Big-box fitness chains remain popular, but smaller boutique fitness studios hosting everything from yoga to boot camp classes have boomed in the last decade, with emerging payment technology playing a big role.
The ability to quickly sign up new customers for recurring payments while offering mobile and QR-code payments for merchandise–all with a bare-bones staff–has become key to profitability for operators in the $22 billion U.S. boutique fitness industry.
These studios are using payment systems that combine processing with customized business-management software tailored to the fitness industry. It's part of a broader trend of payments providers toward specializing in
Mindbody, based in San Luis Obispo, California, has grown steadily since it launched in 2000 to provide integrated payments and software platforms for small-business fitness and wellness services. It serves independent operators and certain chains including F45 and Orangetheory Fitness.
Another rising player is Xplor Technologies, based in Atlanta, which was formed in 2021 from a rollup of Clearent, a full-service payments provider, and Transaction Services Group, a maker of custom software and payments tech. Private equity firm Advent International owned both firms.
Xplor Mariana Tek, the company's combination payments and software program for the boutique fitness industry, has seen rapid growth in the last two years, with many operators citing higher revenues than before the pandemic by adding new services, including hybrid classes, said Andy Swansburg, chief product officer for Atlanta-based Xplor Technologies.
"When the pandemic hit, many boutique fitness studios added remote exercise classes and needed to suddenly accept Apple Pay and Google Pay. And coming out of the pandemic, many consumers are sticking with a hybrid approach by using remote and onsite classes, expanding overall usage," Swansburg said.
Accurately managing recurring gym membership payments has also become an important marketing element for many fitness studios. One woman's complaints about her inability to cancel a gym-chain membership
"Boutique fitness studios don't have the time or personnel to deal with billing problems, so we work to make it simple and accurate, including handling customer billing problems directly," Swansburg said.
Tighter integration of payments processing and software has significantly reduced billing complaints, along with creating easy ways for any staff member to accept payments through a fitness studio's mobile app via a QR code, he said.
"Adding payment acceptance to fitness studios' mobile apps is key," Swansburg said, noting that it helps fitness studios earn more revenue by easing the sale of merchandise, apparel, and snacks and eliminating the need for handling cash.
Xplor's software enables wide customization for each type of fitness operation, according to Swansburg.
"One gym might need to give users access to locker rooms, while a yoga studio operator has a whole different range of services to upsell," Swansburg said.
Increasingly, payments providers are focusing on a handful of verticals or a single vertical, said Hemal Nagarsheth, a partner at Kearney.
"Payments providers are realizing they can scale growth by picking a vertical to specialize in. They recognize they might reduce their target market size, but they're going deeper into that industry to solve problems for that specific niche," Nagarsheth said.
The rise of embedded payments is also driving the movement toward niche-specialization for payments providers, he believes.
"The specific needs of each business demand unique solutions, and we're going to see more of this narrowing by payments providers," he said.
Xplor also offers customized payments-and-software packages for small business operators of childcare services, laundry services and home repairs, but fitness is the company's fastest-growing area. The majority of Xplor's customers are individual businesses, but it serves some small chains including Sweat 440, which has operations in the U.S. and Canada, SLT, with 16 locations and Training Mate, a new chain in Los Angeles.
Xplor serves 78,000 small business customers in 20 global markets, and last year the company processed $36 billion in payments, up 20% from two years earlier, according to Ieuan Owen, Xplor's chief revenue officer for fitness.
"We've experienced explosive growth since the [2021] merger and fitness studios find that once they have a card on file they can eliminate usage of cash and sell more stuff, in addition to just memberships," Owen said.
