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Wellness and fitness services industry in India

1832 words (7 pages) Essay in Marketing

5/12/16 Marketing Reference this

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In India’s economy the wellness and fitness services industry is growing at a stupendous rate where it comprises of numerous segments which includes beauty services like salon, treatment based beauty products and yoga’s and spa’s for enhancement of personal health and rejuvenation. The fitness segment gym is also growing at healthy rates and has an estimated market size of over US $113 million.

􀂾 According to the Statistics of the IHRSA Asia Pacific Market Report, there were 765 fitness clubs in India during the period of 2007- 2008 with a total membership of over 0.23 million and as of a fact compared to people living in India is very less and we can say that market is under penetrated when compared to other several developing and developed countries. Therefore, the fitness and wellness Industry in India has a very major scope to develop and penetrate the market to make higher profit and provide high level of wellness service and make India fit.

For instance, 16.0% of the US populations have fitness club membership compared to a mere 0.4% for Indian markets (taken for Top 7 cities). This is despite the fact that India has the highest incidence of diabetes people in the world pegged at 50.8 million people.

A comparison of Indian market with other markets is presented below:

• Presently, the fitness industry is in its nascent stages. The industry is very fragmented with majority of the market being dominated by a large number of mom-and-pop gyms. Every club offers similar basic gym facilities and there is complete lack of product differentiation. The market also appears to have a shortage of talent, since qualified personal trainers, nutrition consultants and professional managers are scarce, which also contributes to the lack of differentiation.

• This high degree of fragmentation, lack of product differentiation, and customer price sensitivity result in prevalent price competition and low margins.

• Yet, on the other hand, awareness about fitness and a healthy lifestyle is growing; along with higher disposable incomes and a growing young population. India presents a huge opportunity for the health and fitness industry with over 65 towns having a population greater than 500,000 as per Census 2001 statistics.

• Clearly, there is a huge supply-demand gap in the health and fitness industry. There is a visible pent-up demand for quality health & fitness services at affordable price. This is where the organized sector has stepped in.

• To tap this vast potential, organized domestic players brands like Talwalkars and Fitness One along with international chains like Gold Gym and Fitness First have announced expansion plans into India, attempting to have a national footprint. Market share of top 5 players by number of clubs is 14.4%.

• This compares with over 40% market shares in Japan and Singapore and about 20% in Mainland China, Australia and New Zealand for the top 5 players. Thus, the organized players in India have huge scope of consolidation going forward.

Growth Drivers for Fitness Industry

India has a population of around a billion which is growing at a rate of about 1.7%. A global industry report suggests that in general, more people between the ages of 18-54 exercise. However, in India age group 20-44 can be mainly identified as prime market for fitness clubs. The proportion of people in the age group of 20-44 is projected to go up from 37% in 2006 to 39% in 2011 and 40% in 2016. This is an addition of approximately another 4.6cr and 4.2cr in terms of population between 2006-11 and 2011-16 respectively.

To put things in perspective, even if assume a modest 1% of this eligible population enrol into fitness clubs, the potential addition to fitness market could be approximately 0.46 mn and 0.42mn respectively, which is very significant compared to the total current membership of about 0.23mn in the fitness industry

Increasing incidence of lifestyle diseases

• Significant changes in lifestyle related to lack of physical activity and increased consumption of fast foods among both affluent and working class population has led to the greater need for healthy lifestyles through sports, fitness centers and counselling on dietary habits.

• According to International Diabetic Federation (IDF)’s latest report released at the 20th annual World Diabetes Congress in Oct 2009, India leads the world in the number of people suffering from diabetes and by 2030; nearly 9 per cent of the country’s population is likely to be affected from the disease. About 50.8 million people are now suffering from the looming epidemic of diabetes, followed by China with 43.2 million.

• IDF estimates that Type 2 diabetes constitutes about 85% to 95% of all diabetes cases in developed countries and accounts for an even higher percentage in developing countries.

• There is a huge emphasis on regular exercise to prevent obesity and diabetes. IDF estimates that up to 80% of type 2 diabetes is preventable by adopting a healthy diet and increased physical activity.

Health care club market in USA is getting more and more demanding with the passage of time. Following are the common demands that have arisen in recent past.

1. Customization: People who already have membership or those who are willing to have one, are interested in subscribing to a customized health care plan according to their requirements or as per the recommendation of medical expert.

2. Ease of Service: People are looking for exercises that are easy to adopt and are performed by expert trainers.

3. Effectiveness of Exercise: Members are very demanding over results of the exercises which they are performing. An expert trainer can be helpful in setting a proper exercise plan for the members so they can work out accordingly.

