Young workers lure new startups

Over the last two months, I’ve met startups across Bengaluru, Pune, and Mumbai. All of them operate in areas that has a lot to do with youth and their preoccupations. Two companies, Cure.fit and MultiFit, are setting up health clubs, while the third one, Stylecracker, is using analytics to send customers a look rather than a mere selection of clothes and fashion accessories — in other words, they are peddling an experience.

These startups have been around for only three to five years but have succeeded so quickly that it makes you wonder what commonalities they have tapped into. Cure.fit is the most popular among the three, having been in the news recently for raising $120 million in another round of funding to expand its club franchise. MultiFit, a bootstrapped fitness company, has 27 clubs going in 7 cities in India and has nearly 50,000 people enrolled who come to attend hour-long sessions each day to break a sweat. Recently, MultiFit recently set up a club in the U.K., to access trainers and skills and also test its model.

MultiFit’s founder and CEO, Samir Kapoor, who started his first gym after being prodded by his U.K.-trained athlete wife, says, barring three, all his gyms are cash positive. Stylecracker’s co-founder and managing director, Dhimaan Shah, says his company, which acts as a personal online stylist, is set to hit Rs 500 crore in revenue by 2020. Shah’s co-founder is Archana Walavalkar, who was a fashion editor at Vogue India and styled young actors before she came on board. In comparison, a high street fashion brand like Ed Hardy hasn’t reached that number in India after being around close to a decade.

What struck me was how these three entrepreneurs managed to scale up this quickly. Health clubs like Talwalkars and Gold's Gym have been around for decades but they haven’t seen the spurt in memberships these two new names have pulled in.Cure.fit has opened two dozen clubs in Bangalore in two years with two clubs in Indira Nagar in Bengaluru. MultiFit’s advertisement, until now, is only by word-of-mouth.

One key underlying commonality to the three businesses is demographic. A majority of their customers are in the age group 24-35 and all of them come from predominantly metro markets or large towns. The young customers spend Rs 2,000 per month for their fitness regimen and in Stylecracker, 35,000 individuals order three to four boxes of clothes and accessories worth Rs 4,000 every year, while another 60,000 registered members order one or two boxes. A big proportion of this lot are also single, working, and living with their parents. Stylecracker’s Shah adds his own statistic – most of his over 70 employees are single and stay with their parents in Mumbai.

All of these entrepreneurs seem to have taken existing business models further to suit the changing tastes of the new, single and employed young adult. Traditional health club memberships were expensive and boring as they did not engage young customers. Treadmills were expensive to maintain and added a lot to cost of membership. The new clubs cut them out and Cult Fit even did away with body- building equipment. Instead they bought the concept of communities, shared interests and group work-outs to the fore.

MultiFits popular classes include Tabata, which promises exhaustion in 10 minutes as against 40 minutes on the treadmill. And all that Tabata or Zumba, another popular class, requires is a trainer. MultiFit’s centre attracts celebrities like Tiger Shroff and Disha Patani, who train normally with regulars– a cool quotient that also draws in the crowd. Kapoor says earlier clubs were impersonal and a member had to work hard at staying motivated but now he has worked hard to build a community atmosphere.

Stylecracker used customer analysis based on over 100 data points to intimately know its customers’ tastes to send boxes of fashion priced at Rs 2,999, Rs 4,999, and Rs 6,999. Its customers do not even get to see what they have ordered until they receive their box but Shah contends that returns are only 21% compared to 30% for other fashion sites which display products.

It is a well known fact that India’s demographics are skewed heavily towards the young. More than half of India’s population is below 25 years and more than two-thirds below 35. By 2020, the average age of Indians will be just 29. Rapid urbanisation, more nuclear families, and increasing per capita income mean that children don’t have to take on any responsibility, at least till they start their own families.

In an earlier interview to Fortune India, San Francisco-based homestay company Airbnb co-founder, Nathan Blecharzyk, said that it was India's young population, who are increasingly using the portal to travel across the globe and have made India an attractive market. Airbnb predicts that three out of four millennials would choose to spend money on a desirable experience or event over buying something material.

The health club business in India is all of Rs 7,000 crore and only 0.3% of the Indian population goes to clubs as against 6% in theWest Asia and between 16-20% in Western economies. Surprisingly, that statistic was not the starting point for the two new startups. They focussed instead on reading the minds of the young more correctly and developed exciting products for them. If these new businesses pull it off, the single, employed and young adult may well be a new demographic for marketers to watch out for.