The collapse of Space, a warm goodbye

This article is from the WeChat public account: Most Words FunTalk (ID: iFuntalker), author: Wei Xia, editor: Wang Fangjie, header picture from: Visual China

"We've all been spoiled by Space."

The day before the May Day holiday, the high-end gym Space suddenly "ran away", and in the subsequent rights protection group spontaneously established by members, a Space member said:

In the group, they hardly mentioned the topic of rights protection, and the most discussed was the question of "home" in the future. In the past half a month after the Space "ran away", these members went to other gyms one after another, hoping to find a "replacement" for Space as soon as possible, but the results were not satisfactory. Some people complained that their knees were "bad" after using the yoga mat, and some people complained that they couldn't take a shower after exercising and could only go home slimy, which made them miss Space even more.

Everything made Space's farewell seem warm, and even the coaches who lost their jobs held a farewell party in Chaoyang Park, and everyone's faces were full of smiles. Members also exchanged new fitness trends in the rights protection group, and their emotions were terrifyingly stable.

There are many members who vividly describe the "running away" incident of Space as a cliff-like breakup, which is enough to see that members have a very deep affection for Space. Because of this, many people can't understand why Space, which has such a high-quality member group, has come to such an "undignified" ending, and why it hastily closed all its stores without giving members an explanation.

In a letter to employees and members, Space mentions that it has done everything possible to recover since the pandemic, and that it has developed and implemented several solutions over the past few months to get its business back up and overcome challenges.

It seems a pity to survive the epidemic but fall into the "spring" when fitness consciousness is awakened, but the end of Space may have been doomed at the beginning.

One

"Each classroom in the Space is very large, there is a social space in the atrium, you can take a shower after exercising, and the fitness equipment is also of high quality, and the yoga mat is lululemon." A Space member told "Words" that she is very keen to buy all kinds of fitness cards or class bags, and the experience that Space has given her is very good, and for a long time, going to Space to exercise has become her regular habit.

In addition to the environment and hardware, Space's trainers are also an important foundation for high-quality fitness. Space was founded in 2015 by Matthew Allison, the former founder of Sony Music China. The coach of Youspace said on Xiaohongshu, "The final level of the assessment at that time was to ask the coach to teach a lesson with a 'story' sports song list, so that the coaches could freely use their imagination and express their style and attitude to life with music." ”

Under this selection mechanism, Space has trained a considerable number of star coaches, which has also become the core competitiveness of Space. A member of Space commented on Xiaohongshu, "The coaches are very enthusiastic, they all have their own style, they won't sell classes, and they won't PUA where your body is not good, and after a class, hot sweat and happiness coexist." Some people also joked that Space turned sports into star chasing.

In addition to providing members with a beautiful experience, Space's charging model is also a major reason for this farewell to be "warm".

"The big promotion started in October last year, buy 12 months and get 2 months free, 30 festivals per month, but after I bought the annual card, the Jindong card is still deducting money, and the explanation given by the customer service is that the deposit can only be refunded and the deduction can be stopped until 36 periods (12 periods are a cycle)." A Space member said in the rights protection group. According to media reports, Space also frequently held promotions in March and April this year, you can buy a year and get a month free, and some members recharge 18,000 yuan in this promotion.

However, in the rights protection group, there are still a few members who have lost tens of thousands of dollars. Unlike traditional gyms, annual passes are not Space's main products, which mainly sell class bags and monthly passes.

"I bought a class bag 5 times before, more than 700 yuan." The above-mentioned Space member told "The Most Talk" that the main reason why members can calmly look at the matter of Space "running away" is because the loss of buying monthly cards and lesson bags is not too much.

"Space gives me the feeling that it is very decent, and I also bought its gym box during the epidemic, and I don't think it is very easy to use, and it also recycled it for me." This Space member couldn't figure out why Space would use this way of promoting annual cards to "harvest" its long-time old members when they were "dying", and then choose to leave in such an undignified way.

