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Shades of Gray

Four industry experts explain, in black and white, how to find reputable used equipment dealers.

In old black and white movies, it's easy to pick out the bad guy. He has a disfiguring scar or wears an eye patch. He delivers lines with a snarl or maniacal laugh. And he always, always wears a black hat. Unfortunately, in real life, it's a lot harder to tell the good guys from the bad, and that's especially true in the used equipment industry. There are plenty of reputable, solid businesses that sell high-quality remanufactured equipment. But there are far more that lie about who they are, what they do and what they sell. It's up to you to decide who to trust with your money, and the answer isn't always in black and white.

Buyer beware

There are two basic types of used equipment: remanufactured and refurbished. "Remanufactured means bringing it as close as possible to new," explains Nick Pugh, president of Fit4Sale, Paramount, Calif. "Refurbishing means to bring to an operating level." But here's the rub: You can look up those words in Merriam-Webster and find two definitions that jive with Pugh's; but, in the used equipment business, those terms have no set definitions - which spells bad news for the consumer. Part of the problem is that the used equipment industry currently has no set standards or means to certify a product so aspects of its quality are apparent to the consumer. "The word 'remanufactured' is pretty vague, and the quality is determined by the vendor/supplier," says Roy Greenberg, president of Global Fitness, Gardena, Calif. Buyer beware has never been such a prescient warning. "I think [standards are] a good idea," says Chris Creighton, president of Health Line, Houston, Texas. Pugh says certifying products would help improve the industry's reputation. "The competition would be stronger," he says. "There would be more of a level playing field. In the long haul, it would help all of us. It would bring us more [positive] attention and less nervousness about buying remanufactured and refurbished." Greenberg agrees: "This [would] undoubtedly eliminate the lesser companies, which profess to sell remanufactured equipment, but do not conform accordingly." Until then, facility owners and managers are on their own to find the used equipment company that's right for their business.

Where does it come from?

To make educated decisions, it's important that consumers understand the market. Don't settle for an ancient machine that looks like it spent its best years collecting dust in a storage closet. Today, most remanufactured equipment isn't all that old. "The average age of our equipment typically is in the three- to five-year range," says Pugh. "We try not to purchase anything over the five- to six-year range for cardio equipment, and six to seven years in age for strength equipment." Stock is obtained via repossessions or bankruptcies, or are demo models from a manufacturer. "We hold a huge demo/new inventory of equipment," says Greenberg. "In order to fall into this category, the equipment must be the latest generation. We also house a very large demo inventory, which is all newer or latest models that have had minimal or no commercial use whatsoever. These machines are obviously sold at a premium, but will still facilitate huge savings over the purchase of new equipment." Says Pugh, "Some manufacturers allow us the opportunity to sell off their overstocked items, as well as floor models, cancelled orders or trade show units. These are generally new items with no or very little use, which can be a bargain for the opportunist. Although, in a perfect world, we like to have everything with no miles on it, that only happens approximately 10 to 15 percent of the time."

Who buys it?

The used equipment industry satisfies the needs of a specific and important market: independent, small, medium and start-up fitness centers. "We provide equipment to small to medium-sized operations, but where we really shine is [with] start-ups," says Pugh. It would be all but impossible for an owner just starting out to fully equip a facility with brand-new equipment. "We're developing a marketplace for the little guy," says Pugh. In fact, most of the startups Pugh deals with are successes. "Only a handful fall out," he says. "I sold to three to four start-ups every month in 2005. Most tended to succeed and grow, then move on to new equipment." Playing this role, filling the needs of this particular market, is why Pugh doesn't see the industry as being in competition with the new equipment companies. "We complement the new equipment manufacturers," he explains. "We build a segment they never could service in the beginning. We're putting their product into play." Not only that, but buying used equipment to get a new business off the ground actually builds brand loyalty. "[Fitness facilities] get used to the big names without paying big name prices," says Pugh. "We're building the market for new equipment."

Paying for low prices

By buying remanufactured equipment, you're getting someone else to take the initial loss, which can save a significant amount of money. "You lose 20 percent value of the cost of a new car when you drive it off the lot," Pugh says. "It's the same with fitness equipment." But, that same siren song of less money for like-new equipment is what drives many buyers to disreputable businesses. Says Pugh, "A lower price doesn't mean the quality will be the same. You get what you pay for." That thought carries even more weight when you consider the lifespan of high-quality refurbished equipment. "If remanufactured professionally by a reputable vendor, the machine should last almost as long as a new piece," says Greenberg.

The Internet effect

The Internet is both a bane and a boon for the industry. On one hand, it has exposed remanufacturers to a much larger client base, and helped some companies expand their business beyond their wildest expectations. "The Internet has helped to market our products to clientele that would otherwise be ignorant to our existence," says Greenberg. Kevin Shaw, president of Fitness Outlet, Riverside, Calif., concurs: "The Internet has really helped our business a lot. We now sell worldwide." But, for consumers hoping to make educated decisions about purchasing used equipment, "the Internet doesn't help," says Pugh. "Anyone can put up an elaborate website," says Creighton. "It doesn't cost much money to do that." Many companies use their websites to pass themselves off as something they're not. "There are a lot of guys selling on the Internet who are brokers," explains Shaw. "Brokers buy from dealers. Brokers cannot service their customers as well as a dealer can."

Finding the good guys

Weeding out brokers who misrepresent themselves isn't easy, but Greenberg, Creighton, Pugh and Shaw offer some helpful tips for unmasking the impostors. Get referrals. "Select a reputable vendor with a proven track record and with [a] concrete referral base," says Greenberg. Reputable companies rely on word of mouth to build consumer trust, and won't have a problem giving referrals. But be warned: It's not enough that a company supplies a reference list. "Be vigilant about checking their credentials," says Pugh. Get the details. "The one mistake most people make when they talk to a remanufacturer is not getting enough detail," says Pugh. "Ask lots of questions: What is the process by which you remanufacture? How long have you done this? Do you double-stitch or single-stich or staple? Are you using factory components? Are you making your own cables or using factory cables? Do you have product liability insurance?" Get a photo. "Ask the company to send pictures of the product," Creighton says. "That way, you're guaranteed that they have it." Get a tour. "Tour the facility before you buy," Shaw suggests. This way, you can see with your own eyes where the equipment is remanufactured and how. However, unless the company you're researching is within driving distance, this can be costly.

A new generation

Despite the unfortunate business practices of a few, remanufacturing industry leaders remain confident that their business will continue to grow. "In the past, there have been some unscrupulous vendors [that] have come and gone," says Greenberg. "The industry leaders always persevere and carry with them a strong reputation and proven credibility." These vendors are taking the silent, yet strong, approach. "We work to keep the quality high," says Pugh. "Eighty percent [of our business] is repeat business, and that speaks for itself." Consumers who take control of their search for high-quality used equipment will find what they're looking for - even if it means trading in a black and white world for some extra green.

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