With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the UK gym sector between 2016 and 2021.
| Gym Operator | 2016 (%) | 2021 (%) |
|---|---|---|
| PureGym | 24.5 | 22.1 |
| The Gym Group | 14.8 | 13.2 |
| Nuffield Health | 12.2 | 11.5 |
| David Lloyd | 10.5 | 9.8 |
| Everyone Active | 8.0 | 7.2 |
| JD Gyms | 3.5 | 5.8 |
| Simply Gym | 2.5 | 4.5 |
| Snap Fitness | 1.8 | 3.8 |
| Others | 22.2 | 22.1 |
The number of fitness equipment manufacturers and maintenance contractors struggling to remain profitable has increased significantly as gym chains engage in aggressive membership price competition. Industry analysts suggest that major gym groups are delaying payments and demanding substantial discounts on long-term supplier contracts to preserve their margins. Small and medium-sized regional maintenance firms represent over 80% of those facing cash flow issues under these demanding terms.
The price competition has led to average monthly membership fees for budget gyms falling in real terms over the last five years.
At the same time, the market shares of the 'big four' operators—PureGym, The Gym Group, Nuffield Health, and David Lloyd—have experienced pressure due to shifting consumer trends. Many users are opting out of larger multi-purpose clubs, preferring either ultra-low-cost alternatives like JD Gyms and Simply Gym, localized 24-hour franchises like Snap Fitness, or home-based digital streaming workouts.
In response, the dominant operators have attempted to squeeze their supply chains, despite greater standardisation of service level agreements (SLAs). Smaller operators have continued to expand their footprint, capitalizing on the availability of cheaper post-pandemic retail spaces to scale up quickly, drawing many price-sensitive customers away from the market-leading chains.
