Health Clubs: Is Your Business Wal-Mart, Kroger, Or Whole Foods Market?
Once upon a time, your traditional grocery store (Kroger, let's say) ruled the roost. Profit margins were thin, but there was enough business to go around, until... One day, a Wal-Mart Supercenter opened. It offered great prices and great selection. Suddenly, there wasn't enough business to go around anymore, until... Whole Foods Market showed up. Turns out that customers wanted specialty goods - organic foods, bulk gourmet items, lots of produce choices. And now, the traditional grocery chains like Kroger and Albertson's are consolidating and closing stores while new Supercenter and Whole Foods Markets open.

 

Our view:  The health club industry is undergoing the same transition. Larger general-interest health clubs will consolidate. Too many clubs targeted at the superfit exist. They cannot fill up their excess capacity because they do not appeal to high-growth underserved populations. Over time, many will simply go out of business because it will be cheaper for the big-box health clubs to get those customers through marketing, avoiding the risk and headaches of acquisition. Smaller clubs must differentiate to survive. Options include a focus on family-oriented wellness, inactive or older adults, or the physically challenged. Being in a small town does not protect you from this trend. Oxford, MS (pop. 12000) has a Supercenter...and it also has Curves, a university fitness center, commercial gyms and several not-for-profit facilities.  No market is immune from competition.

 

Are you Wal-Mart, Kroger, or Whole Foods Market?  Are you focused on a niche where you can build long-term customer relationships? If not, assess your club's strengths and the local market and focus accordingly.

(c) 2004