- As fitness companies struggle to stay in business amid the pandemic, ClassPass has stayed afloat thanks to its ability to evolve quickly, launch new revenue streams, and prioritize the needs of its customers.
- Within ten days of statewide shutdowns, ClassPass launched a live-streaming platform that allowed its partners to offer virtual classes. A month later, the fitness startup was streaming 50,000 classes a week from 4,000 studios around the world.
- Though the company has taken a sales hit from eschewing commissions and disabling recurring monthly fees for members, ClassPass CEO Fritz Lanman told Business Insider its part of a long game strategy toward its initial public offering.
- "We're really lucky that we're well capitalized to weather the storm and we have the resources that we need to build the company that we want to build," Lanman told Business Insider.
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As a growing number of fitness companies crumble under financial pressures wrought by the pandemic, ClassPass has managed to stay afloat, despite a business model primarily based on indoor group fitness classes.
According to ClassPass CEO Fritz Lanman, the fitness startup has held steady thanks to its ability to evolve quickly, identify new revenue streams, and ensure it puts its customers first. For ClassPass, this has meant prioritizing customer loyalty even if it means sacrificing profits — a long-term effort the company is uniquely positioned to take after raising $285 million in its most investment round in December 2019.
"We decided let's not be pennywise and pound foolish," Lanman told Business Insider. "Let's not only preserve the membership and keep churn very low — because our partners are really going to need us to send them a lot of volume to stay in business — but let's also use this as an opportunity to earn the trust of our customers by showing that we will put their safety first."
Within ten days of statewide shutdowns and stay-at-home mandates, ClassPass set up a live-streaming platform that allowed its partners to offer virtual classes and one-on-one training sessions while waiving its commission fees. A month later, it was streaming 50,000 classes a week from 4,000 studios around the world, Lanman said.
"The ability to take a boot camp class with an instructor in Singapore or a yoga class with an instructor in LA whether you're in New York City or Missoula, Montana proved to be a really effective model," Lanman told Business Insider.
'Let them work out the way they want to'
In addition to its early success with streaming, ClassPass has also managed to ink significant business deals in the middle of the pandemic. Last week, the company announced it would serve as the exclusive aggregator for Xponential Fitness, which owns popular brands like CycleBar, Pure Barre, Row House, and Club Pilates, among others.
Still, Lanman said the onset of the pandemic was a "scramble" for the company, and it has been an incredibly difficult operating company that exists in 20 markets, each with different protocols and restrictions related to the coronavirus. Chloe Ross, VP international at ClassPass, told Business Insider in August that during the first ten days of shutdowns, the company lost 95% of its revenue.
These pandemic losses are not insignificant, especially when paired with sales hits from disabling recurring billing and pausing partner commission. However, Lanman said it's a price worth paying to build consumer trust as the company moves toward filing an initial public offering.
"We're really lucky that we're well-capitalized to weather the storm, and we have the resources that we need to build the company that we want to build," Lanman said.
Lanman said a crucial part of building trust has including integrating new product features that allow gyms and studios to highlight "how rigorous they're being around social distancing, mask-wearing requirements, temperature checking at the entrance, and cleaning routines." Another feature gives partners the option to add outdoor classes for booking.
"Our approach, in general, has been to be very flexible with customers, to let them work out the way that they want to work out, provided it's legal, and to be very conservative in terms of turning our back to auto-billing or recurring billing," Lanman said.
The company has additionally benefited from its recent foray into health and beauty services, which the company first began offering in early 2018. During the pandemic, ClassPass has bulked up salon and spa services that Lanman said customers might feel more eager to do in a one-to-one environment as compared to group fitness.
"Most of those treatments tend to be one-to-one, so they're perceived as being a bit safer than being in a group environment," Lanman said. "By adding wellness and beauty and additional digital experiences like one-to-one personal training, we've expanded our product portfolio and the different ways that you can get value from ClassPass. That protects us from COVID in a prolonged situation."
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