ClassPass Turns to Corporate Wellness for Growth

November 6, 2019, 4:31 PM UTC

ClassPass started as a way for fitness-minded consumers to book classes across studios. But the wellness platform has found another line of business: corporate deals adding ClassPass to employee benefits packages.

In the past six months, ClassPass’s corporate business has “quintupled,” according to CEO Fritz Lanman. “We believe it’s the first corporate wellness program that aligns incentives between the corporate [human resources] team, the provider, and the studios,” he says. “We make more money if people work out more.”

Founded by Payal Kadakia in 2013, ClassPass says it will offer its service—which charges consumers a monthly fee to attend fitness classes or wellness activities in a variety of different studios—in 30 countries by the end of the year, up from just four in mid-2018. As part of this period of growth, ClassPass began piloting its corporate wellness program a year ago. Companies signed on so far include Etsy, Facebook, Gatorade, Glossier, Google, Morgan Stanley, Southwest Airlines, and Under Armour.

The company is diving into the market at an opportune time. This summer, consumers launched boycotts of SoulCycle and Equinox—a popular corporate gym membership offering—when investor Stephen Ross held a re-election fundraiser for President Trump. Analysis of SoulCycle booking records found that attendance declined between 6% and 7.5% in the weeks following the boycott.

Lanman declined to comment on how the boycotts of ClassPass’s competitors (SoulCycle doesn’t offer its classes through the platform) affected the company’s business, but says, “What we learned from the Equinox debacle is that customers do care.”

The company has endured some growing pains in its six years. Its original hook was a $99-a-month membership that provided access to an unlimited number of fitness classes in New York. The startup steadily raised prices before introducing a credits-based system, which it overhauled last year to incorporate fluctuating class prices based on the studio’s availability and demand. Consumers now pay between $19 and $199 a month for between 10 and 130 credits that can be spent on classes.

Consumers have for the most part adapted to the new ClassPass and its new value proposition, says Kadakia, who is now the company’s executive chairman: “A lot of the friction and constraints we’ve had, we’ve been able to get over.”

That helps on the corporate side, too. The company claims that the biggest driver of growth for employer deals is employees asking for the benefit. Lanman says companies that sign up with ClassPass are mostly turning to the service as a replacement for their employee fitness offerings rather than an add-on. ClassPass doesn’t charge companies a common per-eligible-employee fee; instead, employers pay only for the employees who actually sign up for the benefit.

ClassPass isn’t abandoning its consumer origins—but corporate deals are certainly a crucial engine of growth for the company. “Consumer is a bigger opportunity because not everyone works for a corporation,” Lanman says. “But building the best product for consumers makes us more compelling as a corporate player.”

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