Fitness Equipment Manufacturers Ride Wave of Uncertainty During Recession

Nationwide — Although the economic downturn has many manufacturers concerned, some fitness industry manufacturers are cautiously optimistic. Club owners are buying more conservatively and examining expenditures to make the most of every dollar, but some manufacturers say it's still possible for them to remain profitable.

"Club owners are still buying, and in particular, new clubs that have been in the planning stages have to buy new equipment so they can open their doors," says Randall Bergstedt, vice president of marketing for Star Trac. "We do see some conservative buying, such as smaller orders or a longer buying cycle, but we are fortunate enough to have launched new products that helped us generate a 15 percent revenue increase in 2008."

Troy Mosley, marketing manager for Sportsmith, agrees. "We've had a great January, which I think is more than we expected," he says. "I just read a report from the U.S. Department of Labor, and they're saying that jobs in the fitness industry are going to increase by 27 percent from 2006 to 2016. It leads me to believe we'll continue to see growth through 2009."

Dan Toigo, senior director of commercial sales for Precor, notes that keeping current members by investing in new equipment is a good way to avoid member attrition when a new fitness facility opens nearby.

And by buying new equipment early in the year, club owners can get ahead of the competition, Bergstedt says.

"The first quarter is a great time to use funds generated from January initiation fees to keep the club fresh and up to date with the latest equipment," he says. "Facilities that make investments in new equipment and improvements will be the first to benefit when the economy does start to recover."

Toigo says history has proven that record-breaking sales years happen after a down economy. He also says that owners who invest now will reap the benefits on the upside and have a stronger organization because of it.

While the economy remains tough, club owners are changing the way they do business. For instance, Hossein Noshirvani, executive vice president for MotionSoft Inc., says club owners are bringing billing processing in house to save money, connect with members and boost retention rates.

"I think there's been a shift back to providing service to members because people realize it's easier and less expensive to keep a member than to try to get new ones," he says. "Often, they were outsourcing billing and collections, but a lot of smart clubs are bringing those in house. Club owners are beginning to understand that there are places where they can cut costs by big numbers and still increase retention rates."

By keeping collections in house, club owners can take a softer approach on billing with members who have recently been laid off, he says. This change means a shift in sales for software manufacturers and billing companies.

"It's been a seismic shift in our industry," he says. "Everyone provides billing services, but the smart bet is on people handling those services on their own. We're not selling billing services anymore. We're selling software."

CSI Software, another club software provider, altered its own business model to address economic uncertainties.

"We started moving to a SaaS (Software as a Service) pricing model many years ago, and as a result, we don't need to rely on big new software purchases to maintain our growth," says Andy Wigderson, vice president of sales and marketing for CSI Software.

The bottom line is that successful club owners and manufacturers are open to adjusting their courses to ride out the wave of economic uncertainty.

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