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Article / 18 August 2016 at 12:00 GMT

Fitness tracker industry awaiting Olympics windfall

Managing editor, / Saxo Bank
  • Olympics likely to see rise in fitness tracker device usage
  • Fitbit leads industry after June 2015 IPO saw company valued at $4.1 billion
  • Share price has since slumped from $50-plus high to low of around $12
  • Growth could be even faster as fast-food segment is called to the dock
  • Apple's smartwatch threat grows as wearables market slated for $34bn by 2020


A torch bearer laps up the applause as she embarks on her leg towards
the Olympic stadium in East London for the 2012 games. Photo: iStock

By Martin O'Rourke

While we're all watching the Olympics unfold in Rio with a mixture of delight, awe and, after some of the drug revelations of the last few months, the occasional bout of cynicism, we are not alone. Joe public may be an avid viewer, but it might be worth putting your feet in the shoes of those at the vanguard of the fitness tracker industry who will be expecting a massive windfall from the festival of sport.

The fitness legacy of course is part of every Olympic bid promise with London's Singapore pledge from 2005 when it won the bid — 'Inspire a generation' — typical of the usual sentiment that underpins any successful (or indeed unsuccessful) bid.

But in 2012 when the London Olympics was staged, the fitness tracker industry was in its infancy and the craze that has enveloped the leisure health sector only really began to sprout wings in 2013. The Rio Olympics will then in effect be the first true litmus test for a sector that is estimated to riise from a $2 billion industry in 2014 to $5.4 billion by 2019.

Fitbit has long been the darling of the tracker industry and in the aftermath of its IPO in June 2015, it quickly shot to a $50-plus share price for an overall market value of more than $4bn before the enthusiasm waned to send the share price below $12 in June.

Fitbit hit $50 in the aftermath of the June 2015 IPO but has since fallen to below $12

Source: SaxoTraderGO

June may well turn out to be the nadir in Fitbit's fortunes. In the last few weeks and coinciding with the buildup of excitement ahead of the Rio Olympics, the share price has steadily climbed back above $15 and once again has the $20 IPO offer price in its sights as it looks to build on the fitness wave of sentiment engulfing the globe.

Fitbit rediscovers some of its energy and drive in the last month or sof

Source: SaxoTraderGO

At the heart of the extraordinary growth in the segment are a combination of factors: the desire to emulate the performances of sporting heroes; the growing awareness of what constitutes good health; and of course the actual means to do so  — namely the devices that fit around your wrist and record your every move with a degree of accuracy that, while not flawless, enables the user to get far greater insight into his/her own personal fitness than there has ever been before.

It is part of an overall drive towards fitness and health that in the early days was epitomised by the likes of Men's Health in the publishing world and then spilled over into the personal fitness trainer sector where some of the biggest names have assumed guru-like status among their followers.

In true disruptor style, the fitness tracker industry has given the average punter an opportunity to monitor their own health and perhaps tear up forever those expensive gym memberships so often taken out in a rush of guilt after the Christmas binge subsides.

Some 80% of Americans are estimated to have redundant gym memberships which explains why gyms are so much keener to tie you into 12-month deals — rather than pay-as-you go memberships — that burn a hole in your bank account on a monthly basis.

There is a reason gyms offer special deals in January in the full expectation that only some 18% of those memberships will actually be used over the long term. It explains why gyms are often at their fullest in the first two weeks of winter's coldest month and suddenly revert to normal by the middle of February when the New Year resolution's flock finds something better to do with their time.


The harbinger of doom for expensive gym memberships? Photo: iStock

Of course, the reality is that while fitness trackers will eat into some of the gym sectors revenues — US gym membership fees in 2014 totalled $22.4bn in 2014, a 7.4% rise year-on-year —  both the traditional approach to fitness and the tracker segment will continue to thrive and complement one another over the next decade or so.

Of perhaps far greater interest to the fitness and health sector as a whole is the huge untapped potential of those who remain remote and largely unmoved (literally) by the feats of Olympians. The London Olympics is a case in point.

Plastered all over the Olympic Park in Stratford for the 2012 games, the 'Inspire a generation' message was designed to leave a legacy of a fitter, leaner and healthier nation with some £325 million set aside for grassroots sport development.

While it may indeed have been the spur that has helped propel Great Britain to second in the medals charts currently with four days to go in Rio 2016 (such a performance was absolutely unthinkable at Atlanta just 20 years ago when it finished 36th in the table with just a single gold to its name), the legacy of sport, health and fitness it was meant to leave for the general population seems to have fallen by the wayside.

UK diabetes sufferers was put at 5.5 million in 2012 on the back of sugar-laden diets and sedentary lifestyles. If further evidence that the legacy simply has not worked were needed, the latest report from charity UK diabetes shows that five million people are currently at high risk of obesity-led type 2 diabetes — the lifestyle-induced type as opposed to the inherited type 1 diabetes — and that one in ten could suffer from the condition by 2034 as obesity levels go through the roof.

Ditto the US, much of Europe and, as the fast-food industry blitzkriegs its way into Asian markets at an alarming rate, so too the likes of China where an obesity epidemic is threatening to spread like wildfire as living standards rise and quick-food outlets multiply.

While education may be part of the process, advice over what to and what not to eat, differing exercise regimes, and concerns related to our desk-bound, smartphone-centric lives of 2016, often leaves the public confused as to how to attain goals that are seemingly out of reach.

Throw in a segment of the fast-food industry that has in the past actively sought to obfuscate and cloud the food-quality issue in the pursuit of maximum revenues, and then it is understandable why the Olympian messages get diluted and ultimately binned in favour of the next quick fix.

There has been improvement in this sector, however, and a backlash against the rampant consumerism of the fast-food industry which has seen a clamp down on the massive overuse of starchy sugars and transfats, is likely to lead to more enlightenment over time as understanding grows.

That's an ebb and flow battle of course as evidenced by new UK prime minister Theresa May ripping up plans for a junk-food crackdown Thursday morning after the UK government got cold feet over fears of a post-Brexit economic slowdown and lobbying from the food industry over potential job losses.

But it is, nevertheless, changes in food-health standards that the fitness tracker industry is looking to. Olympian feats notwithstanding, the future growth of the industry will eventually be determined by better health education. And, just like the kind of funding that has helped Great Britain to its best overseas performance at an Olympics, time, money and commitment will be essential for promoting that.

That might be something for Fitbit and its cohorts to think about as the cash tills ring over the next few years.

Meanwhile, they'll also have one eye firmly fixed on Apple's smartwatch and devices of that ilk which are slated to overtake the sale of fitness-tracker devices by 2018 with 68 million sales compared to 50 million tracker sales, according to consumer tech analyst Parks Associates. That's quite a swing from when the latter accounted for 72% of the market in 2013, according to analysts NPD Group.

With Apple's vast resources on tap, the threat is obvious.r

Not everyone is inspired by their Olympic heroes to change. Photo: iStock

Martin O'Rourke is managing editor at Saxo Bank


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