heavier with a 137-pound carbon steel frame that includes weight holders, to facilitate the classes\u2019 signature moves (e.g. push ups on the bike) and free weights portion.\u00a0 Finally, the bike is designed for durability to increase studio profitability and minimize ongoing capex \u2013 hand-sanded joints prevent rusting and the chain guards prevent moisture.<\/p>\n

\"\"\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0\u00a0\"\"<\/p>\n

Conclusion<\/em><\/p>\n

Whether or not the SoulCycle workout is truly differentiated remains up for debate, but the wheels certainly are spinning seamlessly between the Company\u2019s operations and its business goals.\u00a0 Its online user interface, in-studio interactions and proprietary bike create a visibly differentiated experience for customers.\u00a0 And its unique site selection and sourcing support its long-term studio growth strategy.<\/p>\n

Sources:<\/p>\n

SoulCycle S-1 Filing<\/p>\n

http:\/\/www.slate.com\/blogs\/moneybox\/2015\/11\/30\/soulcycle_s_superior_stationary_bicycle_is_designed_with_fitness_in_mind.html<\/a><\/p>\n

https:\/\/www.youtube.com\/watch?v=Cz1tJkRJWSU<\/a><\/p>\n

http:\/\/www.cnbc.com\/2015\/11\/11\/how-soulcycle-became-a-cultlike-fitness-sensation.html<\/a><\/p>\n

http:\/\/www.nytimes.com\/2015\/08\/09\/upshot\/soulcycle-you-say-cult-i-say-loyal-customer-base.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Introduction SoulCycle is a rapidly growing boutique fitness brand whose studios offer indoor cycling classes.\u00a0\u00a0 In the last two years, the Company has opened a total of 24 studios and grown revenue and EBITDA at compound annual growth rates in […]<\/p>\n","protected":false},"author":688,"featured_media":984,"comment_status":"open","ping_status":"closed","template":"","categories":[209,227,7],"class_list":["post-983","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-fitness","category-soulcycle","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\nSoulCycle: Spinning towards Success - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/soulcycle-spinning-towards-success\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"SoulCycle: Spinning towards Success - 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