What Is ClassPass?
ClassPass, Inc. is a wellness aggregator that allows customers to take exercise classes at many boutique wellness studios for a monthly subscription. The company was founded in 2013 by Payal Kadakia and Mary Biggins. The pair originally called their company Classivity before rebranding it as ClassPass in January of 2014.
- ClassPass has raised a total of $239 million over seven rounds of funding.
- Between July 2018 and July 2019, ClassPass grew its partner network from 9,000 to 22,000. This is the largest network of its kind.
- ClassPass was most recently valued at $610 million.
- ClassPass operates in 20 countries.
How ClassPass Works?
Since its rebranding in 2014, the company has raised a total of $225 million in venture capital. The company was most recently valued at $610 million after it secured $85 million in its latest round of fundraising (series D) in July 2018. These developments have sparked a period of rapid growth for ClassPass. In about a year, the company has grown its partnerships with fitness and wellness studios from 9,000 to 22,000 in 20 countries. ClassPass’s success has revolutionized the consumer wellness industry.
At the same time, ClassPass is leveraging its vast network to partner with large employers like Google (GOOGL), Facebook (FB), and Morgan Stanley (MS). These partnerships greatly reduce the complexity HR departments face when creating fitness packages for employees. ClassPass is, therefore, the company best positioned to capitalize on the growing corporate fitness market, which is estimated to be worth up to $51 billion.
ClassPass is clearly on the rise, but its inner workings are still shrouded in mystery. Estimates clock its annual revenue between $45 million and $150 million, but how exactly does it make money?
The Business Model
Kadakia and Biggins launched ClassPass to solve two problems in the health and fitness industry: consumer boredom and provider waste.
Many people join gyms with the best of intentions, but they stop going when the initial motivation melts away. Alternatively, aspirational gym-goers may attend select classes at different locations to stay motivated. But one-time attendance fees are often high—sometimes up to $30. Ultimately, both methods are ineffective for both parties and financially inefficient.
Gyms and fitness studios lose money when memberships are cancelled and classes are not filled. Just as airlines operate flights that are not fully booked, fitness classes are not cancelled because of a few empty yoga mats.
ClassPass’s suite of subscription-based products solves problems for gyms and consumers. Their products include monthly memberships for consumers, corporate wellness programs, and two virtual services called ClassPass Live and ClassPass Go.
Consumer Wellness: A Flat Rate For Varied Fitness
ClassPass’s core innovation are monthly subscriptions for access to a wide variety of fitness classes at partner studios. These enable participating businesses to fill spots that would otherwise have been left empty and give consumers the freedom to exercise at various locations. The end result is a single platform flexible enough to create individualized fitness regimens without losing money and an influx of new customers for local studios.
ClassPass offers three levels of monthly subscriptions. The lowest level, which costs between $39 and $49 depending on which city you are in, buys a customer either 21 and 27 “credits,” respectively. These credits can be spent on fitness classes, which cost six credits each on average. This means a lowest-level ClassPass translates to either two to five or three to six classes per month, depending on the location. The same system applies to higher-level subscriptions, which cost $59 to $79 and $119 to $159 per month, depending on the location. Prices in international cities like London, Singapore, or Melbourne vary slightly due to exchange rates.
ClassPass isn't much cheaper than many traditional gym memberships but offers a level of diversity that traditional memberships can’t match. At the tap of a screen, ClassPass holders can reserve classes for anything from yoga or pilates to aquatic spinning, rock climbing, and strip aerobics. The downside is that members are limited to three classes per month at any one location. Nevertheless, ClassPass’s members can’t seem to get enough. In 2014, over 1 million reservations were made on ClassPass. In 2018, that number was over 60 million.
Over 100 million
Reservations made on ClassPass since 2013.
ClassPass is applying the same flexibility to corporate wellness programs. When a company partners with the service, it agrees to offer its employees ClassPass credits just like an individual membership. However, employers don’t actually buy these credits up front. They are only charged when employees actually use them. ClassPass’s corporate programs incentivize employees to exercise more. The more credits an employee uses per month, the more they receive.
ClassPass presents large employers and HR departments with an attractive and simple alternative to traditional consumer wellness programs.
ClassPass Live and ClassPass Go
ClassPass Live was launched in 2018. This service, which members can opt into for an added monthly fee between $10 and $19 provides live-streamed and on-demand fitness classes that members can take at home. The service comes with a proprietary heart rate monitor that tracks a user's fitness progress. Also, in 2018, ClassPass launched a mobile app called ClassPass Go, which is free to members and costs $7.99 for non-members. The app is a platform for audio-based fitness classes.
ClassPass has experienced explosive growth over the past year. ClassPass is secretive about its strategy, but it’s a safe bet that it will continue to dominate both consumer and corporate wellness by expanding its network into new markets and acquiring competitors. Information is limited at the time of writing, but ClassPass is definitely a company to watch.
Big Plans for Asia
Much of ClassPass’s network expansion over the past year has taken place in Southeast Asian markets. The company now operates in Singapore, Indonesia, Malaysia, Hong Kong, and Thailand. In January 2019, ClassPass acquired Singapore-based GuavaPass, one of its main competitors, for $4.2 million. With this acquisition, ClassPass took over GuavaPass’s operations in 11 key cities in Asia and the Middle East including Abu Dhabi, Bangkok, Beijing, Dubai, Hong Kong, Jakarta, Kuala Lumpur, Manila, Mumbai, Shanghai, and Singapore.
ClassPass has expressed plans to expand to 50 new cities in 2019. As the company expands, it is likely that it will begin to raise prices as competition continues to diminish.
ClassPass acquired GuavaPass, one of its biggest competitors, for $4.2 million in January 2019.
Like most fast-growing companies with international footprints, ClassPass is eager for market share in China. With its recent GuavaPass acquisition, ClassPass acquired a Beijing office. This is a first step to entering the Chinese market.