Nautilus had a tough year in 2019. Staff were laid off, executives resigned and the company’s stock prices plummeted to less than $2 per share.
Then came a pandemic-driven embrace of at-home fitness and the Vancouver-based company’s continued commitment to connected fitness. Since early 2020, it has reported record sales for numerous fiscal quarters. Stock prices jumped to $30 a share in early 2021.
When Jim Barr, chief executive officer and board member at Nautilus, arrived in 2019, he and his team diagnosed a number of things that had gone wrong. First, the company had missed out on pivoting around connected fitness. Some products, Barr said, were dated and not connected to the way the company was going. And finally, advertising was done more on television than digitally for the five years leading up to 2019.
“Each year was worse than the last in terms of performance,” said Barr. “We kept doing the same thing, and it kept getting worse.”
When Barr arrived, he and his team did an evaluation of whom the company’s customers were. They found that 36 percent of customers were in a category that does not enjoy exercise.
“We ended up with three times as many of those customers as exist in the market,” he said.
Nautilus, which employs 255 people in Clark County, began running out of those customers, so the executives redirected the company toward another market segment: people who view exercise as an important part of their life.
This group may struggle to stay with it, but they keep working on their fitness. They enjoy variety in exercise and are more likely to go to the gym. That group made up 40 percent of the industry population — with only 11 percent being existing Nautilus customers.
“We have pivoted the entire company around that segment,” said Barr.
Then came the pandemic.
“As we started going for that customer, that customer was the one most profoundly affected by being locked out of the gym,” said Barr.
The leadership at Nautilus believes the habits of their targeted segment, which skews younger and slightly more female than typical Bowflex users, has changed permanently.
“Once the pandemic hit, people started building these home gyms and bought more than one piece of equipment, which is a new part of what’s going on in our industry,” he said.
The company has been surveying former gymgoers for over a year. Twenty-five percent say they will never return to the gym, having discovered the convenience of working out at home and the benefits of connected fitness. The remaining 75 percent who say they will return to the gym say they’ll plan to work out at the gym some days and work out at home other days.
“We see on social media all the time people taking a corner of their garage or a corner of their bedroom and creating their own home gym in a way they didn’t before,” Barr said.
As of the company’s latest fiscal report released in November, Nautilus sold more in the six months leading up to Sept. 30 this year than in the year before.
Barr thinks the at-home fitness market has grown two to three times during the pandemic. But in addition to that, the company has changed.
“I call this a massive transformation of Nautilus from one type of company to another type of company,” said Barr. “And honestly that’s not easy.”
The mission of completely changing a company requires a catalyst, which came for Nautilus in the way of a bad year in 2019, prompting layoffs.
“Going back to being an equipment company wasn’t working, and the way we were going after customers wasn’t working,” said Barr.
So the company needed to change, and that’s where connected fitness came in.
Connected fitness allows users to not only use the equipment but also to receive one-on-one coaching with the company’s JRNY app through either their device or their screen-integrated Nautilus equipment.
Peloton, which Barr credits with having brought connected fitness to the industry, streams classes on its app to use in conjunction with its exercise bikes and treadmills, rather than providing one-on-one coaching like Nautilus’ app. Nautilus, Barr said, has a greater variety of connected equipment and is more affordable.
This year, the company has sold 4.5 times more connected fitness products than it did in 2019. Before the pandemic, there was one piece of equipment that could work with JRNY. Now, there are 15. Nautilus started with 14,000 JRNY app members in late 2019 and now has more than 200,000 members. It plans to have 2 million to 3 million by the end of 2026.
“There’s no going back. It’s the center of our strategy, and it’s super exciting, and I’ll even say inspiring for our employees to say we can have this role,” Barr said.
Nautilus always attracted employees who wanted to help people lead healthy lives, he said, but with connected fitness, the company can see the fruits of that daily.
Nautilus expanded its number of retail partners, going from 5,000 before the pandemic to about 11,000 now. It sells products in Best Buy and Costco.
In its shift toward connected fitness, Nautilus has grown its software department, now employing 160 software developers compared with just 13 before the pandemic.
And with its success during the pandemic, Nautilus has had more money to invest, including buying a software company in Switzerland.
“We have a balance sheet to help fuel our growth and accelerate it even faster,” Barr said. “We’ve made a lot of progress, more than I would have expected.”
The pandemic helped, he noted. Still, the company sees the impact to the business being permanent.
Barr thinks the fitness industry is close to back to normal. Planet Fitness recently reported gym membership sales nearing pre-pandemic levels.
“I think in general during the pandemic, people learned fitness was more important to their lives than maybe before,” said Barr.
The company surveyed consumers who spend $500 a year on fitness, whether that be on applications, equipment or gym memberships. Forty-three percent worked out at home before the pandemic, whereas almost 70 percent do now.
“That’s why we’re so optimistic,” Barr said. “People have really profoundly changed their attitudes and actual behaviors toward home fitness in a positive way.”