Health & Fitness Business '08: State of the Industry report -- positive signs in uncertain times - SNEWS

Health & Fitness Business '08: State of the Industry report -- positive signs in uncertain times

For the first time at the Health & Fitness Business show, attendees were able to hear a State of the Industry presentation and had the opportunity to take part in a subsequent discussion, organized by the show with the talk presented by Therese Iknoian, SNEWS editor in chief.
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For the first time at the Health & Fitness Business show, attendees were able to hear a State of the Industry presentation and had the opportunity to take part in a subsequent discussion, organized by the show with the talk presented by Therese Iknoian, SNEWS editor in chief.

Some 175 attendees nabbed the chance on the first day to sit down, have a free lunch, listen to statistics and network with others.

From the first PowerPoint slide, it was clear that Iknoian's talk had a background that reflected a unique and challenging economic backdrop.

"There is so much unprecedented uncertainty," she said, detailing what she called "a perfect storm" of conditions impacting the industry, all interlaced: the weak U.S. dollar, inflation in China, high steel prices, petroleum costs, increased energy and food costs at home, and a precipitous decline in consumer spending.

"We don't really know the state of the industry," she said bluntly and quite honestly.

Iknoian cited statistics from the SNEWS Retailer Survey just released that covered the 2007 year to demonstrate the current split nature of the industry, as well as a downward trend: 50 percent of fitness retailers pointed at a down year, 40 percent said their year's sales had been up, and 10 percent said they felt they were at about the same level as the previous year. But the number who said it was an "up" year for sales had shrunk over the last three years: The same survey for the 2006 year revealed about 60 percent noting it was up compared to 80 percent who said it was a year of increased sales of some degree in 2005. (Click here to see SNEWS Retailer Surveys.)

Despite this seemingly less-than-rosy climate, Iknoian explained, customers continue to seek great product. "They want to indulge," she said -- although she also tempered overly optimistic expectations, saying, "The next few months may be about survival."

Also just revealed in that week was that the "State of the Industry" is not completely under the shadow of a continued downward spiral or a recession; several rays of hope had begun to shine and continued even that morning. For example, small cap stocks and small companies are soaring compared to the Dow Jones and S&P 500 indexes, which economists pointed out in financial news reports have in the last 10 recessions been the first indicator of a rebound. Other positive forces for the fitness industry include: increased obesity, greater inactivity and soaring health-care costs. How are these positive forces? Iknoian explained, "People must be aware of a problem before they'll take action." More overt positive signs included a huge uptick in total fitness retail sales in 2007 compared to 2006 -- the fitness equipment market hit $5.5 billion that year according to NSGA statistics -- with the biggest sellers still treadmills and home gyms. For 2008, forecasts are for sales to be flat.

In addition, Iknoian pointed out that by channel, specialty retail had grown slightly in overall sales since 2003, from about 12 percent of the total equipment sales to about 16 percent, while sporting goods sales had remained static and sales at Sears had dropped from about 42 percent to about 31 percent.

Lastly, when comparing historic retail sales cycles for overall U.S. retail, excluding cars and food, the troughs seen recently are still not as deep as the troughs seen in 2006 and 2007, according to the Financial Forecast Center (www.forecasts.org).

After Iknoian's presentation, she challenged attendees to come up with an answer by table in a five-minute breakout to the question, "What is just one thing we can do this year to 'save' the industry?"

Retail representatives from Canada suggested greater collaboration with the government, possibly pursuing tax breaks for fitness-oriented consumer purchases, similar to those which already exist for children in Canada.

Another table recommended simply seeking more innovative solutions: "What you did three years ago won't work," she said. "You need to do a better job educating consumers about your product."

Finally, Tom Cove, president of the SGMA, took the moment to mention the PHIT legislation his group is working on that, if passed, could offer the opportunity for the public to start what is similar to a health savings account but from which money could be spent pre-tax on equipment and services that will help the public get more active, such as equipment or dues.

The broad scope of ideas made it very clear that a single silver-bullet answer will not solve the challenges before the industry. However, as Iknoian pointed out, the answers to such difficult times are often spread across the board and it may be up to each person to discover, as Curly said in the movie "City Slickers," the "one thing" that is the secret of life since that one thing is different for everybody.

To view the PowerPoint presentation shown at the luncheon, click here.

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