ClassPass, an App that offers access to fitness classes from different providers in one place, currently operates in over 50 cities worldwide, with an existing international network of more than 10,000 studios and gyms. CEO Fritz Lanman is now launching in Dubai. We asked him about the growing competition in the city’s fitness industry and ClassPass’ expectations for the region in the future.
Why is now the right time to open in Dubai?
It’s not just about Dubai. ClassPass invented the model of fitness subscriptions giving a variety of classes about five years ago, but our model had problems. We were only getting the cheapest inventory from our suppliers and there were a bunch of constraints we put on the customer. For example, they could only go to their favourite studio three times. Studios were also not listing their premium classes or peak time slots, while many wouldn’t work with us because they saw ClassPass as devaluing for their brand. So about a year ago, we changed our model completely.
Now we sell you points and the suppliers can list different spots at different prices expressed in our points’ currency. This was working in the US, UK, Australia and Canada.
How did you manage to secure $85m in funding?
Because of our new model, [investors] went from disliking us to investing in our company. We weren’t out raising money; we had plenty of money left from the previous financing in which we raised $250m in total. But the opportunity to have your lead investor double down on you, especially when you’re going to launch in Asia, gave us the endorsement we needed. So that when we showed up in Dubai and spoke to local studio fitness owners, we could say, “Look, we’re different than all the discount concepts. With us, you don’t only have to offer discounts, you can list higher prices at premium rates”.
We’re using that funding to expand and taking ClassPass global. We’re doing it now because there’s enough variety in fitness to support our proposition. When you look at Dubai, it’s the most mature fitness city in the GCC and that’s why we’re here first.
Many people in Dubai are used to gym memberships. How will you compete?
We don’t see ourselves being competitive with gyms, we see gyms as supplementary to what we’re doing. We are partnering with gyms to let you visit a gym and we’ll even sell you a membership to a partner gym through ClassPass. Most people’s workout preferences are multi-disciplinary. Some like running, some like studio fitness, while others may prefer the gym. We give you the flexibility to mix and match from the different genres. Each customer can decide how much studio fitness or gym or outdoor running they want – which is why we launched an audio product. We want to help them in all different areas to find workouts that help them stay healthy.
Our biggest expenditure is marketing because we’re trying to motivate so many people to get off the couch, try the space and start working out
Are you concerned about competition at all?
We’d be concerned about competition if they had our business model and points model, which had the suppliers excited. But we know the flaws of the old model, which most of the international copycats cloned. That makes us confident that our new proposition is better for customers and studios, and when we show up in cities and talk to studios, they get excited for someone with a fresh take to come in.
What is your highest cost, currently?
People and marketing are our two biggest costs. We have 70 software engineers and data scientists, who are doing all the machine learning for customer recommendations and studios in terms of teaching them how to price their capacity. But really our biggest expenditure is marketing, because we’re trying to motivate so many people to get off the couch, try the space and start working out.
Would you ever consider an initial public offering (IPO)?
Yes, that’s absolutely our plan. The good news is that the business is in really strong shape – that’s why we were able to raise this financing with these great investors. We could be profitable if we wanted to right now, but we continue to delay it in order to scale faster. Spend more on marketing, turn up in new cities and invest in software. We certainly want to provide liquidity to our investors and employees, but we’re in no rush to go public. We’d like to build a big independent company first.
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