The Tonal success story is one of bootstrapping, determination, and a healthy dose of luck. The company managed to carve out a niche as a premier at-home fitness solution in an industry that is notoriously difficult to penetrate. Aly Orady founded the company in 2015 with the mission to make strength training more accessible and convenient.
He used electromagnetics to create electric resistance, making it possible to do away with traditional clunky weights and pulleys. The product was an instant hit, and when investors started noticing, the company secured $12 million in Series A funding in 2016 and $30 million in Series B funding in 2018. Later on, in 2019, it raised $45 million and $110 million in 2020.
Tonal’s latest and most significant funding round was a $250 million Series E led by Dragoneer investment group in March of 2021. The fund propelled the company to a jaw-dropping $1.6 billion valuation. In just six years, Tonal had established itself as the go-to at-home fitness solution with a unique product, cutting-edge technology, and a loyal customer base.
We can also attest to the product’s efficacy. However, this Tonal competitors analysis will focus more on the home fitness equipment market, Tonal’s business model, strategy, and competitive positioning.
Bottom Line Up Front
Tonal competes in a highly competitive and crowded home fitness equipment market. Although the company managed to secure a strong position by developing a strong product and brand, it will need to continue innovating to maintain its place at the top. Its main competitive advantages lie in its product design, technology, and marketing strategies.
List of Tonal’s Competitors
Tonal Business Strategy and Revenue Model
Tonal stands out as a premium product in the home fitness equipment market. The company’s strategy is to focus on quality over quantity. Unlike its competitors, Tonal doesn’t flood the market with products. Instead, it designs and manufactures a single high-quality product that meets the needs of its target market.
The company’s marketing strategy is also unique. It uses extreme ad targeting to reach its target market of affluent gym-goers. Although its e-commerce post-click landing pages aren’t as sophisticated as its competitors, they are still adequate. Celebrity endorsements are a crucial part of Tonal’s marketing strategy. Tonal has partnerships with famous athletes and celebrities like Serena Williams and also has Mike Tyson as one of the investors.
While announcing the $250 million Series E funding round, Orady stated that the company plans to use the funds to improve its marketing efforts and open more brick-and-mortar stores. The CEO also announced that once they scale and capture all the demand, the company would file for an IPO. As of now, there is no set timeline for the IPO.
Because Tonal is a private company, we don’t have access to its financials. However, we do know that it is not profitable yet. The company generates revenue by selling the Tonal system, which costs $2,995. It also charges $49/month for the membership, which gives users access to the digital content library.
Tonal Competitor Analysis
Tonal competes in an industry with well-established companies and new startups. Connected fitness brands and other at-home fitness equipment providers are its primary competitors. Some companies have more than one product under their catalog, whereas others, like Tonal, focus on one product design.
As such, their strategies and competitive positions vary. Below, we’ll analyze five of Tonal’s primary competitors and their business models, strategies, and competitive positions.
1. MIRROR
As the name suggests, MIRROR is a connected fitness company that offers a product called MIRROR – an interactive home gym. The device is a full-length mirror that doubles as a workout screen. It streams live and on-demand fitness classes from the comfort of your home. Like, Tonal, it’s a one-product brand that focuses on quality over quantity.
Founded in 2016 by Brynn Putnam, MIRROR was the first company to develop reflective display technology in connected fitness devices. Its founder is a former professional ballet dancer who has also worked as a certified personal trainer. Its first mover advantage and a boss who knows the ins and outs of the fitness industry gave MIRROR the competitive edge it needed to establish itself as a premium product in the market.
Up until 2019, MIRROR was an independent company. Lululemon acquired MIRROR in 2020 for $500 million in an all-cash deal. The giant athleisure plan was to integrate MIRROR’s technology into its current product range and use it as a new growth avenue. Before the acquisition, MIRROR had raised $74.8 million in funding from investors like Spark Capital and Point72 Ventures.
As per Lululemon’s FY2021 financial reporting, it risks not realizing the potential benefits of the acquisition if it fails to integrate MIRROR’s technology into its product range. The competition in the connected fitness market is intense, and MIRROR is struggling to stay afloat. Moreover, the Lululemon team has limited experience in the connected fitness domain, which further increases the risk.
Although Lululemon’s 2021 net revenue increased 11% to $4.4 billion, MIRROR sales were less than 3% of that. So, there’s a long way to go for MIRROR before it can start generating healthy revenue for its parent company. Tonal is in a much better position regarding market share, revenue, and profitability.
