// Independent operators beware - the times they are a changing
by Emmett Williams
Consider this conundrum: the fitness industry is going through its biggest ever growth spurt in terms of new entrants to the market, but our broader economy is facing more adversity than any one of us has ever faced before. With competition up and consumer spending down, it’s no wonder that club owners around the world are all asking themselves the same question; ‘how do we navigate such challenging times?’
The best way for any operator to look at their business is to perform a trusty old swot analysis (strength, weaknesses, opportunities, threats), a simple tool with military roots which is used to paint the picture of what any given environment looks like at any given time. Only when we have a comprehensive understanding of our environment and the players involved are we in a position to develop a competitive action plan.
But let me make this point very clear; the SWOT analysis conducted today is very different to any which you may have done in the past 12 months. We need to take the cue from leading management consultant Laurence Haughton on this one, and consider that ‘it’s not the big that eat the small, but the fast that eat the slow’.
Who are the players in today’s fitness market?
In addition to the numerous independent operators (among whom you may number) there are three other main groups of competition in today’s fitness marketplace.
We are all aware of the big players; clubs such as Fitness First, Good Life, Virgin Active, Genesis, ReCreation, Fenix and Zest who all like playing in spaces of well over 2,000 square metres. They have strong brands, big coffers, state-of-the-art facilities and are chasing the core fitness market. Membership costs of $75 to $100 a month are the norm with these players, but some have recently promoted ‘off peak’ or ‘alternate day’ memberships at closer to $50 per month. It can sometimes seem as though these players are in a race to see who can open the most clubs, with every new shopping centre becoming a battleground as the market leaders go head-to-head in an attempt to win the new space.
Then there is the ladies' express circuit model, which is made up of clubs like Curves, Contours and Healthy Inspirations. These are typically smaller 200 square metre clubs which offer basic facilities but play on the ladies-only element, the ease of time-efficient exercise and the service they provide. Priced around $50 to $70 per month, they have been through their growth spurt now, and experience tells us that they often act as a ‘stepping stone’ to bigger clubs for members.
Thirdly, there is the new swipe card model such as Anytime Fitness, Snap Fitness, Jett Fitness, World Gym and Oxygym which as a ‘model’ is currently taking Australia by storm. These are approximately 300 square metres in size, often have great exposure and offset their higher rent with low staff wages given they only roster on staff between 7am and 10am and 4pm to 7pm and just a handful of hours on Saturday. The swipe card entry system they have in place allows their members 24/7 access for a membership fee of approximately $40 a month.
Where is the economy headed?
I will leave that one for the economists, but suffice to say that the crash in equity markets is historically followed by a crash in the real economy, and at the time of writing unemployment was rising and consumer spending was tightening. Theory suggests that in these conditions spending on discretionary items is most affected. Is a gym membership a discretionary item? in our minds no; in the average consumer’s mind, absolutely.
The 5-minute swot analysis for independent clubs so, let’s get on with the SWOT analysis that can help to give your independent club a timely health-check.
Service is the leading edge of most independent facilities. With the big chain clubs traditionally not offering program updates as part of the membership, but rather as an additional product, small clubs are in a position to build extra value into membership dues. This service and guidance is a powerful way of showing members that you are genuinely interested in them getting results, it enables you to build a relationship with every individual member, and it creates a positive experience for the members.
Clubs with over 3,000 members find it hard to provide this type of service, making the smaller membership of independent clubs a strength in terms of retention. the new small box clubs typically have limited staffing hours, so simply cannot provide the same level of service. The traditional full service model of the independent club compares well in this light, and can effectively position itself as the ‘Cheers’ bar from the 1980s sitcom, ‘where everybody knows your name’.
Affordable real estate is a strength of most independent clubs. rather than paying $250 to $600 per square metre like the big clubs and the high-exposure swipe card clubs, independent operators can typically provide their product from commercial/ industrial space for between $60 to $160 per square metre. This means that the cost per square metre of running a club is invariably less than that paid by the large clubs or the high-exposure, high-rent swipe card facilities. This significant cost saving means that small clubs will have a lower break-even point per metre, which can either translate into smaller membership dues, or enable clubs to have proportionally more excess dollars in their war chest for other initiatives, such as customer service or marketing.
