Tonal: Can It Dominate the Luxury Fitness Market?

Tonal's Emergence and Market Positioning

Throughout the preceding three sections of this EC-1 analysis, we have traced the development of Tonal. It evolved from initial concepts conceived by CEO and founder Aly Orady into a distinctive offering within the high-end, at-home strength training sector.

The company undertook rigorous alpha and beta testing of its hardware. This was coupled with the creation of a launch and marketing plan, and the fostering of an early adopter community to refine products and build customer relationships.

The Competitive Challenge

Given the strong market presence of Peloton and the emergence of numerous other fitness companies vying for the same well-off clientele, a crucial question arises. What compelling reasons exist for a consumer to invest over $3,000 in a foundational Tonal system?

The resolution to this question will be pivotal in determining Tonal’s long-term viability. Therefore, this fourth and concluding section of the EC-1 will focus on analyzing the competitive environment within this rapidly expanding market.

Analyzing the Competitive Landscape

Understanding the competitive forces at play is essential for evaluating Tonal’s prospects. The company must clearly articulate its unique value proposition to differentiate itself.

Key considerations include not only product features but also brand perception, customer experience, and the overall ecosystem Tonal provides.

Factors Influencing Customer Choice

• Price Point: Tonal’s higher price compared to some competitors requires justification through superior functionality or benefits.
• Technology: The digital weight and personalized workout programs are core differentiators.
• Community: Building a strong community fosters engagement and loyalty.

Successfully navigating these factors will be critical for Tonal to secure a sustainable position in the market.

Evaluating the Tonal Product Experience

The substantial size of the fitness market and the aggressive competition within it mean Tonal’s ultimate success hinges on whether the device justifies its significant cost. My personal experience with Tonal has been predominantly positive, though it’s important to acknowledge that my loaner unit arrived within two weeks, a timeframe considerably shorter than the 10-12 week wait many customers faced during the pandemic-related demand surge.

Tonal utilizes a third-party delivery service, proactively notifying users via email the day before delivery and providing a phone call 30 minutes prior to arrival.

Despite being more compact than traditional gym weight machines, integrating the Tonal into my 900-square-foot apartment required some spatial adjustments, necessitating the relocation of dining chairs during workouts. While this may not pose a problem for those with larger homes, particularly in suburban areas, I anticipate urban residents may face similar space constraints.

The equipment itself is constructed with high quality, appealing to individuals accustomed to strength training in a gym setting. Having been a gym member intermittently for over 15 years, I can confirm that Tonal effectively replicates the functionality of numerous weight stations, offering a unique experience compared to moving between machines on a gym floor.

However, this versatility introduces a learning curve. Although an initial tutorial is provided, mastering the adjustment of the arms for various exercises – and correctly stowing them when not in use – takes several days to fully understand, as confirmed by a Tonal showroom employee during a demonstration.

I have found the fitness classes engaging, and appreciate how the device assesses my fitness level, automatically adjusting and increasing resistance. The “Burnout” mode, which reduced the weight when I struggled, was particularly helpful. Furthermore, Tonal progressively increased the weight when it detected I could handle a greater challenge. The form feedback feature is also beneficial for those new to strength training, offering guidance on safe and effective weightlifting techniques. These combined features represent a clear advantage over traditional gym workouts.

Nevertheless, the price remains a significant consideration, creating a substantial barrier to entry. At $2,995 (plus an additional $495 for essential accessories) and a $49 monthly subscription fee, Tonal is clearly targeted towards affluent individuals serious about strength training. While this demographic represents a viable market, it is becoming increasingly competitive.

A $29.4 Billion Market Opportunity

The global smart fitness market is projected to reach $29.4 billion by 2025, presenting substantial growth potential for Tonal, despite a somewhat gradual initial rollout. While Tonal has not publicly revealed the total number of units sold, data from February indicated over 14,000 users on its leaderboard – a figure the company later removed from its mobile application.

However, Tonal still faces the challenge of achieving the market presence and recognition enjoyed by established competitors like Peloton. Peloton currently boasts over 1.09 million connected fitness subscribers and a total membership exceeding 3.1 million. This scale allows for quicker product development, and Tonal is adopting a “fast-follower” strategy, consistently updating its software, mobile app, and content library.

Distinct Approaches to Fitness

Customers in the premium fitness equipment segment often focus on specific training needs. The choice between a Peloton, Tonal, or alternative isn’t always straightforward. Peloton primarily targets lower-body muscle groups, whereas Tonal concentrates on upper-body strength training, though lower-body exercises are also available.

Many fitness enthusiasts opt to combine both systems for comprehensive workouts. A dedicated online community, the “PeloTonal Group” with approximately 6,000 members, demonstrates this trend, with users sharing orders, advice, and photos of their home gyms featuring both devices. Internal research suggests that nearly 25% of Tonal owners also possess a connected cardio machine, despite the combined investment of around $5,500 being significant.

Competition and Technological Differentiation

Tempo represents Tonal’s most direct competitor, offering devices priced around $1,000 less at $2,495. Tempo’s system includes rep counting, calorie tracking, and feedback on weightlifting form. However, it relies on traditional weight plates that require manual adjustments.

To safeguard its innovation, Tonal has filed over 40 patents related to its digital weight technology and intelligent systems, making replication difficult. This intellectual property forms a crucial barrier to entry for competitors.

Marketing and Unique Features

Tonal’s marketing efforts have emphasized its all-in-one strength training design, digital weight system, and on-the-fly weight adjustment capabilities – features currently unavailable in competing products. While Mirror and Peloton offer strength training classes, and Peloton provides bikes and treadmills, none possess Tonal’s unique proprietary technology.

Early Tonal advertising highlighted its ability to deliver gym-quality weight training at home, appealing to both experienced fitness enthusiasts and beginners. This proved particularly attractive during the pandemic.

