July 8, 2007 - Market in Transition
There have been two big changes that we have seen over the last year in the fitness equipment market. One change we have been talking and telling people about over five years has been the decline of the specialty fitness dealers. The other has been a surprise to us. This is the increase of customer service in internet direct fitness equipment sales.
For years we have been warning the industry about the decline of specialty fitness dealers. Most manufacturers simply laughed, shrugged or just thought that we were crazy. Well they don’t think we are crazy anymore! If I have heard if from one manufacturer this year, I have heard it from most: “the dealers are dying”. The fact is that they are. They are being squeezed by big box sporting goods and mass merchants that have the luxury of varying the floor space devoted to fitness equipment. This is a huge advantage when people are not interested in buying treadmills and ellipticals. It means that they can stay financially strong while the specialty fitness dealers are taking it in the shorts.
What has always kept specialty fitness around has been the level of service that you get from them. Dedicated service departments and a dedicated sales staff, theoretically gives the customer a higher level of service. Frankly, this has never lived up to its billing and customers are keenly aware of this. What has hurt the fitness dealers most is the internet. Customers are now aware of the different options and the failings of fitness dealers. Now that they know, they are finding better values for the money. Hence the decline of the average price of the specialty fitness treadmill (From $2000 to $1600). Big box and mass merchants, along with internet direct, have been picking up market share from specialty. If you are not getting good service you might as well get a better price.
The big surprise has been the internet direct sellers. Most of the product you get direct on the web is the same quality as you could get in the stores. The question is whether or not the company that you are dealing with is going to stand behind the product. Frankly, internet direct sellers have not made themselves look good by engaging in questionable marketing practices. There support of affiliates sites that masquerade as review sites to steer customers to particular brands skirt dangerously close to the business practices of snake oil salespeople. We have found, through customers sending us email and letting us know what is going on, that the direct sellers that are manufacturing their product under their own name are tending to do well by the customers. Internet resellers are not treating their customers nearly as well, on average.
An example of this is Smooth Fitness. Last year we hit them pretty hard on their reviews for having some customer service issues. While we are not popular at Smooth Fitness right now, they did take on the issue and got is solved. We have been getting more and more comments about how customers had a problem with a Smooth product, but Smooth fixed it fast. This leads us to wonder how this increase in the internet direct customer service will affect specialty fitness dealers. We don’t know, but it can’t be good.
July 11, 2007 - Chinese Manufacturing
I have been watching the news lately, and like most people, have watched in wonder at the implosion of the reputation of Chinese manufacturing. Poisoned toothpaste, contaminated baby formula killing 100 plus newborn babies, killer dog food, and killer pharmaceuticals seem to be leaving a bad taste in the mouth of the consuming public. So I wondered if there is a danger of the same type of situation developing with Chinese or Taiwanese manufactured fitness equipment in the North American market. You have to wonder. Will the taint of the Wild West Chinese marketplace hurt those manufacturers that are producing primarily in the Far East? Does it help domestic manufacturers to be able to claim quality in the face of imminent danger to your life if you buy the competition? I know this statement is probably over dramatized, but stranger things have happened.
Chinese and Taiwanese manufactured goods now cover the fitness landscape. The question is not whether or not the equipment is made overseas, but how much is domestic and how much is foreign. As we have reviewed treadmills for 10 years now we have found that where the equipment and parts come from are not as important as who is branding the equipment. Who will take the blame for the screw up? That is what is important. This will tell you who is a long term player in the market and who is not.
Since the late 1980’s there has been Chinese and Taiwanese manufacturers willing to sell a container load of equipment to anyone, under any brand. In many instances the brand opens up and less than a year later you can’t get parts or support. Your warranty is no good because, frankly, the warranty is as only good as the company behind it. If the company is out of business … oh well. We are getting to the point now, that when spending our own money we would only buy a Chinese or Taiwanese produced product if the company branding and marketing it is American. They would have to be responsible for the engineering, specifications, and quality control as well.