Of course, it was this not-so-successful fitness box that gave this member a vague sense of the chaos in the development of Space. During the epidemic, due to the inability to carry out offline classes, many gyms for group exercise classes began to explore online business. However, most companies only adopt the lightest way and choose a short video platform for live broadcasting. But Space rushed to launch its own hardware products.

After receiving the goods,The above-mentioned members found,This is an ancient TV box,It's just one more camera,The whole set of hardware looks very rough,The software runs not smooth,Of course,Less than 1000 yuan,When sending offline classes,Under the premise of such a price,There seems to be nothing to complain about。

In August 2023, Space announced that it was terminating the project.

Two

Judging from past cases, one of the main reasons for the closure of traditional gyms is "blind expansion", while Space has expanded relatively slowly, with only 8 stores in Beijing, Shanghai, Taipei and Hangzhou in eight years since its establishment. Space's talisman is precisely hidden behind these "good reputations".

"Generally speaking, in core business districts such as Beijing International Trade Center and Taikoo Li, store rents usually need to be pressed and paid three." A person in the real estate industry told "the most talk".

That is to say, Space, which is located in the core business district of every inch of land and every inch of money, has to bear the rental cost for six months before generating income, and then its rental cost cycle is always three months, but compared with the charging model of "lesson package" and "monthly card", its income cycle is often only one month, and it seems that there will always be a "mismatch of funds".

This model is very operational, and financial stress can arise in the event of a decline in revenue. Part of the reason why Space was able to survive the pandemic was that some rent relief policies at the time eased this part of the pressure.

On the other hand, unlike the traditional gym "coach is sales" model, coaches in the group exercise class model do not need to undertake sales tasks, and their income mainly comes from class fees. It is also because of this that the salary composition of traditional gym coaches is mainly in the form of "basic salary plus commission", and the management costs that gyms need to bear are positively related to the level of profitability, while Space, regardless of whether it is profitable or not, needs to bear the salaries of coaches and social security and other costs.

Under the premise of high fixed costs, the ceiling of Space's revenue is extremely obvious, because the number of classes scheduled per store and the capacity of each class are basically fixed. But the reality is that no store can reach this ceiling.

"Popular courses have to be rushed to get an appointment, but there are very few people who go to classes at other times." The above-mentioned Space members told "Most Talk" that a considerable number of Space members are office workers around the area, so Space will consider the time schedule of these members when arranging courses, and the course schedule is not very friendly to members with irregular working hours.

There is an upper limit on the "ping effect" during prime time, and the "ping effect" is very low during the rest of the time, which is the profit pain point of Space. Although it is friendly to members to adopt a class fee model, as far as the gym itself is concerned, it has lost the core source of profit in the business model, that is, members who do not go to the gym.

It is precisely because of the existence of this part of the membership that traditional gyms can oversell annual cards, in other words, this business model is similar to life insurance, gambling that it does not need to be delivered.

"This industry is being led crooked by super orangutans." A fitness industry insider sighed. Founded in 2014, Super Gorilla is the first chain gym in China to take the single-charge group exercise model, and it is the first to lead the trend for a while.

It may have felt the constraints of this business model much earlier. A person who has worked out at Super Gorilla told us that around 2021, he clearly felt that Super Gorilla was increasing the number of people in a single class to increase the ping effect. Since the gym is generally small, he feels very crowded, and "the sweat of the members next to him seems to be able to throw it on himself." ”

After the experience deteriorated, the Super Gorilla member switched to Space. Due to the high-end route, Space's classrooms are bright and spacious, and the number of students in a single class is strictly controlled, so everyone has room to perform.

Indeed, the emotional value of the "positive life" that Space can provide makes it highly sought after by the middle class. Space is positioned as a mid-to-high-end fitness company, and its members are mostly 25 to 45 years old, and have the characteristics of stable life and high income. However, in recent years, with the change of consumption habits, some outdoor sports such as hiking, camping, and cycling have squeezed out part of the spare time of the above groups, and based on expectations, they will also reduce some non-rigid demand expenditures accordingly, which is also a major reason for Space's difficulty in profitability. According to the "2023 Fitness Industry Data Report", as of December 2023, there were 69.75 million offline paid fitness members nationwide, down 2.38% month-on-month.