Factor Causing Market Demand

The increasing Per Capita Income in US during the last decade has enable its people to emphasize more on their health related issues such as spending time in health care clubs and gyms. Health care expenses are directly powered by this increase in per capita income.

Market Trends:

Health care club industry has been changing its trends very quickly of late. Last five years have seen major changes in trends such as following:

1. Individual usage of fitness and health care training equipment has increased.

2. Body work out and exercise has become a daily life routine of many Americans in the last decade.

3. Fitness memberships are increasingly getting popular in office environment of USA. Companies are including health memberships as part of employee remuneration package.

SWOT Analysis

Strengths:

ƒ˜ To attract and maintain customers in this highly competitive market, management commits itself towards a result oriented approach.

ƒ˜ According to the need of layman, health care program are well structured and maintained.

ƒ˜ Lowest cost of amenity in the entire market of Coral Gables.

ƒ˜ Qualified and trained staff will be hired by the company.

Weaknesses:

ƒ˜ Personal training services are of higher costs as usual due to personalized aspect.

ƒ˜ Due to lower number of staff in fitness Plus, it can be difficult to provide service to a large group of members at a same time which can hinder the business growth.

ƒ˜ Fitness Club is much or less short of marketing budget and various tools to implement the plan and therefore it’s very difficult to attract large business client.

Opportunities:

ƒ˜ Health care segment is growing at a very fast pace and therefore it needs better facilities and its proper implications to satisfy the customers at most.

ƒ˜ Due to obesity and other heart diseases, people are developing interest in going to fitness clubs for exercise and other health care activities.

ƒ˜ More and more individuals are making gym and fitness clubs in their daily routine of life.

ƒ˜ Due to A large segment of market is still unexploited, low income area will be of superior focus for Fitness Plus which is completely overlooked by the competitors.

Threats:

ƒ˜ The economic cycles like Recession and economic depression can slowdown the progress of fitness clubs.

Competitors providing all facilities at a lower cost can pose as threat but by product differentiation, the fitness plus can overcome, it’s a small level threat due to a statistic that believes that this market segment is rapidly growing.

ƒ˜ Home exercise health care equipment’s are available at a very low cost that can pose a serious threat to industry, this can be overcome by providing personal touch to it with personalized training and coaching for each individual to achieve what the wants to achieve like Weight gain or loss, body building, Aerobics, Cardiac exercises or normal workout.

Startup Expenses

Fitness Plus, Inc

Sources of Capital

Investment requirement

$1,000,000

Total Investment

$1,000,000

Start-up Expenses

Health club development

$346,000

Personnel

$290,000

Capital Expenditures

$150,000

Consulting Services

$90,000

Promotion

$5,000

Total Start-up Expenses

$881,000

Sales Forecast

Fitness Plus, Inc.

Year 1

Year 2

Health Club memberships

Year 1

25000 members

$1,225,000

Year 2

100,000 members

$4,900,000

Year 3

300,000 members

Others:

Sales of training equipment (20% growth each year) –

35,000

Total Revenue

$1,225,000

$4,935,000

Profit and Loss Projection (3-Year)

Year 1

Year 2

Year 3

Revenue (Sales)

Health club memberships

$1,225,000

$4,900,000

$14,700,000

Sales of sports training equipment

$35,000

$42,000

Total Revenue (Sales)

$1,230,000

$4,940,000

$14,751,000

Operating Expenses

Health club development

$346,000

Personnel

$290,000

$840,000

$940,000

Capital Expenditures

$150,000

$148,200

$150,000

Consulting Services

$90,000

$480,000

$480,000

Promotion

$5,000

$6,000

$6,000

Total Operating Expenses

$881,000

$1,474,200

$1,576,000

Profit Before Taxes

$322,900

$3,385,800

$13,025,000

Taxes (10%)

$32,290

$338,580

$1,302,500

Net Profit

$290,610

$3,047,220

$11,722,500

Breakeven Analysis

Fitness Plus, Inc.

Cost Description

Fixed Costs ($)

Variable costs (%)

Variable Costs

Personnel

10.00%

Consulting services

3.00%

Fixed Costs

Health club development

$346,000

Personnel

$290,000

Capital Expenditures

$150,000

Consulting Services

$90,000

Promotion

$5,000

Taxes

$32,290

Total Fixed Costs

$913,290

Total Variable Costs

13%

Breakeven Sales level

1049759

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