See also: Lululemon Competitors Analysis
2. Peloton
Peloton Interactive Inc. is a publicly-traded company (NASDAQ: PTON) founded in 2012 by John Foley, Hisao Kushi, Yony Feng, and Graham Stanton. It started as a producer of high-quality spinning bikes before venturing into the connected fitness space with its Peloton Tread and Peloton Bike+. The company has a range of at-home and on-demand fitness equipment and services.
Peloton competes with Tonal in the at-home fitness equipment market. It offers three main types of products bikes, treadmills, and the Peloton Guide. The Peloton Guide turns your TV into a connected strength training device. Perhaps Peloton’s main competitive advantage over Tonal is its diversified product range. Besides that, it’s a much bigger company in terms of revenue.
Peloton went public in 2019, raising $1.16 billion at a valuation of $8.1 billion. Unfortunately, the company’s share price took a deep; it has been trading well below its IPO price for a while. The company’s shares started trading at $27, $2 below its IPO price, and by closing time, the stock was trading 11% down. As of July 2022, Peloton’s per share price was $8.71, with a market capitalization of $2.93 billion.
While the company’s top-line growth looks impressive, its bottom line tells a different story. The company has yet to turn a profit and has been reporting quarterly losses since going public. In 2020, it reported a net loss of $71.6 million on revenue of $1.825 billion. 2021 was no different, with a net loss of $189.2 million on revenue of $4.021 billion.
The company’s mounting losses and debt are a cause for concern. It has a long way to go before it becomes profitable. While the strong revenues give it some breathing room, the company will need to find a way to become profitable soon. Likewise, Tonal isn’t profitable yet, and it will need to find a way to generate positive cash flow if it wants to stay in business.
3. Hydrow
Hydrow is another Tonal competitor that designs and develops connected rowing machines. Founded in 2016 by Bruce Smith, it’s a privately-held company based in Boston, MA. The company specializes in manufacturing two main products- the Hydrow Wave and the Hydrow. Both products come with a 22-inch HD touchscreen that streams live and on-demand classes.
Hydrow and Tonal are direct competitors in the connected fitness equipment space. Both companies offer at-home fitness equipment that streams live and on-demand classes. The main difference between the two is that Hydrow specializes in rowing machines while Tonal offers a complete strength training system.
Business-wise, Hydrow is doing quite well. Since its founding, the company has raised $269.8 million in funding from several venture capitalists like constitutional Capital Partners and L Catterton. Its latest round of funding was in March 2022, after raising $55 million in a Series D round led by Constitutional Capital partners.
As a private company, it doesn’t release its financials to the public, but after nine rounds of funding, it’s safe to say that the company is doing quite well. In 2021, the CEO announced that the company would go public through SPAC once it hits a $1 billion valuation. According to the CEO, 2020 sales during the Covid-19 pandemic were up 400% compared to 2019.
It’s safe to say that Hydrow and Tonal aren’t far apart in terms of their business models or products. However, Tonal has a significant advantage in terms of funding. Tonal’s $450 million in funding dwarfs Hydrow’s $269.8 million. As such, Tonal has a lot more resources at its disposal to grow and scale its business.
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4. Echelon Fitness
Echelon Fitness is a connected fitness company that manufactures and sells exercise equipment like bikes, treadmills, rowers, and ellipticals. It’s a privately-held company founded in 2017 and based in Chattanooga, TN. Unlike Tonal, it focuses on manufacturing a wide range of fitness equipment instead of just strength-training systems.
Echelon Fitness enjoys the backing of Goldman Sachs and other institutional investors. In 2020, it raised $65 million in a Series C funding round led by Goldman Sachs. This funding propelled the company’s revenue growth by more than 500% to about $100 million in 2020. The company is set to capitalize on growing investor interest even as the number of Covid-19 cases continues to decline.
Like Hydrow, Echelon Fitness hopes to go public through a SPAC. It also can take advantage of investment from interested private equity firms that could see it raise $100 million in fresh funding. If successful, Tonal will face even more competition from Echelon Fitness soon. But to date, Tonal has been more successful in attracting funding and generating revenue.
