Questions arise about Cap Barbell's connection with WarehouseFitness.com

Cap Barbell appears to be selling its equipment directly to end consumers on the Internet, raising the ire of some retailers, although Cap tells SNEWS® despite state business records showing names and addresses that cross-over, that it is only funding the e-tail business for a customer. Still, some retailers question a supplier seemingly competing with its retailers.
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Cap Barbell appears to be selling its equipment directly to end consumers on the Internet, raising the ire of some retailers, although Cap tells SNEWS® despite state business records showing names and addresses that cross-over, that it is only funding the e-tail business for a customer.

Nevertheless, a search of Internet ownership records showed that Warehouse Fitness' domain (warehousefitness.com) is owned by Cap Tech Inc., with the same address in Rancho Dominquez, Calif., as Cap Barbell's distribution center. And a search of business records filed with the Secretary of State in Texas -- the location of Cap Barbell headquarters – showed Warehouse Fitness owned by SCR Holding Co. Inc, which shares the same address as Cap Barbell offices in Texas. Both filings occurred in late 2003.

“The Warehouse Fitness site is clearly a Cap Barbell-owned site,” Fitness Unlimited store owner Stan Terry told SNEWS®. “They sell some product for prices I can't touch, and they allow customers to pick product up from the Cap distribution centers; they sure wouldn't let my customers do that.”

Terry last month severed ties with Cap Barbell for what he sees as a business that harms Cap retailers, like his own Houston, Texas-based retail stores Fitness Unlimited, Busy Body and Winston Fitness. Terry said he was "irked" after he stumbled onto the Warehouse Fitness website (www.warehousefitness.com) while doing some research on the Internet in January.

For years, specialty dealers like Terry and others have been leery of the Internet as a selling tool. They worry any retailer or etailer could sell to someone in what is considered their territory, provide unfair competition, or even undercut normal prices and therefore margins. As the Internet grows more pervasive and more consumers are turning to the web for shopping, anger similar to that felt about the Cap/Warehouse Fitness relationship will only grow.

"It's not going to go away," Terry said about the Internet.

In its defense, Cap Barbell insisted that the Warehouse Fitness e-tail business is only a Cap customer like any other and isn't infringing on any territories or harming anyone.

“Warehouse Fitness is a customer of ours,” Cap National Sales Manager Curt Reynolds told SNEWS®. “The owners are friends, and he may have set up some funding to help with systems, etc.”Â

Reynolds did not return several follow-up calls by deadline for additional explanation.

Domain registration and business records show cross-over
Business records only complicate this particular case: According to the Texas Secretary of State office, Warehouse Fitness's owner SCR Holding Co. Inc. shares the same address as Cap Barbell in Houston. In addition, the listed owner of SCR, Ching-Ting Tseng, shares the same last name as Cap Barbell owner Edward Tseng.

Further clouding the picture was the Internet domain registration records. Warehousefitness.com is owned by Cap Tech Inc., a wholesale and computer consulting company, whose listed secretary happens to be another person with the same last name, Caroline Tseng. A call by SNEWS® to the Cap Tech company was greeted by a Cap Barbell answering machine. Upon reaching a real person (the original registrant contact, Marcus Yeoh, no longer works for the company) we were told to call Roger Guerra at Warehouse Fitness.

Guerra said Cap has totally funded the business, which he said he hopes to buy back.

“Warehouse Fitness is a separate company, although CAP does help fund me, and I rent space in its headquarters,” Guerra told SNEWS®. “The owner of CAP owns the paper on Warehouse Fitness, but at some point I'm hoping to get a transfer of ownership to me once everything is paid back.”

Despite this hope, Guerra said that there is no official payoff date or any written buy-back terms regarding ownership or future transfer.Â

“There is no set date but I'm in charge,” said Guerra. “Cap does not control inventory or pricing policies.”

