The Sunday Feed

From treadmills to treading carefully!

The world is in chaos. There are more questions than answers. Future seems as clear as the road covered with heavy fog in the middle of a severe winter night. It is difficult to ascertain how life will be in the coming days.

Online seems to be the new thing. Everyone I speak to seems to be working from home. We were always told to leave work in the office to maintain sanity! How things have completely turned on their heads in just a year is still difficult to fathom.

Apart from the change in work habits, this event has also affected people’s health. It has made them realise that while money is important, it cannot be prioritised over one’s health. You need to live to use the assets you accumulate.

The Australian gym industry is worth $2.2 bn. Before the pandemic, it saw a steady annual decline of over 4% since 2016. However, last year, it fell by 8%. It does not come as a surprise but I have a feeling that it will fall much more. The only thing that might be holding it is the yearly subscription. Once the term ends, a lot of people might not come back.

A 5 year decline is a good enough trend to make you understand that people are going away from the gym and either not exercising at all or indulging in other sporting activities like walking or cycling, not to forget the weekend sports like surfing or beach volleyball.

I definitely saw one trend — People exercising at home during the lockdown. Most were using stretch bands to facilitate them. A lot of companies also jumped in to sell their apps and appliances and make a quick buck. Wonder how many people actually bought the equipment, which looked very shoddy and highly questionable.

I worked for Fitness First for some time in 2012. At that time there was a new trend that had just emerged and was catching on very rapidly — gyms with a 24/ 7 access, targeting those who had no fixed work schedules. Fitness First was losing customers to another brand called Any Time Fitness and so it had to open a few 24/ 7 gyms as well.

In my stint in the fitness industry, I realised that it is a business:

1. That needs a lot of space to set up

2. Is like real estate where location in key

3. Calls for huge investment in land and equipment

4. Needs to be heavily maintained

5. Has huge fixed costs

6. Unlike other products cannot be delivered to home

So with the above parameters, it is difficult to make large profits. The only saving grace is that the consumer can be lured by a lower rate if he or she signs an annual contract. While the figures may vary, it is believed that around 40% of the people on an annual subscription use the gym for just a few months in year. The rest is free money for the gym. This is what makes the gym business viable.

But this is about to change. Let me give you a concrete reasoning for this. At the moment around 90% of people are working from home and it look as though it is going to stay this way. In the Central Business District also known as the CBD, the occupancy might not reach more than 50–60% even after majority of the populations is vaccinated. Now this should be a matter of concern for Fitness First because it has about 8–10 gyms just in the Sydney CBD and surrounding areas catering to people working in offices situated in these areas.

But every event has something to teach us. As individuals or business people, we need to make note that in the future, we cannot venture into any businesses that

1. Are heavily dependent on locations

2. Needs huge investments

3. Have high fixed costs

4. Cannot be delivered online

Just one virus has managed to completely disrupt the whole planet. What is the guarantee that there will only be one virus operating at a time in future? What if we had a variety of them, all active at the same time! I hope we never see that day but as a wise businessman, I need to factor it in my future plans. And so should you!

Photo: Andrea Piacquadio on pexels

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