The company has reported substantial revenue growth, with an 800% increase from December 2019 to December 2020, according to CMO Christopher Stadler. A recent partnership with Nordstrom will expand Tonal’s retail presence, increasing visibility to potential customers.

Future Expansion and Product Roadmaps

A key question for the future of this market is whether these companies will broaden their product lines to encompass a wider range of muscle groups. Most currently specialize in single-focus devices. Even Peloton, with two offerings, primarily targets lower-body muscles and cardio.

Will Peloton venture into strength training to directly challenge Tonal and Tempo? Conversely, will Tonal introduce a cardio machine alongside its existing device, or as a separate product? The answers to these questions will significantly shape the competitive landscape and future direction of the at-home fitness market.

Competition for Fitness Professionals Intensifies

The future appears bright for Tonal in the medium to long term; however, the company currently navigates several challenges, particularly concerning its on-screen instructors.

Our analysis has largely focused on the Tonal device itself, which presents a significant obstacle for competitors. However, it’s crucial to recognize that Tonal functions as a media company, requiring a consistent stream of content for its subscribers. Users seek a strong emotional connection with their coaches, as highlighted in a previous analysis, making the acquisition and retention of top on-air talent a key competitive area for Tonal and other connected fitness companies.

The Scarcity of Qualified Instructors

While many individuals work as fitness instructors, those who excel on camera and possess a substantial following are far less common. Similar to platforms like YouTube, Instagram, and Twitch, the number of influential fitness professionals is limited.

It proves more effective to recruit experienced, camera-ready talent from existing companies rather than invest months in discovering and developing potentially successful, but inexperienced, instructors. This approach minimizes risk and accelerates the process of building a compelling on-screen team.

Peloton, for example, has actively recruited prominent instructors from SoulCycle and Barry’s. Although these hires undergo auditions and extensive training, they already possess valuable experience performing before an audience.

Tonal initially focused on recruiting talent from local gyms in the SoMa district of San Francisco, as previously discussed.

The Impact of Apple Fitness+

The competition for skilled instructors is expected to intensify with the emergence of Apple Fitness+. Despite being a relatively new service, Apple’s substantial financial resources and large existing user base of smartphones and smartwatches make it a formidable competitor.

Apple has demonstrated a proactive approach to securing top talent, notably by recruiting Kelly Savage, a Tonal coach and curriculum product manager, in 2020 to contribute to their exercise tracking application.

Leveraging Investor Star Power

A crucial element of Tonal’s future strategy will be capitalizing on its high-profile athlete investors by transforming them into brand ambassadors and guest instructors. This possibility was strongly suggested by the CMO during recent discussions.

Offering strength-training sessions led by renowned athletes like Stephen Curry, Serena Williams, and Maria Sharapova would differentiate Tonal from its competitors through sheer celebrity appeal. This strategy could significantly enhance Tonal’s market position.

• Key Challenge: Securing and retaining top on-screen talent.
• Competitive Landscape: Intense competition from Peloton and Apple Fitness+.
• Strategic Opportunity: Leveraging celebrity investors for unique content.

Building Strength for Long-Term Success

Tonal is well-positioned to become a leading force in the luxury fitness sector. However, sustained success hinges on addressing key challenges in the near and medium term, even with continued product development and the retention of prominent on-screen instructors.

A critical area for improvement is reducing the current delivery lead times of 10 to 12 weeks. Prolonged waits could generate negative feedback, mirroring the experiences of companies like Peloton during periods of high demand. Stadler highlighted significant increases in device production, but acknowledges the inherent volatility of global supply chains, as demonstrated by recent disruptions like the Suez Canal blockage.

Supply chain complexities present numerous obstacles, according to Orady. Despite these hurdles, the company has successfully doubled its supply capacity multiple times. While progress is being made, full resolution remains ongoing. While strong demand pleases investors, it can frustrate potential customers.

Strategic expansion of physical retail presence is also advisable. By prioritizing smaller installations within Nordstrom stores, Tonal minimizes the costs associated with dedicated showrooms while simultaneously boosting brand visibility in high-traffic locations. Nordstrom anticipates a 25% sales increase in 2021, which could positively impact Tonal’s sales figures.

Currently, the company benefits from heightened demand. However, future growth necessitates strategic investment in areas like expanded marketing campaigns across various platforms, including television, to enhance brand recognition and prestige. Furthermore, developing additional physical retail locations will be crucial for driving sales as pandemic restrictions ease and consumer activity normalizes.

The question of pricing remains significant. A price reduction for the Tonal device appears likely to be essential for broader market penetration. While not immediately necessary, a cooling of the current sales surge will inevitably occur. The company’s ultimate objective is to maximize the number of Tonal devices in homes.

Following Peloton’s example – a $350 price cut on its original bike in September 2020 – will be vital in attracting a wider customer base, who will still require a monthly subscription to access Tonal’s class content.

Tonal’s evolution from a simple magnetic resistance system represents years of dedicated product refinement and overcoming initial investor skepticism. Now, the company must accelerate its efforts to capitalize on the at-home fitness market pioneered by Peloton.

Its unique approach, a resilient founding team, and compelling customer data should facilitate future fundraising. Nevertheless, the competition remains fierce, and sustained effort is required to achieve victory, much like completing a marathon. This presents a substantial challenge.

Tonal EC-1: A Detailed Overview

• Part 1: The Company’s Beginnings
• Part 2: Initial Product Release
• Part 3: Cultivating a User Community
• Part 4: Analyzing the Competition and Future Outlook

Explore additional EC-1 reports on Extra Crunch.

Last updated March 30, 2021: The text was revised to clarify that Tonal incorporates exercises for the lower body, and is not solely focused on upper-body workouts.