Why should Americans be in charge? One word … safety. When there is no accountability there is no pressure to maintain the quality and safety of the product. When a Chinese company can make and ship the product without consequences then there is no reason for them to maintain quality. They can build product after product and continue to change the look and brand. They can do this to keep their profits high without worrying about consequences later on. American companies, for the most part, cannot do this. Not only do they take a hit to the company reputation, they are held responsible legally for their actions here, something the Chinese and Taiwanese can avoid. In our opinion, it’s OK to buy Chinese or Taiwanese, as long as the Americans are in charge.
July 23, 2007 - Specialty Fitness & Internet Sales
For years the fitness equipment retail market was bisected between mass merchant sales and specialty fitness dealers. This setup existed for years. Eventually other distribution channels like TV marketing, discount retailers, price clubs, and big box sporting goods began to eat into the specialty fitness – mass merchant market share. Mass merchants, like Sears, had plenty of resources to fight back against the new distribution channels, but specialty fitness has taken it on the chin. The SGMA for years has estimated that specialty fitness has taken 6% to 8% of the fitness market share. That means that specialty fitness at the upper end represents $640 million.
The problem is that no one in their right mind would say that specialty fitness does $640 million in fitness retail sales, and specialty fitness isn’t. Specialty dealers have lost more profitable retail sales to their competitors, and for the most part, have replaced them with less profitable full commercial and vertical commercial equipment sales – if they have survived at all. Specialty fitness has steadily lost retail market share to the various market competitors, but the biggest competitor that has taken the biggest bite has been internet direct sales.
While the numbers have not been tracked well by industry trade groups we have given it a shot. Treadmill Doctor, through our contacts with various fitness manufacturers and retailers, estimate that internet direct fitness equipment sales now account for over $250 million per year in retail fitness equipment sales. All of this amount has not come directly from specialty fitness dealers, but we believe that it would not be unreasonable to estimate that a minimum of $150 million would be have had a good shot to been purchased from Specialty fitness dealers. So the question has to be raised: Why have specialty fitness dealers resisted the internet as a distribution channel?
We believe that Specialty dealers do not want to distribute over the internet is due to mistrust of manufacturers, and with good reason. Specialty fitness dealers and manufacturers have had a tumultuous relationship at best. Neither dealers nor manufacturers have been especially loyal, but for them both to survive these groups will need to come together in their marketing efforts. Frankly, the best way to distribute via the internet would be for fitness manufacturers to sell the machines directly via the web and use Specialty fitness dealers to distribute, deliver and service the machines. The manufacturers and the dealers could then split the revenue.
Dealers are mistrustful of this arrangement, but we believe that they are worrying about the wrong danger. The real danger is that dealers are being pushed into less and less profitable businesses and will eventually be pushed into oblivion by internet direct and the other channels. The danger for specialty fitness manufacturers is that they will be locked out of the more profitable retail sales and forced to rely on commercial and vertical sales. On the positive side, why would anyone buy from an internet only brand when they could buy via the web and still have bricks and motor service?
With the annual Specialty fitness show coming up in Denver next week, it seemed the perfect opportunity to encourage specialty fitness dealers and specialty fitness manufacturers to save themselves. Dealers need to understand that by standing on the internet sideline refusing to make a decision to participate in the internet distribution channel is itself a decision … and a bad one at that.
July 26th, 2007 - Affiliates & Stuff
When you look at Treadmill Doctor Reviews you should ask yourself the following question: How does Treadmill Doctor make its money? The answer is simple – we are the largest distributor of treadmill replacement parts on the internet. You will also notice that we frequently slam on affiliate web sites that masquerade as review sites. You may think this is just sour grapes, but frankly we believe we have a point. Just as we were the first to point out the failings in the reviews produced by Runner’s World and Consumer Reports, we have never doubted that they were an honest attempt at reviews. With affiliate review sites these companies have a vested interest in steering you in one direction – a direction that will make the affiliate money. Affiliate review sites are trying to steer you to a product that will pay them a percentage of the sale, typically 6% to 8% of the sales price. For a treadmill that will sell for $1499 that means that the affiliate will get approximately $120. For $120, how objective can these sites be? In light of the slight of hand these “affiliates” are perpetrating on the consuming public we thought that the bright glare of truth might be helpful. We have created a list of some treadmill affiliate sites that we sometimes hear about, and the list of companies that pay them money to push their products! Just remember, when dealing with affiliates, buyer beware!