Entering the type of cooperative arrangement seldom seen among competitors, three key specialty fitness businesses in the Carolinas have agreed to split and share markets and work together on stores rather than go to battle.
In a deal sealed today but officially not closed until July, owner/operators for U.S. Fitness, Lifestyle Fitness and Charlotte Fitness will help each other, not step on each others' toes, and share markets and vendors, where appropriate and possible.
"We developed a relationship from the bottom up and, through that, we came up with a relationship that benefited all of us," said John Ward, COO of Charlotte Fitness. "We're all going to compete, but we still need to work together to bring people to specialty fitness."
The agreement is between owners/operators Chip Hunnings, U.S. Fitness Products and Lifestyle Fitness; Tom Flanagan, U.S. Fitness Products; and Steve Beuerlein and Ward of Charlotte Fitness.
"We both realized we didn't want to do battle with each other," Beuerlein told SNEWS®. "And we both got what we wanted by eliminating one choice for the consumer in the Charlotte market and streamlining that market."
Although the agreement states that the entities will work together "up and down the Carolinas," Ward said, Hunnings and Ward explained to SNEWS® the details of the specific actions to be taken:
1. Lifestyle Fitness Equipment (www.lifestylefitness.com), opened in November 2004 with its first store in Charlotte and now with two stores there and two stores in Greensboro, will permanently exit the Charlotte market as a store brand. One of two Lifestyle stores (Arboretum) will close, while the other store (Clanton) will become a Charlotte Fitness operation (www.charlottefit.com) and will retain the same staff. The store's signage will eventually change to reflect its new name and ownership.
2. The entities will form a joint venture in the Greensboro/Winston/Salem area, known regionally as The Triad, with the Hunnings/Flanagan partnership owning half and the Charlotte group, which was also founded in November 2004, owning half. Currently, there are two Lifestyle stores there, and the best store brand for the area is still to be determined, both for the stores now open and for planned expansion there.
3. U.S. Fitness (www.usfitness.com) will retain exclusivity of the group in the Cary/Raleigh/Wilmington market.
"It's a win-win situation for both sides going forward," Beuerlein said. "We've established a trust between the companies."
Hunnings explained that when he entered the region he felt it was a market for two strong specialty players. But both Lifestyle and Charlotte opened at about the same time and both were expanding in an area that already had a large network of Superior Fitness stores as well as a couple of other single-market players, including Dan Wilkins' Charleston Fitness, which already works closely with Charlotte Fitness.
"A joint venture in that market eased pressure on both of us," Hunnings said, since they will now work together to give their suppliers alternatives.
The product lines may remain slightly different for a few months as the teams decide what the best mix is, Ward and Hunnings said. The goal, they added, is to have the same mix across the stores.
Meanwhile, one wonders how competitors can come to this kind of working relationship. Despite being in a competitive situation, Ward said, the teams were able to continue to talk and be open and honest. Hunnings said he feels that even in a competitive area, specialty retailers need to work together on a mutual goal -- simply getting people to specialty to buy as compared to buying at big-box or mass merchants.
"We're in this together," Hunnings added, noting that it nevertheless took the team "a real leap of faith to have these kind of conversations" over the last few months.
For Ward, the long-time experience of Hunnings', including starting and building a chain in Colorado to 14 stores before selling it, is vital to his learning and success. "Chip's experience and credibility in the industry are unsurpassed," Ward said.
For Hunnings, the intensity and energy of Ward's hands-on management has uplifted the entire team, infusing additional creativity and ideas. "That's the energy that drives the entire business," Hunnings said. The acquisition by Beuerlein of Charlotte Fitness earlier this year also has added new business insights and opportunities, he added.
Together, they said, they can join energy, experience, creativity, marketing and in-store ideas.
"This agreement shows it doesn't have to be a situation where you're trying to butt heads with your competitors," Beuerlein said. "It really doesn't have to be a blood bath."
"We worked this agreement out to work together in a positive, go-forward relationship up and down the Carolinas," Ward said. "It wouldn't do anybody any good to go to battle….
We both feel as if we came out of it better than we were."
SNEWS® View: It is remarkable indeed to see several forward-thinkers in specialty retail come together in a way that will not end up in a battlefield littered with bodies. In the end, one of them would have suffered -- or someone else in the area perhaps would have, which still could happen with a couple of other players still in the Carolinas. And even a "winner" in that kind of scenario would have lost in many ways. This way, they can all make it work in a way that will keep vendors happy and businesses afloat, while also benefiting specialty retail in a broader sense. We also think that the merging of someone with more experience with someone who has fresher eyes will also mean better stores and better business with all players learning and benefiting. Kudos to them all for making this, no, letting this, happen.