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					Exercise Equipment                                                              In addition to treadmills, home gyms, exercise cycles,
                                                                                and free weights are very popular. Elliptical machines,
                                                                                also called cross-trainers, have surged in popularity --
                                                                                though they still represent less than 6% of the total
Industry Overview                                                               equipment market (Consumer Reports, January 2005).
                                                                                Fitness-equipment specialty stores sell primarily top-of-
                                                                                the line equipment, while mass merchants and general
U.S. fitness-equipment manufacturers serve two end-
                                                                                sporting goods stores sell many of the lower- and mid-
user markets in the $10 billion industry: consumer and
                                                                                priced lines. There has been a significant amount of
institutional (which includes health clubs, apartment
                                                                                erosion of specialty fitness-equipment retailers’ share of
and condominium complexes, and hotels). The
                                                                                the market. Specifically, Sears easily leads retail sales
consumer market is by far the largest of the two
                                                                                of treadmills, and its merger with Kmart only increased
markets; over 80% of manufacturers’ shipments of
                                                                                that lead (Sporting Goods Business, June 2005).
exercise equipment is for home use.
The industry has experienced significant growth since                           Sears sells more fitness equipment than any other
the 1990s, though specialty retailers have declined in                          retailer in the U.S., and the merger of Gart Sports and
number and face tough competition from sporting goods                           Sports Authority resulted in expanded treadmill and
stores and mass merchants (Sporting Goods                                       elliptical equipment offerings at general line sporting
Manufacturers Association, or SGMA, “Recreation                                 goods stores. But higher-income and more athletic
Market Report,” 2005 Edition; “Marketing Ideas,”                                consumers still shop primarily at specialty fitness-
Norbert J. Kuk & Associates, February 2004).                                    equipment retailers. The models they carry tend to be
                                                                                heavier and more durable -- and more expensive --
In recent years, millions of consumers decided that                             than the units sold by mass merchants (National
having exercise equipment at home was important and                             Sporting Goods Association or NSGA, June 2004).
made room in their bedrooms, dens and basements for
exercise machines. The most popular piece of                                    The influence department stores, Sears in particular, in
equipment in home gyms is the treadmill. An estimated                           the sale of treadmills indicates how much ground other
11.6 million Americans report that their indoor exercise                        retailers must make up if they are to take a larger share
routine includes either walking or running on a treadmill.                      of the most popular piece of fitness equipment. The
                                                                                following chart illustrates this point:
            Home Exercise Equipment
    In Wholesale Dollars and % Market Share,                                            Retail Treadmill Sales: $2.8 Billion
            By Type of Equipment                                                      (% of Dollar Volume, by Type of Retailer)
      Treadmills
                                             Home gyms - 9.9%
     $1.05 billion
       33.1%                                                                                                               Full-line sporting goods
                                                                                 Department stores
                                                                                                                                  $449 million
                                                    Exercise                     (primarily Sears)
                                                                                                                                     16%
                                                    cycles - 6.0%                  $1.38 billion
                                                                                     49.4%
                                                Free weights - 6.0%
     Other*                                                                                                                       Fitness equipment
                                               Elliptical                                                                             specialty
  $840 million                                  trainers - 5.7%
     26.5%                                                                                                                          $352 million
                                             Benches - 5.0%                                                                            12.5%
                                          Ab machines - 4.8%
                                                                                                                          Other* - $619 million
                                         Ski machines - 2.8%
                                                                                                                                22.1%
  * Other includes stair-climbing machines, aero gliders and other equipment.
    Source: SGMA Recreation Market Report, 2005 Edition.                           *Includes mass merchandisers, warehouse clubs, Internet sales, etc.
                                                                                   Source: NSGA, June 2005 press release.




                                                                                                                                        5.1
                                                            name and offers equipment designed with women in
Issues and Trends                                           mind, has grown by leaps and bounds (Sporting Goods
                                                            Business, January 1, 2004 and March 5, 2005).

