After Leaving the Big Chain Gyms, How Did They Build Their Own Fitness Studios?

Once fitness became fashionable, people began demanding better service and a better experience. For the entrepreneurs opening fitness studios, the hardest part isn't the training expertise.

After three months of preparation, Dang Ningyuan opened his fitness studio, DNF Fitness Space, in Shanghai's Pudong district at the end of 2014. The studio sits on Laoshan Road: 2.3 kilometers to the north is the Babaiban shopping and business complex, and 2.1 kilometers to the west is the upscale Shimao Riviera Garden residential compound.

Dang was reasonably happy with the location. He had studied the Pudong New Area and narrowed his ideal site down to four options: Babaiban; Lujiazui, the financial center; the Zhangjiang Hi-Tech Park; and Zhuyuan, the new CBD business district.

These areas fit his target customer — "white-collar and up, manager level" — people willing and able to pay 350 to 480 yuan for a single personal-training session. At three workouts a week, that puts each customer's monthly fitness budget above 4,000 yuan.

When Dang first heard the rent was 70,000 yuan a month, he hesitated: he doubted he could handle 500 square meters. He had wanted to "try out" something closer to 300. But his trainers were waiting for him to open for business, and before he found this place a broker's empty promises had already cost him a month. Short on time, he signed the lease anyway. He had run the numbers: the rent was steep, but "as long as I can last three months, I believe there won't be any big problems."

Dang graduated from Xi'an Physical Education University, started working as a fitness trainer in 2005, and moved to Shanghai in 2007. By the time he was getting his studio ready in 2014, he had more than 100 active members in his own network.

He put up his savings to cover six months of rent and operating costs, including salaries for four trainers besides himself. He was prepared for the worst: "If I can't make it past three months, that just means this isn't for me."

In 2014, the idea of a "fitness studio" had not caught on. By Dang's own research and estimate, Shanghai had only about 40 of them at the time. Commercial gyms have barely 20 years of history in China. Will's Fitness opened in 1996; Tera Wellness was founded in 2001; and the Hong Kong chain Physical entered the mainland at the end of 2002, opening its first club in Shanghai's Metro City mall. These large chain gyms, often more than 2,000 square meters, were stuffed with treadmills, ellipticals, stationary bikes and other bulky cardio machines — for a long time, that was what people pictured when they heard the word "gym."

Fitness studios are different. In China, the term usually means a smaller gym (some as small as 100 or 200 square meters) where personal training is the main format; a studio carries a wide variety of equipment, but only a few of each kind. Even in Europe and the US, where the fitness industry is more mature, private studios only became popular in the last seven or eight years.

Lu Shun thinks studios built around personal training "weren't really brought in by anyone — some people (meaning fitness trainers) felt their skills had matured and wanted to try something new." That's how they appeared in China.

Lu Shun is the founder of Lu House, a studio that now has two locations in Shanghai, with a third opening this summer. Before he started Lu House in 2014, Lu had been in fitness for more than seven years, including four-plus years in sales at large gyms such as Tera Wellness and the Megafit fitness centers.

For the fitness industry, 2014 was a landmark year. Midyear, the O2O self-service fitness platform Super Monkey was founded; at the end of the year, the mobile fitness app Keep was founded, launching in early 2015. The former raised a Series A round in the tens of millions of yuan this March; the latter closed a $32 million Series C two weeks ago, and one report citing Keep's own figures put its user base above 30 million.

Capital has been flowing toward fitness studios too. Within a year and a half of starting out, both Dang Ningyuan and Lu Shun were approached by venture capitalists. The investors offered 5 million yuan, on condition that the studios grow to 10 locations — within six months in one case, a year in the other. Both men said no.

Capital is a weathervane for how hot an industry is, but you have probably felt fitness's rising popularity yourself: photos in WeChat Moments showing off ab lines, marathon finishes, even daily step counts; friends who suddenly decide they need to hit the gym; the one who is hooked and keeps pushing you to try a personal trainer. Enthusiasm for health has gradually turned into demand for fitness.

During his interview with QDaily, Lu Shun took at least two calls from prospective customers. What people most want to know is: Does training at a fitness studio work? Can it help me lose weight? How do you charge?

