Recent consumer research has convinced Nautilus’ management that the traditional home fitness-oriented customers addressed by the company have become “enthusiastic cross-trainers” who are looking for home gear to supplement their gym or outdoor exercise routines, building up to a larger addressable market. In fact, the retail channel has grown to represent about 60 percent of revenues for the group, which recently divested Octane Fitness, as more retailers have stepped up their offerings of home fitness products.
Persuaded that this hybrid or home-based trend will continue, a few days ago Nautilus presented a new “North Star“ business plan for the next five years to investors that calls for a focus on fewer brands and products, expanded omni-channel distribution and more digital connected subscriptions. The plan is designed to allow the company to keep a steady 10 percent operating margin on sales that are set to grow on average by 10 percent a year, reaching a level of $1 billion by 2026, compared with $552.6 million in 2020.
Some financial analysts did not quite believe in the company’s forecasts, indicating among other things that Nautilus is facing a lot of competition in digital fitness and that the shift to home fitness may not be as sustainable as the management believes. The company’s stock market price fell after its latest results showed that its sales for the fourth quarter were below the analysts’ estimates, and it lost some ground again after the investor conference.
According to the company’s new projections, its high-margin JRNY connected fitness subscription program is going to grow to account for 20 percent of revenues in five years’ time as the number of members should hit the level of two million by then. Described as a program that is meant to create a highly personalized fitness experience, JNRYwill be gradually integrated into the group’s two main brands, Bowflex and Schwinn, and it will also be offered to members who use a different type of equipment. JNRY is currently available in seven products, with one more to follow later this year. Partnerships with wearable smart TVs and commercial gym operators will be sought out to accelerate the adoption of JNRY.
As a brand that claims to have launched the home fitness movement in strength training 35 years ago, Bowflex will take the center stage in Nautilus’ brand portfolio, further extending its reach to cover both the strength and cardio categories. During the last holiday season, Nautilus launched the Bowflex C7 bike, two new Bowflex treadmills and an updated Max Trainer, all with the JRNY platforms on their touchscreens.
Bowflex and Schwinn will cover the medium and premium tiers of each category. Schwinn’s product range will be pared down to concentrate on the bike category, focused on the mid-price range. The future remains uncertain at this stage for the Nautilus and Universal brands of the group.
Nautilus has made a remarkable recover under its new CEO, Jim Barr, who joined the company in July 2019. At its Investors Day, Nautilus said it has restructured its product development approach by introducing a “Consumer First Mindset” by which it gathers consumer input at the very beginning of the process, followed by marketing tests to ensure that its communication will be “driving an emotional connection with the consumer.” Nautilus will also evolve its supply chain by creating “geographic diversity” in order to reduce risks and transport times.