Space's profitability pressure has long been hinted at. Since 2022, Space has successively closed three stores in Shanghai Ganghui Hang Lung, Hangzhou Hubin Yintai and Shanghai Xintiandi, which has also aroused the vigilance of Space members.

A member of Space said on Xiaohongshu that the staff of Space had sold him a half-year course package in March, but he did not buy it because he suspected that Space was "about to go out of business", and asked to withdraw from the class, but the staff only gave a reply of "We are operating very well". The social nature of Space increases the stickiness of members, but also accelerates the spread of negative information and emotions among members, which also directly affects the effect of Space promotions, resulting in the failure of its regeneration.

To sum up, there are many reasons for Space's collapse, but the root cause is that its underlying business model is difficult to run.

Three

After the wave of traditional gyms running away and going out of business, the fitness industry has fallen into a crisis of trust, and many gyms have set up consumption traps through refund thresholds, which also makes consumers feel uneasy about "annual cards", and even "two-year cards" and "three-year cards". In this context, Super Gorilla has created a precedent for retail models and told the story of a "new fitness format" based on Internet product thinking.

The advantages of this model are obvious, the form of monthly payment/single payment reduces the pressure on users, and also allows users to take off their psychological defense. According to the results of a fitness user survey, among the key considerations for potential users to choose a gym in the future, 42% of them are flexible card types (monthly cards), which is the first consideration; followed by interested special group courses, accounting for 39%; Again, there is the distance factor, which accounts for 35%.

But this model can also easily lead to financial crises, and from an operational point of view, the company's cash flow will be put to great challenges.

Although traditional gyms need to invest a lot of costs in fitness equipment and fitness venues in the early stage, they can alleviate the pressure on cash flow by prepaying annual cards and other methods, and can even use this part of the funds to continue to open stores, so as to expand the scale of operation. However, new gyms such as Space and Super Gorilla cannot guarantee cash flow through the prepaid model, and can only rely on burning capital to maintain their operations.

In the early years, by telling new stories, this new type of gym was indeed once sought after by capital. So far, Super Gorilla has completed 7 rounds of financing, only from 2015 to 2017, it has completed 5 rounds of financing in succession, but the most recent financing is in 2021; In 2017 and 2018. Space has received two rounds of financing, of which Series B financing was led by Alibaba Taiwan Entrepreneurs Fund, with a financing amount of RMB 100 million.

But as the capital boom faded, cash flow problems followed. From the day Space chose the new fitness model, there were only two paths in front of it: one was to tell a good story in the capital market and go public; The other is that there is no capital to enter the market to cover losses, and it can only go to the end of closing the door. Obviously, Space's first path did not go through, and even though it has become a social label in certain circles in Beijing and Shanghai, it is not enough for capital to continue to pay.

Not only Space, but other brands in this model are not having a good time.

For example, Super Gorilla has closed nearly 10 stores this year, and the resignation of star coaches in Shanghai has caused quite a stir in the membership circle; Not long ago, Leke's "cancellation of 9.9 yuan boutique class" group class adjustment measures also caused a crisis of confidence, and some coaches told the media that Leke was using a covert way to "reduce costs and increase efficiency". After the cancellation of the boutique class, the class schedule in his area was reduced by half, and if you want to achieve the original class time, you need to go to a farther place to schedule the class, and another Leke coach revealed that his monthly income was reduced by 5,000 yuan after the cancellation of the boutique class.

However, it is rare that in the half month without Space, the coaches and students did not "get separated", and the coaches cooperated to set up the stage again and teach classes to the old members. The current Space rights protection group has become an appointment group for following star coaches, and the courses of several star coaches have been observed by "the most talk", and they all show the status of "contract expired" until the 22nd.

Maybe with a different mode, Space will have a better ending.

This article is from the WeChat public account: FunTalk (ID: iFuntalker), author: Wei Xia, editor: Wang Fangjie

This content is the author's independent view and does not represent the position of Tiger Sniff. May not be reproduced without permission, please contact [email protected] for authorization

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