Retailers and direct marketers of home-exercise
                                                                  The Outlook for Home Exercise Equipment
equipment -- many of which sell equipment through
                                                                     Resistance trainers -- Nautilus’s Bowflex or ICON’s
infomercials -- have benefited from manufacturers’
                                                                     CrossBar, for example -- still sell well, but sales were
increased development of products for home use. The                  down slightly in 2004.
reasons consumers buy exercise equipment include:
                                                                     Stair steppers, or stair climbers, are a home-fitness
        Convenience                                                  trend that continues to grow. They are simple to use
                                                                     and small enough to store out of sight.
        Improved health
                                                                     Demographics seem to favor the fitness industry over
        Weight loss
                                                                     the long run. Americans aged 55 and older have come
        Privacy in working out                                       to enjoy exercise (or at least participate in it) in
                                                                     extraordinary numbers, and are the fastest-growing
The downturn in the economy in 2001 interrupted a                    segment of new health-club members. They also
long-term pattern of growth in the exercise-equipment                represent nearly one-quarter of the households in the
industry, according to the 2002 and 2003 “State of the               U.S. in which exercise equipment is owned and used.
Industry Reports” published by the SGMA. Sales                       Sales of elliptical trainers are going strong. They were
rebounded in 2002, increasing by an estimated 7%.                    introduced to the retail channel a few years ago, and
Sales remained relatively flat in 2003, but a healthy 4%             sales have been impressive; in many regions, sales of
increase for 2004 mirrored the strengthening U.S.                    elliptical machines are on par with sales of stationary
economy (SGMA, “State of the Industry,” 2005).                       cycles. Sales increased nearly 20% in 2004.
Growth in the industry has been driven by an increased               Many exercise equipment dealers have hired personal
awareness of the benefits of exercise and the dangers of             trainers as sales reps. Their knowledge of how the
sedentary lifestyles. The U.S. Surgeon General’s office              use of exercise equipment affects different parts of
has consistently issued reports urging Americans to                  the body helps make customers comfortable purchas-
                                                                     ing high-ticket machines. Dealers emphasize that most
become more physically active, and many have listened.
                                                                     personal trainers must be coached to develop their
Many consumers, wanting to spend more time at home                   sales skills and should be trained by manufacturers on
with family, are also interested in looking and feeling              product characteristics. Both Omni Fitness and Fitness
                                                                     Experience have personal trainers on staff.
better and are working out more at home. According to
data gathered by the National Sporting Goods                         Used exercise equipment is a growing market, with
                                                                     2004 sales of $855 million. It’s a niche that many
Association and Money magazine (February 2005), their
                                                                     independent dealers have found to be profitable.
purchases of fitness equipment have increased steadily,
and are forecast to rise to $5.1 billion in 2005 (at the             Manufacturers are introducing equipment that is far
                                                                     more technologically advanced than ever, keeping
retail level).
                                                                     consumers’ interest level high. Marathon-friendly
An estimated 33% of all U.S. households own and use                  treadmills, for example, have features such as on-deck
exercise equipment. This broad category includes yoga                computers with built-in 26.2-mile “course,” with a 15%
                                                                     incline. Or video and DVD workouts can play on the
and pilates mats, hand weights, barbells and exercise
                                                                     screen. On other models, data from heart monitors
equipment like treadmills and stationary bikes. Ever-                helps marathoners set training goals; there are also
stressed for time, equipment for home use balances                   customized units for runners with long legs, allowing
consumers’ need for activity with their desire for                   them to take longer strides.
convenience (Atlanta Journal-Constitution, January 10,
                                                              Sources: Health and Fitness Business, January 2004, July 2004; The
2004). The American Council on Exercise, the largest          Wall Street Journal, October 8, 2004, October 1-2, 2005; Money Maga-
nonprofit fitness certification and education provider in     zine, February 2005; Sporting Goods Business, July 11, 2005, NSGA
                                                              press release, June 2005.
the world, lists a few helpful tips before buying fitness
equipment, such as making sure of versatility, checking          Top 4 U.S. Specialty Equipment Retailers
on size in relation to home space, making sure
                                                                     Gym Source, based in New York, New York, has 26
maintenance is straightforward, insuring ease of use will
                                                                     stores and $40 million in 2004 sales.
not be a problem and covering all safety concerns.
                                                                     LA Gym Equipment, based in Arleta, California,
Women, in particular, have embraced the “exercise at                 has 13 stores and $26 million in 2004 sales.
home” concept. Between 1987 and 2002, the number                     Omni Fitness, based in Moonachie, New Jersey,
of women participating in home exercise routines                     has 46 stores and $28 million in 2004 sales.
increased by 113%. One of those taking advantage of                  Fitness Holdings, based in Torrance, California
that trend is Donna Savage, the President and CEO of                 (which also owns and operates Busy Body), has 44
Fitness EM. Her company, which licenses the Danskin                  stores and $68 million in 2004 sales.
                                                                     Source: Sporting Goods Business, June 2005.


