Highs and Lows

Being in charge of the largest health club company in Latin America sounds like a fairytale. But every fairytale has its ups and downs, and Edgard Corona’s story is no different.

The Lows

In 1995, Corona left a career as a CEO in the alcohol and sugar industry to enter into a new venture. He became a stakeholder in BioRitmo, a full-service, high-end health club. At first, the venture was a failure. The club was unprofitable for close to eight years before Corona decided a new strategy needed to be implemented.

He shifted his focus internationally for inspiration. “I looked to the U.S. to understand how [clubs in America] saved money, retained members, designed clubs — how they operated overall,” said Corona.

As a result of these observations, when opening the second BioRitmo location in Paulista, Brazil, Corona and his team took an entirely new approach. They focused on creating a bright, clean and colorful atmosphere, in addition to offering top-notch customer service.

“When we began BioRitmo, we had copied some clubs that we saw here in Brazil,” recalled Corona. “At [the Paulista location], we hired the best architect in town that used to make restaurants and nightclubs, so it was a different experience. It had more decoration; it didn’t look like a traditional health club. Those changes allowed us to grow the operation.”

Now, BioRitmo has 29 clubs in Brazil. However, there are still plenty of challenges to overcome.

For example, operating a health club in Brazil is expensive, far more so than in the U.S. Corona’s businesses are required to pay 62 different taxes, and there are a host of rules and regulations that must be abided by, which differ from city to city. Additionally, equipment is 2.5 times more than in the U.S., with some treadmills costing up to $12,000.

Even joining a health club isn’t a quick process. “For example, to join a club here, you need to have a doctor evaluation before you join the club,” said Corona. “We need to have instructors on the floor, and other things like that. So, it’s not easy. You have a lot of rules you need to follow to [abide by] the law.”

Due to the high expenses, it can be difficult to keep membership prices down. This is a problem when you consider the average income of Brazilians, which is six to seven times less than that of the average American. “So we have a big problem to fix,” said Corona. “We need to be a little bit higher price than U.S. clubs. That’s why we never went to very low-income neighborhoods, because they don’t have conditions to pay this.”

However, Corona didn’t let these challenges discourage him from being successful. In fact, in what some may see as a cannibalizing move, Corona launched another health club company to work alongside BioRitmo. That company was SmartFit, a value-priced model that would operate in some of the same markets as BioRitmo.

The Highs

Launched in 2009, SmartFit has been successful for a variety of reasons, partially due to the fact that the high-end market in Brazil is saturated.

“We have more high-end health clubs here in São Paulo than in New York City,” said Corona. “It doesn’t make sense. New York has 33 percent of its population going to health clubs. The income is higher than São Paulo. So we worked to face a different market, and that’s why we launched our SmartFit club.”

Like BioRitmo clubs, SmartFit also features great design, lighting and superior customer service. “We don’t consider SmartFit a budget club, but the best value for your money,” said Corona. “We deliver a great experience, for a very, very good price.”

Corona seems to have hit the mark. Since 2009, SmartFit has grown to 271 locations across Brazil, Mexico, Chile and the Dominican Republic.

Now, Corona’s goal is to continue offering the best clubs in both the premium and low-cost segments. And that involves being open to changes and allowing flexibility.

For example, in late 2014, Corona began thinking about adjusting BioRitmo’s layout to provide for a better user experience. The gym floors are now split into three distinct zones: one for beginning exercisers, one for semi-athletic exercisers and one for experienced athletes. In addition, there are instructors on the floor at all times, offering their expertise free of charge.

“The customer experience is high, and the members stay longer,” said Corona. “We can make it very profitable by doing this, because we’re delivering results. Members come here to have results.”

Although both clubs have found great success in Brazil, with SmartFit being successful internationally as well, the highs and lows of this fairytale are unfortunately not over. According to Corona, the Brazilian economy is in a recession, and inflation is expected to reach record levels. “It will be two hard years,” said Corona.

However, as he has in the past during times of struggle, Corona will press on and continue to strive for success.

“I think we can grow 5 percent a year in BioRitmo,” he said. “We are creating additional services in SmartFit. In the next three months we’re going to have a bar where you can drink our products. We are also launching a partnership with Netshoes, which is like a Brazilian Zappos, so our members will have discounts in this kind of store. Next month they will be allowed to pay their memberships using mileage points from air companies, like American Airlines. We are looking to deliver some different experiences for the members.”

At the end of the day, Corona is optimistic, because he believes both brands offer something that other gyms in Brazil can’t. Like all good fairytale heroes, his eyes are set on the silver linings.

“We’re delivering a better service, with a better club,” he said. “We’re going to crush the mom and pop gyms. It’s going to be tough to keep the profitably, and we need to work hard. But at the same time, it’s a great opportunity. You can grow better in this kind of situation. If you are prepared, you can grow.”

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