Friday, June 11, 2010

The ‘Gymming’ Business..

Looking at the number of Gyms and fitness centers that have mushroomed recently in Bangalore one would feel its one of those profitable business. But they too are dogged by many hindrances that are seen in many businesses today - the most common being Competition and Attrition.

One just has to visit a gym to understand their business model and the troubles they face. To the naive, it might seem a very profitable business given the number of fitness sensitive people one finds everywhere today. The sheer number of people who sign up for these fitness centers is astonishing. But how many actually continue to attend after the first month is unfortunately a very small number. The gym I visit is frequently thronged with new faces everyday and many of them do enroll the very first day itself. But hardly any of them continue after the first few days/weeks. “Customer Attrition” at a different league! But how does one motivate people? - and that too for something as strenuous and boring as a gym? Even a discount in the rates doesn’t suffice to entice people.

The other problem is the competition. In my area alone I see some 4-5 full fledged modern gyms (price ranging from Rs. 800-3000 per month) and many assorted smaller gyms (prices ranging from Rs. 250 – 500). Even though its early days and half of these might close within a year there is still the problem of plenty, considering that the majority of their target audience is in the age group of 15-35. Because of the competition the prices too comes down. The other day after my quarterly payment was due I was offered an Rs.6500 annual fee if I could pay immediately (and of-course I didn’t miss the golden opportunity as it amounted to an annual saving of Rs.3700). But for how long these guys can sustain if they continue like this?

The investment costs for such gyms runs in lakhs (my estimate came up to approx. 10-15 lakhs for a decent establishment – equipment, music systems, AC etc) and of course there is the operational cost (cost of trainers, electricity and maintenance costs). Also there is the infrastructure cost of setting up the whole setup and paying monthly rentals. It will atleast take 1-2 years for them to break even.

One should not only have lots of patience but also the right business acumen to turn it profitable. Many things like renting out the space for aerobics/Yoga during afternoons (when the strength for actual gym is very low), offering family packages, offering special programs for reducing or increasing one’s weight, selling accessories like deodorants, energy drinks, and appropriate food items should be taken up. I hardly see these in many gyms. Also one should even try becoming an agent or distributor for the gym equipments in one’s area. Many people don’t like to go to gyms but would like to buy equipments and use it at home (atleast that’s what they hope for when they buy!) and so there is tremendous potential there. Considering the amount of competition and the problems of sustaining the customer base, one really needs to constantly innovate if one doesn’t want to shut shop.


Divya A L said...

Actually, people I have come across are all GYM addicts! Call them at any hour in the day, they would say - "I'm in my 2nd home" and thats the gym!!!! No wonder people still take such a risk on investing such hefty amount into this business!
As far as annual enrolments are all concerned, it is just to keep customers for the next 1 yr atleast... Whether the enrollee will be interested throughout the year or not is secondary! Guess the risk is worth it though not with immediate effect :)

dilip said...

How many people do you think actually enroll annually? Its actually a very small number bcoz most people who enroll annually are those who are sure will go to a gym most part of the year..A very small number indeed!

The art or the challenge is to attract and retain the newer folks and thats where the problem is!!
In our generation most people would have given a shot at Gym once atleast in their lives but hardly any of them continue..

Thats why folks who start Gyms should think out of the box to make money and that was the basis of the post..:)

Gym addicts somehow sounds like drug addicts..:) Given the lifestyle we lead it makes more than necessary to become addicts in some sort of physical exercise..:) Maybe time for you to join one of these or maybe the easier thing would be to expand the circle of friends who dont go to gym..:D hehe..

Srinivas Guntupalli said...

Hiring some 'good' cheer-leaders to give appreciative looks at the non-existent cuts of the customers, after every move they make should boost their business, I guess :)

dilip said...

hahaha...:) Too good!!
Looks more like IPL kind of an idea..;) But yes...I am sure it will be very effective..:)

The ideal way to implement this, would be to get them like customers by giving them discount in exchange for their 'appreciate looks' to other customers..;-)

Sagar said...

Looks like a lot of activity in the Mind Gym. :-D

Srini's idea is plain outstanding, from any perspective you look at.

dilip said...

I totally agree!! :)
And yes its been a wile since 'a lot of activity in the mind gym'..:)

Rajesh Goli said...

"something as strenuous and boring as a gym"

If you are referring to cardio machines like treadmill, I agree. Running on a treadmill is THE most boring thing I've done in my life :)

But, on the other hand, doing weights is anything but boring! The endorphin and to a less extent adrenalin rush you get is exhilarating!

dilip said...

haha..I agree...Treadmill IS the most boring thing!

On the other hand weights may excite US, but it doesnt to everyone...Especially after the first few weeks when people get demotivated after seeing no spectacular change in their looks..;)

Overall the entire experience itself IS exhilarating! Only problem is its always at the end of the workout..:) The problem is people have to motivate themselves to reach there..:)