His usual answer: "I can't promise results, but we have a free trial class, so come and see for yourself. It's 280 yuan for a one-hour session." What reassures Lu now is that hardly anyone asks him, "Are you guys going to go under?"

That was also the question Dang Ningyuan heard most often a year ago. "A large share of the people who find their way to a fitness studio have no experience with one," he says. People fear two things: that a small storefront means the place will fold, and that they will be sold to.

He knew exactly why people feared the sales pitch. It used to be the most important part of his job.

Before he founded DNF, Dang worked at MOB and Will's Fitness, moving from personal training to group-exercise instructor, and eventually becoming a group-exercise manager and a store manager.

Being a personal trainer meant selling packages. That is how large chain gyms work — the trainer doubles as the salesperson. Talking about the years he spent selling training packages, Dang buried his face in his hands, embarrassed, laughing until he turned red.

Insiders call the method "POS." Staff from the sales department sell the customer a membership card first (large chain gyms split their operations into a sales department, a group-exercise department and a personal-training department). Then a trainer from the personal-training department pitches training packages — usually starting with strength-machine classes, then small-equipment classes, combat classes and stretching classes, sometimes rehabilitation classes too — and when that cycle ends, it starts again, sometimes for several rounds.

A customer typically ends up buying 200 sessions this way; at a minimum of 350 yuan a session, the whole run costs about 70,000 yuan.

Dang sold packages like this himself. Before 2009, though, life was relatively easy. He was a personal trainer at a large chain gym then, with a monthly KPI of 100 one-hour sessions plus 30,000 to 40,000 yuan in package sales; if he worked hard, a monthly salary of 15,000 yuan wasn't hard to reach.

After China's stock market bull run in 2008, capital poured into fitness companies. As Dang remembers it, the "sell cards cheap, sell packages dear" model used by Hong Kong and Taiwan fitness centers reached the mainland after 2010. "That suddenly made gym profits extremely high, and gyms started closing deals by force, high-pressure stuff."

Starting at the end of 2009, the KPI target for the whole personal-training department at Dang's gym rose from 120,000 yuan to 240,000, then 360,000, then 480,000, and now stands at 800,000 to 1 million. Sales grew more than eightfold; the number of trainers only doubled.

Zhao Min, who worked as a personal trainer at Physical and Tera Wellness, described his working life around 2012 to QDaily: "You just train members one after another, with no proper time to eat." Besides selling packages, Zhao said, trainers were also told to push nutritional supplements. "If you couldn't sell packages, if you had no numbers, you were out." Trainers who got fired, Zhao recalls, mostly just moved to another gym and did the same work there.

Dang couldn't take the pressure, and in 2012 he asked to transfer to the group-exercise department. As a group-exercise instructor, he had more free time. That is when he started training abroad, traveling to Australia and New Zealand in 2013 for fitness industry conferences.

For the first time, he saw that gyms abroad were nothing like gyms in China: no trainers selling packages, no aggressive salespeople. Fitness enthusiasts there usually went to a small studio first, learned how to train properly, and then moved on to a large gym to work out on their own. Dang thought the model made sense, and figured Chinese consumers should want the same thing.

The idea of opening a studio started forming then. What pushed him to commit, though, may have been a set of industry signals that began appearing in 2013: that year the State Council issued its "Several Opinions on Promoting the Development of the Health Service Industry" (《关于促进健康服务业发展的若干意见》) to encourage the fitness industry; and according to a report from the Asian Academy for Sports & Fitness Professionals, even as the number of general fitness instructors fell, the number of personal trainers grew 3.28% in 2013, to 16,000.

Lu House also opened into this favorable climate. In 2014, Lu Shun, then working in a gym's sales department, left the Megafit fitness center and began preparing his own studio.

Both Lu Shun and Dang Ningyuan remember plenty of uncertainty from their first months, but many signs suggest they picked the right moment.

According to a Boston Consulting Group report, future growth in consumer spending will come mainly from the middle class earning more than 12,000 yuan a month, whose total spending is projected to keep growing 17% a year for the next five years — with 51% of it going to services rather than physical goods.

