No Pain, No Gain: Examining the Digital Resilience of the Fitness Sector During the COVID-19 Pandemic

56 Pages Posted: 1 Dec 2020

See all articles by Uttara M Ananthakrishnan

Uttara M Ananthakrishnan

Michael G. Foster School of Business

Jenny Chen

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Anjana Susarla

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management

Date Written: November 30, 2020

Abstract

The COVID-19 pandemic has had a negative impact on small businesses, substantially accelerating business failure and adversely affecting financial viability. With several sectors of the economy adopting digital transformation initiatives to deal with the pandemic, we consider digital resilience in the market for fitness clubs and gyms. The traditional economics of the fitness industry made them less vulnerable to digital disruption, pre pandemic. The pandemic also shifted patterns of human mobility, where gyms’ operating model was suddenly negatively impacted by digital substitution. We consider how these businesses adapted by being entrepreneurially alert and digitally agile in adopting virtualization and greater social media enabled connections with consumers, and how digitization substitutes for co-presence in the relationship between consumers and fitness centers. We examine these issues using a fairly granular data on foot traffic from Safegraph and combining it with data from Google Places, supplemented with hand collected data from individual websites. The empirical challenge is that of disentangling the impact of digital resilience on economic indicators of the well-being of a business, given that small businesses are prone to failure, and that COVID has been a worldwide shock impacting aggregate economic statistics. The mandated lockdowns and re-openings across states provide us with a natural experiment to examine the impact of digital substitution and digital resilience in the fitness sector. By using hand-collected data from each individual gym, we can uniquely identify whether each gym offers virtual services, and if these services were offered in response to the lockdown. Compared to gyms, dentist establishments offer services that are almost impossible to virtualize and have more of an inelastic demand. We therefore conduct a difference-in-difference analysis to quantify the digital resilience for fitness centers, compared to dental establishments. We find that compared to dental services, gyms with virtual services see about 38% displacement in footfalls post-pandemic. By using another set of hand collected data, we examine whether this observed displacement is robust to alternative explanations such as the ownership structures or franchise arrangements in the fitness sector, the distance traveled by consumers, local political partisanship etc.

Keywords: COVID-19, Safegraph, Digitization, Digital Substitution

JEL Classification: L1, L67, L70

Suggested Citation

Ananthakrishnan, Uttara M and Chen, Jiaoping and Susarla, Anjana, No Pain, No Gain: Examining the Digital Resilience of the Fitness Sector During the COVID-19 Pandemic (November 30, 2020). Available at SSRN: https://ssrn.com/abstract=3740143 or http://dx.doi.org/10.2139/ssrn.3740143

Uttara M Ananthakrishnan

Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Jiaoping Chen

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

Anjana Susarla (Contact Author)

Michigan State University - The Eli Broad College of Business and The Eli Broad Graduate School of Management ( email )

East Lansing, MI 48824-1121
United States

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