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It wasn’t too long ago that SNEWS® talked to fitness retailers who said they were getting into commercial sales to help beef up their overall business — or they’d exclaim how thankful they were for commercial sales since that division was doing so well compared to retail.
Times change and sometimes pretty quickly. Although the commercial arena was slower to get the one-two punch, the downturn began in earnest with the start of the year.
“We knew it would come, but we didn’t know when,” said Rick Barbee, who has sold commercial equipment for 25 years, most recently heading up the California division of Advanced Exercise Equipment.
From coast to coast, manufacturers, retailers and commercial dealers have recently told SNEWS the financial woes that smacked retail sales in the last year — with the start of the TKO coming in September with the crash — have finally reached commercial sales and even club memberships.
They aren’t in the skids like retail sales are in most areas, but everybody is being a little less eager and little more conservative it seems. According to Carlos Vazquez, owner of Busy Body/Gyms To Go in Florida, “it all ties back to the credit crisis.”
Once the housing market went sour and people began losing their homes and then their jobs, customers such as home owners’ associations, condos and country clubs started downsizing orders because they simply weren’t getting the lending they had expected or hoped for. Hotels, Barbee said, mostly carried through with plans since he said they had brand standards to uphold. He added, however, that most will likely look to less frequent upgrades. And clubs that had planned new facilities put a kibosh on plans, which naturally put a hold on equipment sales.
“Everybody’s personal financials changed,” Vazquez said. And once that happened, the slowdown trickled down and gradually spread from retail sales into vertical and commercial areas.
“What we started seeing was less activity in the pipeline,” he explained. “There is less demand for replacing and adding equipment. It’s definitely changing.”
Vicki Greenberg, co-owner of Commercial Fitness Solutions of Littleton, Colo., voiced the same observation as others: Although many accounts weren’t ready to commit for 2009, most corporate clients had budgets that were in place for 2008 “so they were going to spend it.”
Right now, though, “things are on hold,” she added, although “it’s not panic.”
Suppliers and clubs feel punch
Of course, if dealers aren’t selling, then suppliers can’t sell. In mid-December, Precor-parent Amer Sports announced Precor sales were dramatically off due to a huge and sudden drop in demand in November and December and it was lowering its full-year guidance. At Johnson Health Tech, parent of Matrix, Vision and Horizon, CEO Chris Clawson had told SNEWS that there was a hint of the start of a slowdown commercially also at the start of the fourth quarter. Those types of slowdowns have in part forced most manufacturers into layoffs.
In the club arena, surveys have shown that some clubs — much to the chagrin of some — are discounting memberships to keep and attract members, but for the health-conscious a club membership is not what they want to give up. According to a survey conducted by Opinion Research Corp. and sponsored by Anytime Fitness, among those who already belong to fitness clubs, 60 percent said they will keep their current memberships. Another 23 percent plan to downsize to more affordable health clubs. And when choosing health clubs, 21 percent selected convenience or atmosphere as top considerations.
A light still shines
But it’s not all bad news. At Sacramento Exercise Equipment in California’s capitol, owners Victor and Kelly Novak said the year ended on a bang — December ended with their highest sales ever for any one month in 28 years in business, which included commercial sales. January has started a bit slower, however, they said, with customers so far showing a slightly more conservative bent.
In Colorado, that’s also what HealthStyles co-owner Dave Sheriff said he experienced.
“I kept waiting for the commercial shoe to drop in 2008,” he said, but he added that he had a good flurry of business even at the end of the year and closed the year on his commercial side up double-digits over 2007.
“Everybody already had their budgets in place,” he said, echoing Greenberg.
So far, for everybody, 2009 is a big question mark. Most have said they are preparing for slower sales commercially and are beefing up service offerings or trying to increase customer service while avoiding simply deep discounts.
“We don’t really know yet,” Sheriff said, how it’s going to shake out.
SNEWS® View: All the news is about retail sales tanking, but commercial and light commercial sales will continue to take a hit as the year progresses too. As the credit crunch loosens — when it loosens — the commercial area could be one of the first areas to come back. So far, we continue to hear of some good-sized retail sales, particularly higher-end equipment, but even that has slowed down somewhat. If inventory is busting out of warehouses on the heels of slower sales that means there could be fewer innovations and introductions later this year as suppliers try to spend less money and clear out stock. Of course, if there isn’t anything new to catch a customer’s eye, that could mean even fewer sales as we head into the 2009/2010 season.