In August 2014, Lu Shun put up his savings and borrowed some more from friends and family, pulling together 268,700 yuan. He paid 15,000 yuan to rent a 200-square-meter space on the 15th floor of a mixed-use commercial-residential building on Lujiabang Road in downtown Shanghai, and another 110,000 yuan for a chest press, a bench press, a small cable crossover and a Smith squat rack from an equipment distributor in Nanjing — the machines a fitness studio uses most. He didn't buy many treadmills and the like, partly because they take up too much room, partly because they are too easy to use and don't suit the targeted training a personal trainer does.

That decision cost him. Before Lu House opened in October, about 20 people told Lu they would come by to support him; in the end, exactly one did. "They couldn't accept that I had no treadmills."

Lu Shun had never run a business, and worked everything out from scratch — the site, the renovation plan, the equipment, the negotiations with the building management and with neighbors who came to complain. In the first month of renovations, his weight fell from 75 kilograms to 64.5 kilograms; he is 180 centimeters tall.

During that stretch Lu, who came out of sales, earned his personal-trainer certification and designed several muscle-building programs himself. Then he found that most of the people coming to him weren't men who wanted to bulk up but women who wanted to lose fat and slim down. So he paid out of his own pocket to learn the training protocol for HIIT, an interval program aimed at fat loss.

In the early days, the worst worry was where customers would come from. "I couldn't sleep, couldn't eat properly, and every bit of the pressure and the worry landed on me alone," Lu says.

Just as Lu feared, Lu House had no business for its first two months. His daily job was to work out, keep studying, and hand out flyers near the studio. He got up before dawn, because he had to tuck flyers printed with the Lu House name and his personal WeChat ID under the windshields of parked cars before commuters set off. Then, after office workers finished for the day, Lu went out again with another stack. Shanghai had just turned to winter, and Lu still remembers standing there in a padded coat with his hands frozen red, two hours in the morning and two hours at night. In all he handed out more than 5,000 flyers.

"Back then it was just flyers — we weren't even on Dianping, and I had no money." Lu had calculated that if one customer came in for every 50 flyers, the studio could survive. At that point he was the only person there, teaching, running the place and handing out flyers himself. "If you got one customer out of 20 cars, you thanked heaven for it."

The flyers paid off in the studio's fourth month — new customers, plus some help from friends, brought Lu his first 100,000 yuan. He still remembers writing his first 2,000-yuan training-package order; he was "excited for a whole month."

The studio slowly took hold. A year in, Lu had more than 60 members, some in small group classes, some in one-on-one personal training, and the studio's annual revenue passed 1 million yuan.

That is when the second studio opened. Lu tracked down a former colleague and asked him to introduce a trainer. He chose a spot closer to Xintiandi, in the busy heart of the city, having found that customers there spend twice as much on fitness as those in an ordinary residential area. The two locations now have 18 trainers between them, and the price of a personal-training session has risen from 200 yuan in 2014 to 280 yuan.

Venture capitalists came knocking around then, and Lu turned them down. "It sounds impressive to say you have a dozen-odd locations, but if you don't have the people, forget a dozen — a hundred would be useless."

Dang Ningyuan knows this problem of managing people too. "This is an industry that grinds people down. Managing people is the hardest part."

He learned it the hard way once. In 2015, DNF hired a trainer who left six months later and took a fifth of the studio's members with him. Poaching customers is common in the fitness industry — the first members of a fitness studio are usually clients its trainers "captured" from large gyms — but for Dang this came out of nowhere, and "hit hard."

All he could do was find ways to keep his trainers, such as connecting them with "chances to get known."

Dang Ningyuan is a contracted Adidas trainer. The official adidasGirls WeChat account lists DNF as one of its Shanghai partners, and DNF has hosted several adidasGirls training camps. Walk into DNF's newly opened studio near Century Park and the first thing you see is a huge Adidas poster; Dang says this is "ad space" the brand bought, and it brings DNF income every year.

To hold on to good trainers, Dang offers to make introductions for them: "I can move you along through my channels — you can get known, you can even sign (with Adidas)." Signing with Adidas means a chance to coach at the sporting events Adidas runs: half marathons, university games and the like. For a personal trainer, that is hard to resist.