                                                                                                                   5.1
In the advertising that is placed by fitness-equipment                      Some of the new marathon-friendly treadmills that hit the
stores, there are several factors that are mentioned to                     shelves in the Fall of 2005 are NordicTrack’s Apex,
motivate people to call or visit, or to make them feel                      priced at $1,999 to $3,299, and the T518 LC by Nautilus,
comfortable doing business with the store. Some can be                      which retails for $3,200 (The Wall Street Journal,
categorized as “confidence factors,” and some as                            October 1-2, 2005).
“convenience factors,” examples of which follow.
                                                                            Average prices for some popular types of exercise
    Confidence Factors Mentioned In Ads                                     equipment range from $400 to $700 for exercise
 Gurantees/Warranties                  Size of Inventory - Selection        spinners, $300 to $500 for high-end dumbell sets, and
                                                                            $750 to $1,500 for home gyms with in-place weights.
  Years in Business                    Complete Service Center

 Certified Technicians                 "All Fitness Questions Answered"

 Spa-Quality Equipment                 Experienced Staff                    Critical Success Factors
  Treadmill Specialty                  "Try Before You Buy"                 Among the factors that exercise equipment retailers
                                                                            said they consider to be critical for success in the
 Factory-Authorized Service            "Our Only Business"
                                                                            industry are many that relate to good customer service.
Source: 2004 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates.   These include making sure the customer is comfortable
                                                                            with the equipment purchase, following up to make sure
                                                                            customers encounter no problems, honoring warranties
   Convenience Factors Mentioned In Ads
                                                                            when something breaks down, and selling customers
 Large Display/Showroom                   Free Delivery and Set-Up          what they want to buy, “not what is in stock that you
                                                                            can sell to them.”
 Multiple Locations                       Open 7 Days
                                                                            Other key factors in the formula for success follow:
 Large Selection in Stock                 Ample Parking

  Toll-Free Telephone Number              Free Consultation                        CSFs for Exercise-Equipment Stores

  Website Promos                          In-Home Service/Repair                      Thorough knowledge of all products carried
                                                                                      and what they are capable of doing, to help
 Assembly/Installation                    Free Brochure/Catalog                       troubleshoot if something malfunctions after
                                                                                      installation.
Source: 2004 Comparative Ad Analysis Survey, Norbert J. Kuk & Associates.             Timely delivery of equipment once it is ordered.
                                                                                      Carrying products with the latest technology,
                                                                                      to differentiate from mass merchandisers,
Value of Products and                                                                 which typically carry less sophisticated
                                                                                      models.
Services in the Industry                                                              Stocking a wide variety of products in addition
                                                                                      to equipment, to attract a wider audience and
                                                                                      provide opportunities to “upsell.”
Articles in Consumer Reports and Health Magazine
(both January 2005) provided a sampling of prices for
some of the equipment that was tested by their staff
members.                                                                    Industry Resources
 Life Fitness Treadmill T3i                                     $2,800
                                                                             Sporti ng Goods Busi ness          SGMA
 Horizon Fitness Elite 5.1T                                     $1,800       770 Broadway                       200 Castlewood D ri ve
                                                                             New York, NY 10003                 North Palm Beach, FL 33408
  Schwinn 418 Elliptical Trainer                                $1,100       646-654-4500                       561-840-1165
                                                                             www.sporti nggoodsbusi ness.com    www.sgma.com
 Reebok Elliptical Crosstrainer                                   $600
                                                                             NSGA                               Sporti ng Goods D ealer
 Parabody GS6 Weight System                                     $3,000       1601 Feehanvi lle D ri ve, # 300   22 Paterson Avenue
                                                                             Mt. Prospect, IL 60056             Mi dland Park, NJ 07432
  Concept2 Indoor Rower Model D                                   $850       847-296-6742                       201-612-6901
                                                                             www.nsga.org                       www.sgdealer.com




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                                                                                                                               5.1

				
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