The Warehouse Fitness website, which calls the company "the nation's largest factory direct source for fitness," also states Warehouse fitness has distribution centers in California, Texas and New Jersey – coincidentally the same as Cap Barbell. The site also states that customer pickup is available at all three locations.

How do prices compare?
A Warehouse Fitness sales representative told a caller for example that the caller could pick up product at the distribution center and not pay shipping on items except dumbbell sets, home gyms and weight benches. On products in those three categories, the website states there is no shipping and, the representative said, it is included in the price and cannot be deducted.

For example, a Phys-X "Value Home Gym" by Cap (Model SM-T888) with a 200-pound single weight stack is being sold on Warehouse Fitness for $799, with full retail reportedly of $1,099. Another e-tailer on a Yahoo shopping site is selling the same gym for $659 plus $99 shipping (a total of $758) and states full retail is $899. That means the Warehouse Fitness prices aren't necessarily the cheapest around.

However, on any other items, pickup by a customer at one of the three Warehouse/Cap distribution centers could add up to some small savings. For example, a 300-pound Olympic weight set sells on Warehouse Fitness for $149, but buying it online would mean an additional $138 in shipping, bringing the total to a whopping $287. Consumers could buy it from a specialty dealer for about $160 without ringing up those hefty shipping fees – a total only about $10 more than heading to the distribution center for a personal pickup and may not be worth the gas if the drive is very far.

In another comparison, a regular 160-pound, 1-inch cast iron set -- including a bar, handles, collars and plates – sells on Warehouse Fitness for $79, but upon purchase tacks on a shipping charge of $48 if not picked up, adding up to $127. Some sporting goods dealers sell that item for $100 if you walk in the door and buy it, a total that would jump to about $180 if you had it shipped from their sites.Â

In one last comparison, a 550-pound Hex dumbbell set with weights from 5 to 50 pounds with a two-tiered rack on Warehouse Fitness goes for $459, which includes all shipping. A specialty dealer might sell that set for about $325 for just the dumbbells and charge another $130 for the rack, adding up to about $455, or basically the same price.Â

All in all, unless someone lives near a distribution center and can personally pickup the product, the Warehouse Fitness prices wouldn't add up to much savings, if any. However, the business for retailers does represent a supplier competing directly with them and could harm retailers in the backyard of the three distribution centers.

A look at the site pages shows only Cap strength products under various brands, including the Phys-X home gym brand, and a few cardio items from Horizon Fitness, although Guerra said he also carries Maxicam, Hampton, Bodyguard and others.

Home gym distribution said to be key
For Cap's Reynolds, the site more importantly has become a good way to sell its home gyms, which have not had huge success landing brick-and-mortar dealers.

“We are utilizing Warehouse Fitness as a way to get distribution of our home gyms, which we couldn't get done through our bricks-and-mortar dealers,” said Reynolds.

Despite Cap's argument that it is not operating the website, Terry is one retailer that has fought back. He dumped the company in February since he felt the Warehouse Fitness business would be particularly damaging to companies like himself in the same area as one of the three distribution centers.

“I did more than $200,000 a year for them and now they are competing directly with me in my own backyard,” Terry said. “I'm upset with these guys. “I will only support manufacturers that support dealers, and I've spoken with others that feel the same way and either have or will be moving on.”

SNEWS® View: Well, Cap may not be as secretive as the CIA, but it sure is doing its best to go the secret identity route with its Warehouse Fitness connection. Odd, considering the not-too-hidden paper trail points to it owning the online retailer – at least for now. And with no set payoff date for the “loan” made to Guerra, it may own it for quite some time. Pricing on Warehouse Fitness may not be enough to attract savvy shoppers from around the country, but those living in Cap's backyard could easily save some cash, depending on the item, by visiting its distribution centers in California, Texas and New Jersey. But if more of its brick-and-mortar dealers follow Terry's lead due to competition or simply on principle—and we hear they will—the lure of direct sales online just may not be strong enough for Cap to go it alone. The blow could be worse than any gains won from going direct.

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