How the Club Market Continues to Change

A few weeks ago, I was talking with a friend who owns a small chain of very successful paint and wallpaper stores in my area. He said, "Even with all of the experience I've gained over the past 20 years, I'd never open an independent paint store in today's market." I was surprised by this comment, as I know he really loves what he does.

He explained that his industry has changed dramatically over those two decades, and it wouldn't make sense economically to open stores like his. A large amount of capital is required for soft costs, inventory and equipment and it would take years for a store to turn a profit. That's because margins are being driven down by big-box stores and a limited number of wholesalers who want to move product any way they can, regardless of the toll it takes on their distributors.

That made me think of the fitness industry and the changes that have taken place over the past 20 years. Would I open an independent club like mine now, even knowing everything I've learned? And what will the next 20 years bring?
 

Divergent trends
When I first started, the goal was to have a neighborhood club where we knew everyone's name. We wanted a club where people could get the help they needed from trainers and instructors who cared about members' health and wellbeing. We wanted to offer sound, practical advice to people who wanted to get healthy, lose weight and build strength.

We charged more because we were worth more: better staff, better service, better amenities. And every year, as we added services (a heated indoor pool) and upgraded the club (luxurious locker rooms), we raised our prices. The cost of the membership equaled the value members received.

While we were growing our club, two divergent trends developed in our industry. On one hand, the low-priced chains started to gain traction and then grow at an unheard-of pace. On the other hand, we saw high-end clubs like Equinox and the Life Time Fitness chain also continue to grow and expand. Which model would dominate our industry? The answer, it would seem, is both. The high-end clubs seem to be extremely successful in their markets. The low-priced chains seem equally successful in their markets, which are more expansive and thus able to support more purveyors in this space.
 

That dinosaur feeling
So, if I had it to do all over again, I would — with a few changes. We had a lot of programs that didn't work and didn't make money. I wish we were quicker to jump on the functional training trend and had offered more of that to our members. I wish we had put more into specialty classes (yoga, Pilates, senior fitness) over the years as the trends dictated.

But this is the kind of club I wanted. Fitness people go into the fitness business because they love it. They love helping people feel better and healthier. They love the look on someone's face when they accomplish something they didn't think they could. They love just being in the gym. They don't go into the fitness business to get rich, and neither did I.

In today's market, however, I get the feeling that my club is already a dinosaur. Based on what I'm seeing in various industries and markets, consumers continually want to pay less and get more. Not "more" in terms of quality, but more in terms of quantity — and therein lies a big difference.

How many consumers are willing to pay more for a higher-quality product (perhaps, made in the USA)? Or are they more likely to choose a similar, cheaper, lower-quality product from overseas where the costs of production (wages, materials, regulations) are dramatically lower? With these lower-priced products, you can get twice as much — in essence, a two-for-one. Who doesn't think more is better?
 

The next 20 The health club of the not-too-distant future will have to be big, with lots of "stuff," and it's going to have to be cheap. There won't be any staff, because staffing is expensive. If you want to join the club, there will be a kiosk on the outside of the building, like an ATM. You just sign yourself up and enter your billing info.

There will be rows and rows and rows of cardio equipment. After all, two-thirds of the population is overweight. There will be a few strength machines, but no free weights. They're too risky and the average person doesn't want to get "too big."

There won't be any babysitting (too labor-intensive). There won't be group fitness classes led by an instructor with 15 to 30 friendly members, all socializing and having fun. Instead there will be a small open area with a big-screen TV and a computer that will allow you to pick a class and follow along to the virtual instructor. Access as many classes as you like, all for an additional fee.

Need a bottle of water or a protein drink? Just pick what you want from the vending machine. Need a place to put your stuff? You can rent a locker for the day, for a small fee. Need to use the bathroom? It's a quarter. (Anyone else old enough to remember pay toilets?)

There won't be a need for locker rooms. Instead you can rent an individual stall with a shower. Access one if you need it and your account will be debited a small additional fee. Tanning? You guessed it — small fee. Massage? We have these massage chairs just like you see at the mall — $5 for 5 minutes.

If you are a businessperson who wants to minimize costs and maximize profits, this club might be the perfect franchise to purchase and roll out in your community. Expand to surrounding towns, too, if it's feasible.

But, if you're a fitness person who loves being in the gym, a group fitness instructor who loves seeing their regulars come in for their Tuesday morning class, or a personal trainer who loves helping clients reach their goals, then there might not be a job for you here. You may be a member of an endangered species. For now, we can only work extra hard at what we love to do in the hope of staving off extinction.

This article originally appeared in the July|August 2018 issue of Athletic Business with the title "Survival in a changing club business climate." Athletic Business is a free magazine for professionals in the athletic, fitness and recreation industry. Click here to subscribe.