2nd Wind downsizes as economic breezes spotlight potential of over-saturated markets

Minnesota-based 2nd Wind Exercise has been blowing down its store count since 2008, with the remaining numbers dropping again this year by a third over last year’s already pared-back store count.

This jibes with other retailers’ actions across the country, big and small, which have shut doors to try to weather the economic storm. Although forecasts now predict the downturn will slow or stop in the next few months, full recovery could take years since, for example, the number of unemployed nationally rose again in May to 9.4 percent.

Dick Enrico, 2nd Wind founder, declined to comment about the latest surge of store closures or where the business was headed. However, in a June 19, 2006, story about his move to expand into the Chicago metro area, he told SNEWS®: “Every market I went to there is and was competition. It’s just that I overpowered them…. Either I make the competition better or they go out of business. When I go into a market, I stir it up a bit.” (Click here to see the full story, “2nd Wind blows into Windy City.”)

SNEWS has tracked fitness retailers annually for its spring eFitBiz report (Click here to see those publications in SNEWS archives dating back to 2004, which cover the 2003 year.). Those figures show that 2nd Wind, as of Dec. 31, 2008, had dropped from a high of 104 stores in nine states a year earlier to 85 storefronts, still in nine states. As of June 2009, the chain has dropped to 55, per its website and other reports, also still in nine Midwestern states: Illinois, Indiana, Iowa, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wisconsin.

The largest number of closures this year has come in the Illinois markets where 2nd Wind has dropped from 30 to 12, and in Missouri where the retailer, which began in Minnesota, now has five after closing four this year.

The current number of stores — 56 — is now equivalent to what Enrico’s chain had in December 2005, although that was only in seven states. Indiana and Missouri were added in 2006. Those numbers were already more than double than the 26 stores 2nd Wind operated as of December 2003 in five states, or before Nebraska and Wisconsin were added.

–Therese Iknoian

SNEWS® View: In a SNEWS View in a Feb. 25, 2009, story updating Fitness Holdings International’s bankruptcy progress (click here to see that story, “FHI to gut business”), we noted that fitness equipment and gear was not like a cup o’ joe: You don’t need a shop on every block trying to sell someone fitness equipment. With the downturn of the economy hitting hard late last year after starting to sneak up on the country a year earlier, it became clear that fitness specialty retailers had perhaps in some areas grown beyond need and, we’ll add, sanity. We believe that in some areas, such as a number of the regions 2nd Wind had marched into, including Chicago, Missouri and Nebraska, fitness shops had over-saturated the market well before the recession struck. For example, in Omaha, Neb., there were at one point 14 fitness specialty stores, as well as an assortment of sporting goods stores. With seven of the eight 2nd Wind stores now closed and a couple of other retail adjustments, there are now seven serving a metropolitan area population of just over 700,000 — better at least. When money was flowing, many more retailers were able to get by in an area, but now the entire retail community is re-adjusting to what is likely not only a current reality but a future reality. In a May 18, 2009, special report, SNEWS found that the downturn may have lasting effects on consumers and their shopping habits. Click here to see that story, “Economic downturn may have lasting effect on consumer behavior.” Over-saturation is out. Market-correction only with sane expansion is now in.

Some of the fitness retailers who’ve expanded may have done so on the behest of suppliers looking for ways into a region. Even Enrico told SNEWS in the June 2006 article that several vendors had moved their allegiance in Illinois from another to him, including Life Fitness, Hoist, Vision Fitness, PaceMaster and Octane Fitness. All still show up on 2nd Wind’s website. Of course, it’s up to a supplier to decide if it wants to jump from one retailer into the arms of another with promises of marital bliss and increased profits but, more often than not, that sort of leap-frogging around is not only short-sighted it’s also proving detrimental. This industry is small enough that building relationships as well as maintaining relationships is a key factor in doing business and doing it well for the long term.

Vendors should not be dictating to retailers where to open stores — unless the vendor wants to assume all the risk and make the store a company-owned one. Instead, we would argue that vendors need to work with existing retailers in existing markets. Let’s cut out much of this exclusive distribution malarkey that certainly has helped drive the over-saturation in so many markets. Let retailers decide which brands they feel will best suit their market’s needs and, if that means a retailer wants to carry Precor, Life Fitness, Star Trac, Vision and Octane in the same store, more power to them. They know their market and what they can and cannot sell in it.

Too, retailers need to learn the power of saying “no,” and manage their own businesses by not letting suppliers or potential suppliers tell them where to open or not. Opening a store should be based on need or potential need and business in an area, not simply on the request of a supplier to be there, lined up shoulder-to-shoulder with another.

This raises the as-of-yet unanswerable question: Are there too many suppliers? If they are constantly jostling in and out of retailers or having retailers open in an area to showcase their goods because of a lack of other options, is there also an over-saturation of brands to represent? This could be a huge issue for the fitness equipment industry as it moves forward in finding that new reality.

Now, closing retail doors may not be a bad thing if it’s done for the right reasons, and we know the current economic crunch can be a very good reason, especially if that means survival of a business overall. We’ve said it once, twice, many times, and we’ll say it again: These are the times that make finding a real tie to your community key, establishing alliances in your region is nothing short of vital, and learning how to work together with others in the industry for the good of everybody is the next step in the industry’s growth.

–SNEWS® Editors