Neil Gillis, the former CEO of Esporta has now left the UK health club industry to rejuvenate the fortunes of Blacks, the outdoor leisure clothing retailer. However, since his departure, he has had made some very interesting observations which I wanted to share with you. These insights from a former CEO are always very illuminating as they are filled with the benefit of hindsight and the ability to be more open.
What follows are comments Neil made in an article for Leisure Report.
Employees did not use the clubs
There was one thing which haunted me during my time in the health and fitness industry and which I have continued to think about since I left more than a year ago. In every other business I have run–from Cadbury’s biscuits to Greene King pubs one of the many difficulties We faced was ensuring that too much of our product was not taken by a minority of our employees. Shrinkage is the technical term. But in health and fitness we provided free membership of premium health clubs to all of our employees and yet a remarkably low number ever used this benefit and visited the clubs. There was very little shrinkage in more than one way.
People do not enjoy the fitness experience
This highlights the difficulty that faces this industry. Unlike most other industries we are selling something which people fundamentally don’t want. They need it, they know they need it, but they would rather there was another way. They are distress buyers. Much of our success with Esporta came not from driving sales but from driving retention levels. This gave a much better return on investment and, in a tough market, it was clearly better to hang on to your existing members than try and recruit new ones. The approach we took was that the membership sales process never stops. Once the member has signed the direct debit the selling has only just begun. We systematically called low users, regularly reminded members of why they had originally joined and constantly sold the benefits of exercise to them. It worked–we grew profits every year for four years and doubled the value of the business. But it shouldn’t be that hard. Imagine running a pub where you have to call your customers every week to remind them to come out and drink. Even when they had paid for their drinks in advance. There must be something structurally wrong with an industry which has to work so hard to persuade its consumers to use a product they have already paid for. It is even more concerning when employees can use the product for free and don’t do so.
Fundamental change is required
Having left the health club industry for the gentler and calmer world of clothing retail (frying pans and the fires of hell come to mind) I have spent some time looking back at my former role. It is clear to me that the health club industry now needs to go through another fundamental change if it is to remain viable in the long term.
Look at the success of five-a-side football
The clue for what is needed is to be found in the phenomenal success of the several five-a-side football businesses. These businesses have understood three aspects of human psychology which the health club industry has yet to fully incorporate into their offer. Human beings are competitive animals; human beings are social creatures; and human beings prefer play to work. An hour of five-a-side football will burn a lot of calories and do great things for cardiovascular fitness as well as reflexes and even flexibility. But it is fun. So people do it, and in ever-greater numbers. Contrast that to a lonely hour on a treadmill or lifting weights. The health club industry needs to reinvent itself so that it replaces the idea of a work out with a play out.
All health clubs are fundamentally the same
And let’s be honest, it is time for a bit of genuine innovation in the health club market. I see this most weekday nights. Because my current role involves a lot of travel I belong to several different chains of health club. Despite using many different clubs in many different cities I never have a problem acquainting myself with any new club I walk into for the first time. I know what the reception will look like, I know what the changing rooms will be like, I know how the gym will be laid out and I am familiar with both leading brands of exercise equipment which the industry uses. The only real differences are that some have tennis courts and some don’t, some are bigger than others and some have different names above the door, although this latter point changes quite frequently too. The problem the industry has is that it is on a bit of treadmill itself at the moment. All available management effort and resource goes into running and maintaining the current business. Very few new clubs are being built, and when they are, they are built to the safe models of the past. Existing clubs are starved of cap-ex so the money here is spent on refurbishing rather than reinventing the offer.
An innovator will arrive soon
But sooner or later someone will come along and innovate this sector. And when they do, and if you can, I would invest everything you have in such a concept because it will clean up. I am convinced there is a huge demand out there for the right product. The health club industry still invests a lot of time and effort in attempting to educate the UK public about the need for exercise and the problems with obesity. With all due respect I think these well-intentioned efforts are largely a waste of time. People know that being fat is not good. But there is no-one out there providing an easy way of dealing with this problem, and people will always prefer an easy solution to a difficult one.
What future healths clubs will look like
So what will this next generation of health club actually look like? It will be an area dedicated to active play. People will arrive at set times and join groups which will be led by a club trainer. But instead of staying in a studio they will roam the zoned exercise area and mix activities. These will be game based and split the group into teams. They will involve timed challenges, sprints, rallies and competitions. The activities will spread from the indoors to outdoor exercise areas where space allows. For those who prefer a different approach there will be spaces allocated to games that most of us enjoyed when we were kids and would probably enjoy again–the obvious is five aside, but even games like basketball and netball. The club environment would ensure that there were always enough people to play such games and these would begin on the hour. lust roll up, get changed and join in. And after the game you could relax for a snack or a pint and get to know the people you have just played with. A couple of hours in such an environment would pass very quickly. It would be fun, competitive and social. It would give people a great play out. And one further change. Because people would enjoy doing this and would want to come and play there would no longer be the need to lock people into annual commitments. It would be pay and play in every sense of the phrase. And this would remove one o
f the other great barriers to the health club industry–the contract.
I think we will have to wait a while for this next round of innovation because the health club industry is stuck in its current funding structure which makes it very hard to get off the day-to-day treadmill. For that reason I suspect the innovation may come from outside the industry. It may come from the five-a-side world branching out into larger sites with more games, and post-play social facilities.
Whoever leads the next round of innovation, and whenever it comes, there is one thing for sure. If they want to know whether they have got it right they should offer the use of the facilities to their employees for free. If their own employees regularly use the facilities they will have at least made significant progress on the current model.