The biggest weakness of the independent club is the size of its wallet, which affects the size of its ‘market might’. Bigger brands often spend a lot of money on marketing, whereas the independent club usually does not. this means that even though a large portion of the market may prefer the independent product, if they don’t know about the independent club then there isn’t a ‘snap’ situation. The lower rent which translates into lower exposure of independent clubs now becomes a weakness. The obvious argument here for independent clubs is ‘what you save on rent, spend on marketing’, but of course it isn’t always that easy. Clubs find it a risky investment to spend big bucks on a ‘full assault’ campaign. Most independent clubs incorporate one or two exposures at any one time, such as newspaper and radio, but baulk at upping the ante and also incorporating TV, multiple layers of direct mail, outreach and a wealth of guerrilla marketing. The fact remains that this is what is required to stimulate action from deeper down in the fitness market, and to reach those prospects there are no shortcuts.
Another weakness is the difficulty in finding and keeping good staff – a weakness shared by all clubs, with the possible exception of the low-service models. However, with the prospect of rising unemployment, things may well be set to change, arguably creating more choice of candidates for employers.
The economic situation will help independent clubs capitalise on members who still value exercise but who don’t necessarily want to pay for the well located and well known chains. There could be a flight from more expensive clubs, to independent clubs which are more moderately priced. Industry icon Casey Conrad recently made a great observation that during the 1930s depression, when we might have expected spending on discretionary items to clam up, the businesses that faired the best were affordable restaurants and affordable entertainment. Why was this? Because people were looking for an escape, some time out. Do fitness facilities not provide that same opportunity? We are certainly an affordable ‘time out’ compared to boating, golfing and skiing!
Independent club owners around Australia and New Zealand are currently telling me ‘if the going gets tough i can always hold the current line of cardio for a bit longer, do 80 hours a week myself, cut my wages down and live off the smell of an oily rag’. This mentality of doing whatever it takes to survive is something the big clubs can’t do. Also, the lower rents will favour the independent over the swipe card club. If the going gets tough, low rents and then possibly low wages are on the independent club’s side.
Let’s also appreciate that good health and vanity are not going away. As long as there are underwear models on billboards I am always going to feel a little out of shape, and therefore i will always work out; as long as our sedentary lifestyle continues to be the number one killer in the Western world, then a gym membership will always have a strong value proposition. A discretionary item perhaps, but becoming more and more of a necessity. we are absolutely coming of age as a product.
The big clubs will challenge rural and coastal independent clubs in the next three to five years by developing models for the smaller markets of 30,000+ population. They will challenge the suburban independent by running omnipresent marketing and saturating an area.
The swipe card facility will pose the biggest threat given it is small enough to nestle into the smaller markets, but with its low costs structure will be able to compete on price. They have already pitched their rates at $40 a month, which undercuts the current independent.
Another possible threat is the potential introduction of volume clubs in larger markets which follow the Planet Fitness model in the USA , which charges $10 per month with no commitment and no contract. This model is about to explode in the UK, and may head down under and attack the bigger cities like Sydney and Auckland, though it poses no threat to populations under 100,000.
So, yes we face weaknesses and threats, but we always will. No business could do a SWOT analysis and claim it had no negatives. At the same time, we will always have strengths and opportunities – the key is to identify what they are and tweak your game plan based on an honest and genuine understanding of the variables.
Independent clubs need to reinforce their personal relationship with members, to be the ‘Cheers’ pub in their market. Tap members on the shoulder and offer them a complimentary program update to keep the relationships and the value of the membership where they need to be.
Stay very aggressive from a marketing point of view (even if it is only with low cost guerrilla marketing initiatives) to send the signal to the market that you are strong and thriving and to maintain your fitness presence in the consumer’s mind. Be aware which new clubs are seeking planning permission from the council, and be prepared to offer long term direct debit memberships and ‘alternate day’ or ‘off peak’
memberships as a way of competing with the lower price ‘swipe card’ facility that is your biggest threat. Most importantly of all, keep your belief systems strong; the independent club is alive and well.
In the USA the big chains and franchises have not been able to squeeze out the independent, and over the last 30 years our industry has grown through recessionary times, so stay positive in the knowledge that it ain’t all doom and gloom.
Emmett owns two independent clubs, is a co-owner of the international marketing company Creative Fitness Marketing, and has worked within the fitness industry in the USA, Canada, UK, Ireland, New Zealand and Australia. For more information, e-mail email@example.com
CLUB NETWORK • AUTUMN/WINTER 2009 • PP8-11