At the start, Dang's worry was how to attract customers; now he thinks trainers he can rely on are much harder to find than members. "Traditional gyms put pressure on you to hit sales numbers; for us it's more pressure to deliver service." People come to a fitness studio expecting a better service experience, Dang says. He believes a good personal trainer needs more than solid technique — he also has to "understand psychology, pay attention to mood and diet, and nag the member like a nanny."

An American personal trainer once described this relationship vividly: "Personal training is fundamentally an art of entertainment, or really an art of listening — you have to talk with the client while getting them through a series of exercises." Seven hours of personal training a day, he added, is really seven small parties.

Fitness studios have only just emerged in China, and this niche operating model within the fitness industry still has no official statistics. But by Lu Shun and Dang Ningyuan's estimates, Shanghai has roughly 2,000 of them, a figure that broadly matches the research of Dou Ying, who sells management solutions to gyms. A search on Dianping, meanwhile, turns up more than 12,200 fitness venues in Shanghai in total, counting studios, large gyms and single-discipline studios for yoga, dance and so on.

Compared with the large chains, studios sell no annual memberships and charge less per personal-training session, so a customer's total spending is lower as well. On the other hand, studios don't open their equipment to customers outside scheduled training sessions, which may "turn away" some of them.

Dang doesn't see much of a problem in that. He thinks studios and large gyms should complement each other: people go to a studio to learn how to train properly, then leave the studio and work out on their own at a gym.

Wang Xiao, who works in Nanjing, plans to do exactly that. She discovered fitness studios last year and calls herself a complete beginner at exercise. She wants a personal trainer to teach her the right technique, and her main reason for not buying personal-training sessions at a large gym is, "At a gym you still have to buy an annual card, right? That's too expensive."

Most people in the industry will say "studios are the future," but the basic consensus is that studios cannot replace large gyms within five years.

Pang Lang, who spent six years as a personal trainer and four years in management at large chain gyms, told QDaily, "Large gyms have grown fast these past few years too — you can't say fitness studios have hurt them." He now runs Chengdu Dabenshi Health Management, which advises about 20 gyms a quarter, most of them mid-size or large clubs of a thousand square meters and up.

By Pang's figures, large gyms have a relatively mature operating model and can hold costs to 35% of revenue, far below what studios manage. In a first-tier city, a well-run 2,000-square-meter gym can take in 3 million yuan a month — by Dang and Lu's reckoning, roughly 10 to 15 times what a fitness studio makes. And "a gym's costs are at most 200,000 yuan more than ours; the bigger the space, the cheaper the rent per square meter," Dang says.

Customers don't care much about these numbers, though. What comes first for them is results, service and experience. On experience, studios may still have the advantage: a more private space, sometimes with a degree of social life and a sense of belonging — the same thing a brand reaches for when it wants a lasting bond with its customers.

Lu Shun and Dang Ningyuan see this too. Every so often they invite members and trainers out to dinner, organize outdoor cycling trips and team laser-tag games. A studio's smaller scale makes it easier to marshal resources and build that sense of belonging, which is harder for a large gym to offer.

Some changes since the start of 2016 have put Dang Ningyuan on alert. He has noticed quite a few fitness studios cutting their prices lately, which may be the first sign of a price war among studios.

A week ago, Dang brought in Ji Kaili, a certified national sports nutritionist in China, to give a talk at DNF on nutrition and diet. Ji is also a national-level bodybuilding judge in China and has long run a bodybuilding and fitness training camp for professional athletes at DNF. In the audience, along with the studio's ordinary members, were key opinion leaders from the fitness app Keep, most of them with more than 20,000 followers.

Dang hopes that working with Adidas and with Keep's KOLs will build DNF's name and credibility inside the fitness community. He now goes abroad twice a year, one of those trips for further training: he has to be sure he isn't falling behind.

Lu Shun is trying new things too. Lu House has just added a meal-plan program — a small freezer of pre-portioned nutrition meals, cooked and delivered by an outside company. It is one of the few partnerships Lu has accepted; the franchise requests and app-platform pitches that arrive about once a month he mostly ignores. As he sees it, the urgent thing now is still to get the service right. "The more attention you get, the easier it is to make a mistake. You can't make mistakes — one mistake is fatal."

To Dang Ningyuan, it feels like running an experiment that could change the industry.

Cover image via Visual China Group.