Now that you can’t go anywhere easily with the Covid induced lockdown, we might start seeing an increase in either the number of startups offering some type of exercise at home solutions or we might see the existing companies doing better because of increased sales. I’ve heard that Pelaton’s sales are up 36%, which wouldn’t be surprising.
One such company offering weightlifting at home in front of a smart mirror is a startup called Tempo. They just recently raised another $60M. Clearly the investors must be thinking “well, people can’t go to the gym, so they wouldn’t mind spending some significant cash to workout at home instead. Just look at Pelaton – they are doing well”.
So, what exactly is Tempo selling? Well, for $2000 (yikes) you get a smart mirror that can track your moves and tell you how to improve your posture and keep you motivated to pump some iron with some classes that cost an additional $39 a month. The $2000 initial purchase also gets you some weights and dumbbells.
Let’s do a structured analysis on this startup. My favorite is Porter’s Five Forces method, which I learned during my MBA at the UCLA Anderson school of management (I’m hoping that they will send me a check for this plug 🙂 ).
Applying Porter’s Five Forces Analysis to Tempo
(1) The Threat of New Entrants:
Whenever there is an attractive industry, product or trend, inevitably it attracts new entrants. Up until this point, people either lifted weights at gyms or at home, but they didn’t really use some sort of artificial intelligence, computer-based instructor to help them.
Developing something that detects the person, the movement, analyzes the posture just like a person and then provides feedback on a large beautiful display is definitely a multi-disciplinary engineering effort and is not cheap. Coupled with the fact that this is still a niche and unproven market, I would say that the threat of new competitors entering this method is low.
(2) The Threat of Substitutes:
A substitute is really a different product or solution that tries to solve the same problem but slightly differently. Coke and Pepsi are competitors using very similar technology (look and feel as well as taste) whereas water would be a substitute (a very healthy one) to Coke. That is the difference between the concept of a substitute and a competitor in this analysis.
For Tempo, the threat of substitutes is high. Covid will be over and gyms will reopen. Gym membership might be comparable to the average cost of what Tempo charges per month. I know Equinox is way more expensive, but that’s the exception. Furthermore, to use Tempo at home you really need significant space. Depending on where you live such as Manhattan or San Francisco, this may not be possible.
There is another substitute: working out using dumbbells without the smart mirror. Just use YouTube to learn proper technique. Sure, you will not get feedback, but this isn’t rocket science.
Another substitute is to use a personal trainer via some video conferencing software – could be FaceTime or WhatsApp. I’ve done this in the past when I was traveling and couldn’t go to the gym to meet my personal trainer. It’s convenient, quick (you don’t have to video chat the whole workout time) and you get instant feedback from a professional.
(3) Bargaining Power of Customers
This is really about the power of customers. If you have very few but large customers (for example if you are selling servers only to the cloud guys such as AWS, Azure and Google, they have more power than you) than you might be at the mercy of your customers assuming that they have alternatives. In this case, they might be very sensitive to price changes.
On the other hand, if you have a lot of customers who have very few alternatives, you can charge all you want even if you have a crappy product or customer service such as your health insurance company or your internet service provider 🙂
It’s too early to say for Tempo, but, let’s take a stab at it. For customers that want to workout at home, have space and the money, then this is pretty much a captive market for Tempo. Once you spend $2000, you probably will not want to switch even if a new entrant comes into play.
Similarly, even if the monthly charge goes up, customers will not want to see their initial $2000 fell like it was wasted and therefore, they will continue to be loyal customers. Hence, once Tempo gains customers, I think they will stick.
In this case, the customers don’t have much bargaining power, which is good for Tempo.
(4) Bargaining Power of Suppliers
What is this? Well, you have to use suppliers in your products or services. Do you have a diverse set of suppliers or not? If you do, then you can easily switch between suppliers and if you don’t, then the supplier has the upper hand.
Europe buys gas from Russia. Unless they have alternative gas suppliers, Russia holds the cards. On the other hand, there are many olive oil producing countries. So, if your relations with one of them goes sour, you can still enjoy olive oil with your salad 🙂
Unless Tempo is utilizing a very specific technology from a specific LCD/mirror manufacturing, I do not see this being an issue for Tempo.
(5) Competition in the Industry
This one is obvious – how is the apples to apples comparison? Just when I was about to say “for weightlifting, I’m not aware of any other competitor that provides a similar, smart display monitoring and feedback-based solution”, then a Tonal ad came on TV. Amazing timing!
Tonal is a very similar concept to Tempo’s mirror except that it doesn’t come with free weights, instead the weights are part of the mirror using resistive wires. The mirror/machine can adjust the resistance, essentially mimicking the effect of standalone weight lifting eqipment.
Remember, to not confuse this with substitutes. In this case, Tempo does have competition in this space Tonal charges $3000 (jeez) and also has a similar monthly subscription plan. Sure, Tempo is cheaper, but if you are already going to spend $2000 for a mirror, what’s stopping you from spending another $1000? I have not personally tried any of these (here is an in-depth review for Tonal and if you do a search I’m sure you can find one for Tempo).
In short, there is competition and the differentiation is not very clear? Remember, you can only compete by either differentiating or pricing (lower price). Tempo in this case is the lower-priced option, which might be how it intends to compete.
Any other competitors that you know of? Please write a comment as I would like to learn more!
The following image sums up the Porter’s five forces analysis:
Does it have the ability to disrupt a multi-billion dollar industry? Can it be a billion-dollar unicorn?
This really depends on how long Covid will keeps us locked down, but I’m going to say no, it really can’t disrupt the industry. It will be a niche player at most. Why?
Many people either workout at the gym or already have free weights in their home. Free weights are relatively cheap and they are easy to store. However, this human sized mirror takes up considerable space. Where do you put it? In your garage? No. In the yard? No. You really need dedicated space. I do not believe enough people will justify owning one and dedicating the space for this device. Best case, Tempo will be acquired, just as Lululemon acquired Mirror (for $500M). Worst case, it will not make it.
You might be tempted to say “hey, not so fast, Peloton is doing well. So, why shouldn’t Tempo”. My counter argument would be that people wo are serious about biking already spend significant dough on bike gear. Have you seen the prices? They don’t ride $100 Walmart bikes like I do. They easily spend thousands. For them, Peloton is really just one more bike. That is not the case for weightlifting. I know there are people very serious about the activity, but they would probably prefer to spend the money on protein shakes. Because, smart displays don’t build muscles. Pumping iron and dieting do.
How is the current sales/market traction?
Given that the company just raised $60M in funding, they must have hit some metric to convince investors to put more money into the company. Now, this doesn’t necessarily mean that the company is doing well.
Remember, Juicero? The company that raised a ton of cash only for an article on the web about how easy it is to squeeze the juice by hands instead of purchasing the juice pouch squeezing machine, resulting in the company collapsing and embarrassing all those investors. Yeah, so, investors don’t always to the right thing.
In any case, the current traction is low and I’m not convinced that it will be adopted by the masses.
Have you heard of competing companies in this space? If so, please drop me a note.
Startup Surfer’s Scorecard for Tempo fitness mirror:
What do you think about Tempo? Would love to hear your thoughts.