US Fitness Industry for IWell

1

• US Fitness Industry for I-Well
• May 7, 2002

2
Agenda

• US at a glance
• Fitness market
• Technology
• Market entry strategy at a glance
• Case study
• Concluding Comments

3
US At A Glance

• Not one market of 270 million people, rather
  collection of regional markets
• Larger than continental Europe, highly fragmented
  and segmented
• Industries typically segment by geography,
  demographics, race more by need and benefit
• Americans buy solutions, not products or items
• It is critical to understand the environment and
  meet its needs

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US Basics

• Companies entering the US, must treat it as a
  primary market and follow American rules and
  business practices
• Failure results from ego, lack of understanding,
  incomplete information and wrong expectations
• Perceptions are real and strong and must be
  controlled and aligned with expectations
• It is essential to give the market what it
  wants--not what you make or you think it wants

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Historical Perspective

• Origin - running and tennis in 1960s
• Highly influenced by the environment and club
  industry
• Progression - 70s running 80s aerobics 90s
  low impact cardio
• Mid-1990s industry blossomed with numerous
  devices

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Market Segmentation and Direction

• Retail 5.8 bil.
• Club 565 mil.
• Vertical 2 bil.HospitalsHotelsCorporateMa
  llsAirportsAcademia

• Linking of fitness with healthcare
• Progression from corporate wellness to personal
  health maintenance
• Influenced by e-health
• Future smart equipment and ease of workout

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Market Characteristics

• Not sophisticated and slow to change
• Driven by Baby Boomers mirroring social issues
• Technology and new product must first gain
  acceptance at club level before consumer trickle
  down
• Consumers are forgiving and willing to try
  anything -- two or three times
• Distribution is critical, requiring market
  research and knowledge

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Trends

• Fitness for health will dominate the future as
  people continue to seek the magic pill for
  maximizing time with health outcomes

• Adventure workouts
• Virtual coaching
• Smart equipment
• Mind/body fitness
• Sport-specific training
• Lifestyle exercise
• Goal-oriented fitness
• Fitness toys

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Trends in Aerobic Exercise
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Fitness Equipment by Location of Use(millions of
participants)

• Home Club Other Facility
• Treadmills 38 25 18
• Dumbbells 33 23 25
• Stationary Bikes 40 22 19
• Source American Sports Data

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Participation Trends 1990-2000(millions of
people)
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Manufacturers Top Concerns for 2001
Access to market and smart labor
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What Manufacturers Say About Retailers
Supply side flexibility is key
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Home Fitness

• Largest category, driven by treadmills
• 13 exercise and want easy to use equipment of
  commercial quality
• Prices have increased and consumers will pay
  1,300 - 3,000 for a product
• Specialty fitness dealers are the primary targets
• Dealers work on keystone margins
• Sales and after-sale service are labor intensive

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Retail Segmentation
Segment
Retail Pricing
Maximum
Range
10,000
Club/Institution50,297 facilities
3,000 - 10,000
A LINE
1,600 - 5,000
6,000
Specialty Dealer2000 stores/500 companies
Full Line Sporting Goods Dealers7,500 stores
1,200
600 - 1,200
Mail Order
B LINE
Department Store
900
Mass Merchandisers/Discounters
500
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Health Clubs

• Second largest category with 164 growth in
  membership (12 _at_18-34 393 gt 55)
• 14,000 clubs with 32.7 million members, majority
  are female
• Geographically - urban locations
• Single and multiple facility operations with 60
  being independent -- 2002 projections balanced at
  50/50
• Large clubs and opinion leaders buy direct from
  manufactures based upon product lifecycles

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Vertical Markets

• Non-health club facilities -- commercial and
  non-profits
• Driven by convenience and need to market or sell
  a location or service
• Hotels that are standardizing health facilities
  -- 68 luxury hotels upgrading
• Rising healthcare cost and strong corporate
  wellness market are catalysts

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Technology

• In its infancy -- currently vague and poorly
  defined
• Health clubs were early adapters - 1980s
• Internet promotes weight loss, nutrition, health
  monitoring and fitness measurement
• Technology is software, VR, AI and Internet
• Computerized Exercise Supported Programs (ESP)

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Technology Players and Future

• Future
• Tracking
• Monitoring
• Training
• Personalization
• Consistency
• Ease
• Seamless communications

• Vivometrics
• BodyGem
• Tectrix
• Game Bike
• Vivonics
• Physical Genius
• SportBrain

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Market Entry

• Critical element of corporate infrastructure
• Must meet 5 criteria Strategic Interactive
  Integrated Balanced and fact based
  Long-Termed
• Requires use of knowledge
• Commitment on three levels Time Human
  resources Finance

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Case Study - Suunto USA

• Background Selling outdoor equipment in US
  since 1980s Acquired Seaquest - product line
  extension Acquire Primus - distribution
  Merged companies and expanded in 1994/95
• Restructured way of doing business Redesigned
  and designed product for the market Took 3
  years Researched and used knowledge Delivered
  products that appealed to consumer
• Accepted different than Finland doctrine
• Differentiated via branding Wristop

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Case Study - Suunto USA continued

• What Did The Do?
• Understood market needs and developed product
  specs around them
• Identified and partnered with REI and EMS
• Enhanced communications between product
  development, marketing and manufacturing
• Used public relations as a powerful and critical
  tool - told newsworthy and timely stories
• Established Retail Price Policy and correct
  pricing

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Summary

• Market sending growth and need signals
• Americans switched their focus - want to feel
  good
• Definition and location has changed - exercise
  has gone outdoors
• Ease of use and variety in exercise wins
  acceptance
• Research and American business practices yield
  positive results
• American partner and solid distribution are
  critical success factors

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Future Industry Needs

• Self-powered equipment
• User-friendly, simplified consoles
• Simple maintenance
• Total-body workouts
• Technology compatibility
• Innovative new products
• Meet physical needs and capabilities of people
• Focus on health

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What To Do

• Be Proactive-- Americans will not call back or
  call overseas -- Take Control
• Anticipate and Adapt-- Product need to be
  modified for the US -- Both user and buyer
• Plan and Plan for the Long-Term-- Attract
  attention - fast -- Follow up and deliver
  solutions
• Success is Possible