5. NordicTrack
NordicTrack is a subsidiary of ICON Health and Fitness, Inc. It’s a leading manufacturer and retailer of home fitness equipment. The company was founded in 1975 and is based in Logan, UT. ICON Health & Fitness also owns other popular brands like Proform and iFit. NordicTrack’s product catalog includes various fitness equipment like treadmills, ellipticals, exercise bikes, rowing machines, and strength training systems.
NordicTrack is one of the oldest and most established companies in the home fitness industry. It has a wide product range and enjoys the economies of scale that come with being part of a large conglomerate like ICON Health & Fitness. IFit, another ICON Health and Fitness subsidiary, gives NordicTrack a leg up in the connected fitness market.
IFit is a subscription-based service that provides users access to live and on-demand fitness classes, custom workout programs, and other features. It’s available on NordicTrack equipment and other devices like smartphones, tablets, and smart TVs. Under the ICON Health and Fitness business structure, NordicTrack operates under iFit. As such, the company has all the resources it needs to compete against Tonal.
IFit filed for an IPO in 2020 and planned for its Class A shares to trade on the Nasdaq under the ticker “IFIT.” It postponed the IPO and, later in 2022, scrapped plans for a public offering, citing unfavorable market conditions. If the company had gone public, it would have given NordicTrack more resources to compete with Tonal. But for now, the company will have to rely on ICON Health & Fitness’ deep pockets to fund its operations and growth.
In FY 2021, iFit sold $2.8 billion in Gross Merchandise Volume (GMV) after selling about 10.1 million interactive fitness devices. Still, NordicTrack only had less than 1% of the global fitness equipment market in 2021. And it’s unclear how much of iFit’s GMV is attributable to NordicTrack sales.
Brief Overview of the Home Fitness Equipment Market
A study by Fortune Business Insights projects that the global home fitness equipment market will grow from $10.73 billion in 2021 to $14.47 billion by 2028. This statistic represents a compound annual growth rate (CAGR) of 4.6%. Given the slow but steady rise in popularity of at-home workouts, this number is not surprising.
However, it’s important to note that the above data is a projection of post-covid-19 growth. It doesn’t account for the potential market expansion due to the pandemic. The study had projected a 25.1% growth by the end of 2020 when the pandemic was still raging. Therefore, the CAGR would be significantly higher if the study factored in the potential market expansion due to the pandemic.
It’s also worth mentioning that the home fitness equipment market wasn’t as strong pre-pandemic. We would consider the surge in demand for at-home workout equipment as a temporary or false market expansion. We say this because the demand for at-home workout equipment dropped sharply once gyms and other fitness facilities reopened.
See also: Asana Competitors Analysis
The most significant challenge facing the home fitness equipment market is the intense competition. Many companies are selling fitness equipment, and there is little to no differentiation between products. This is especially true in the budget-friendly segment of the market. Therefore, companies must have a well-defined competitive advantage to succeed in this industry.
Tonal Competitors Analysis (FAQs)
Question: Is Tonal a public company?
Answer: Tonal is not a public company. It is a privately-held company backed by venture capitalists. Its valuation as of 2021 was $1.6 billion after raising $250 million in a Series E funding round. The company CEO announced plans to go public but did not give a timeline for the IPO.
Question: What is Tonal’s market share?
Answer: It isn’t easy to estimate Tonal’s exact market share because the company is privately-held and doesn’t release detailed financial information. However, the company revealed that it controls about 90% of the connected strength training market in the United States. If we assume that the connected strength training market is a small subset of the fitness equipment, Tonal likely has a single-digit market share.
Question: Is LeBron James invested in Tonal?
Answer: Lebron James and Mike Tyson are among the high-profile investors in Tonal. Other notable individual investors include Maria Sharapova, a tennis player; Sue Bird, a basketballer; Drew Brees, a football player; and Larry Fitzgerald, also a football player.
Conclusion
Tonal competes in a highly diversified and competitive home fitness equipment market. While the Covid-19 pandemic created a surge in demand for at-home workout equipment, the market is expected to return to its pre-pandemic state once gyms and other fitness facilities reopen. Tonal’s competitive advantage lies in its innovative connected strength training system that offers a personalized workout experience.
The company also has a strong team of investors, including high-profile athletes such as LeBron James and Mike Tyson. While Tonal doesn’t have a large market share, it is one of the leading companies in the connected strength training market. Some of its biggest competitors are Mirror, Peloton, Hydrow, Echelon, and NordicTrack. Other players on the market include Tempo, Smart Spot, and FightCamp.
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