With economic, population and growth data showing Arizona as the hot spot in the country (and we don't just mean weather), fitness retailers are sensing the market there heating up and are either wading in or hovering expectantly, such as recent entrant Precision Fitness out of Florida.
"We see Arizona as our best market for growth this year," Chip Hunnings, president of Denver, Colo.-based, All About Fitness, told SNEWSÂ®.
Contributing to the recent or expected influx is the weakening of retailer Fitness Gallery's hold on the area, with others trying to position themselves to take market share now -- or be ready to nab it later.
"Everybody is hovering around like a bunch of buzzards. Everybody knows" what's happening with Fitness Gallery, said John Talley, vice president of retail for Advanced Exercise Equipment, also based in the Denver area. "Everybody has an eye on them to see what's going to happen."
Consider the numbers: Between 1990 and 2000, Arizona had a population growth of 40 percent, only second behind Nevada's 46 percent. In absolute numbers, Arizona was the fifth-fastest growing state, coming in behind only California, Texas, Florida and Georgia. Perhaps surprising to some who may consider the Southwest a bit of a no-man's-land are U.S. Census Bureau numbers that show the Phoenix-Mesa metropolitan area has nearly 2.8 million residents, which is only a couple of ticks behind the Denver metro area's 3 million.
The census bureau data also showed that the Phoenix area may be experiencing the growth that Denver experienced a few years ago: From 1990 to 1999 (the latest figures available), the Phoenix area was eighth in the nation based on percent change of population, while the Denver area was 26th, and Phoenix's growth from 1998 to 1999 was up 2.8 percent compared to Denver's at 2.3 percent.
"There's opportunity there," Talley said. "It's a growing, viable market."
Information from the Arizona Department of Economic Security shows that the state continued to add jobs in 2003 and expects to continue to do so this year. The non-farm employment for the Phoenix-Mesa metropolitan area is estimated to grow 2.6 percent this year. And the same office showed that personal income was growing strongly in the late '90s, with an 8.7 percent increase in 1998 compared to the national average of 5.9 percent, which it has consistently beat for years.
"While its share (of national income) may be comparatively small, Arizona's share has consistently and gradually increased throughout the '90s. Arizona's share of national income in 1990 was 1.3 percent," reported the Arizona Department of Economic Security in early 2001. "With annual growth ranging from 4.5 percent to 9 percent each year, the latest available data show Arizona's share reached 1.5 percent in 1998. This may seem rather paltry when compared to the 12.5 percent share held by our neighbor, California, or even New York (7.9 percent) and Texas (6.8 percent). Nevertheless, with the exception of Texas, states such as California and New York have shown a significant loss in their share of the national total income."
What's happening store-by-store:
>> Advanced Exercise Equipment -- This group out of Denver has six doors, including one (a Life Fitness brand store) that opened in December in the affluent Phoenix suburb of Scottsdale. Others are in Colorado and Kansas. Talley said the group "isn't going to settle with one store," but isn't actively looking either. Nevertheless, AEE could decide to add another this year. "We'll definitely be growing down there."
>> All About Fitness -- Its first entry into the Southwest market out of its Colorado home base was in 2001 in Tempe, followed closely by Scottsdale a year later. The group now has 12 stores, not only in Arizona, but also in Colorado and Kansas with one added in late 2003 in the Las Vegas, Nev., area. Hunnings said his group looks to add two more in the Phoenix area this year, with one perhaps in the Northwest and another perhaps in Chandler to the east.
>> Busy Body (Fitness Holdings International) -- With a wildly growing year behind it (from 21 to 47 stores with two acquisitions), FHI now has stores in Alaska, Arizona, Colorado, California and Washington, with three of those in Arizona (Phoenix, Scottsdale and Glendale).
>> Fitness Gallery -- Still holding tight to its three Phoenix-area stores (Ahwatukee, Scottsdale and Glendale), the rumor mill is buzzing about its future since it closed its Houston store and three Atlanta-area stores late last year. The name is also still on three stores in Colorado and two in Kansas. Lots of changes here, though.
>> Precision Fitness -- A newcomer to the area that marched in from Florida, Precision Fitness has eight stores in the Sunshine state to the east. But in early winter it took over a Fitness Source store in the North Phoenix area and just before Christmas opened the doors on a combination health club and small retail showroom in Chandler to the south of the city not too far and just across the highway from the Gallery's Ahwatukee location. President Richard Wasserlauf told SNEWSÂ®, "It definitely is across the country for us," but declined further comment and didn't return a second call by deadline. If the positioning was aimed to start stealing traffic from the Fitness Gallery, one industry and Phoenix-area insider said the Chandler location isn't in the right area to be set up for that.
Of course, Tempe, Ariz.-based, Fun 'N Fitness is also gone after quickly growing to five stores in Arizona back in 2000, so upheaval isn't new in the Southwest.
Can the Phoenix market support all these stores, as well as the others looking to jump in? Opinions vary, depending on the person.
Said All About Fitness' Hunnings, "I think it can handle us all pretty well, when you look at the size of the market."
But AEE's Talley said he doubts the market can handle the masses -- unless Fitness Gallery just disappears. Either way, Phoenix could be like the Kansas City market when everybody flooded in once someone struck gold then shook itself out, meaning some will win and some will lose.
But the Southwest shakin' has only just begun, Talley said: "We haven't seen the end in Arizona."
SNEWS View: Arizona is hot. We expect some eruptions are about to begin there, and that 2004 is going to be a big one for changes all the way around. Interesting difference between the Phoenix area and its counterpart, Denver, is how much more homogonous Denver income is, while personal income in the Phoenix area is some of the highest but also some of the lowest. Some retailers say many of their customers are actually outfitting second homes in the area with full exercise rooms. One noteworthy characteristic is how spread out Phoenix is, indeed leaving more room for perhaps a higher number of specialty retailers to experience success than in a more compact urban area like Denver. But, as usual, the caveat is wise and carefully planned growth. Sticking in a storefront in case someone else fails ain't going to cut it.