Insights from Midtown Athletic Club and VASA Fitness on how retail operations can function as successful profit centers for your club.
Loss of revenue has been the biggest struggle for the industry during the COVID-19 pandemic. As many clubs are still clawing their way back, the idea of finding viable profit centers can seem like wishful thinking.
However, while much of the typical operator’s attention has gone toward virtual programming and reversing attrition statistics, there are a few areas of operation that can serve as viable profit centers. One area that can be particularly profitable is a retail store or apparel shop.
Midtown Athletic Club and VASA Fitness are prime examples of clubs that have optimized their retail operations and turned these spaces into viable profit centers, even in the midst of a global pandemic. Their secret to success is rooted in a similar focus: the member experience.
Tailored to a high-end market in the industry, Midtown places a special emphasis on creating outstanding experiences every time a member walks into any of the brand’s eight locations in the U.S. and Canada.
In fact, Jon Brady, the president of Midtown, calls it “creating a sense of arrival” for members. “It’s something that resonates with customers,” he said during an episode of the virtual roundtable series, Successful Strategies for Shaping Your Future. “When you come into the club, what do you see? Everything on the member’s journey in our clubs was designed to try to engage the senses, whether it be by touch, smell or view.”
Midtown wants to build anticipation for every area of the club, including its retail store, which is key to the area’s role as a viable profit center. “The retail stores are profitable in all our facilities,” shared Brady. “They all run about a 25% profit margin.”
A major element in the success of Midtown’s retail operations is a principle that applies to every area in its clubs: creating a destination.
“You can make any space its own destination,” said Brady. “It doesn’t matter if you’re in a premium 600,000-square-foot club or 50,000-square-foot gym in a strip mall. You can create a destination using lighting, sound, and trendy clothing and apparel, or design a certain space around a certain product or activity.”
To make a space a destination, you have to give that space its own feel. “You can define a space by having it change from where you’re walking in,” said Brady. “It could even be a waiting area — make it something that is lit differently, painted differently and has different flooring. There’s some element of arrival there.”
When designing its clubs, Midtown sought to deliver great experiences in each of its spaces, including its retail stores. To accomplish this, the brand turned to experts in other industries that specialize in creating destinations.
“We spoke with a number of executives and customer experience experts at Disney,” shared Brady. “We also brought in an operations director from the Royal Caribbean cruise line to help us with that resort-type of experience.”
From the insights it gained working with these experts, Midtown learned positioning is everything for retail operations. “In Disney World, you queue up, they give you the experience and after the ride, you always come out through the store. That retail journey is really important.”
Through intentional placement of its retail stores — Brady said you have to walk by the store on the way in and out of each Midtown location — and creating an experience by using pleasing aromas or hosting special events, a focus on the “sense of arrival” can turn any retail operation into a viable profit center.
In Fall 2019, VASA Fitness, with several locations across the U.S., launched Revive. The branded retail and refreshment coolers also offer apparel and quick snacks in the clubs. In spite of the COVID-induced turmoil, Revive has maintained similar levels of profitability to what it saw prior to the pandemic, helping VASA stabilize.
Revive has become a key part of VASA’s operations because it enhances the member experience through clothing styles people are interested in and branded apparel that helps members feel part of the VASA family.
“The keys to Revive gear’s success have been giving our members high-quality and on-trend styles that transition from inside to outside the gym at an affordable price,” said Megan Pham, the retail category manager at VASA Fitness. “We also believe refreshing the gear every quarter has been a big driver of our success.”
Members are also able to use the card VASA has on file to quickly pay for a snack pre or post-workout. “Consistent with the high-value fitness experience members have come to expect in our clubs at a low price, we make every piece of merchandise we offer accessible,” said Pham.
Intentional placement of the Revive retail areas has been a key strategy for VASA, but through the process of reopening and adjusting COVID-19 protocols, it has also been essential for VASA to promote its retail operations.
“To get members through the doors, we continue to drive our brand awareness with special promotions that encourage people to experience VASA,” said Mindi Bridges, the chief brand and marketing officer of VASA Fitness. “Every month, we feature special promotions aimed at getting more people to try us out.”
According to Bridges, VASA’s marketing not only encourages members to check out the new retail areas but the facility’s new safety and cleanliness procedures as well. “We want members to see it’s safe to be in a gym environment during this time and to trust VASA in their fitness journey,” she said.
As it has at VASA, optimizing and promoting retail operations can benefit your club as a whole. By delivering great experiences in a safe way throughout your entire facility, you’ll be setting your club up for success during and after the pandemic.
“We want our members to get healthy, feel strong and be happy, and we do everything we can to help them do that during these uncertain times,” said Bridges. “Our hope is people who miss their gym will feel good about coming back to VASA.”