California Fitness slows expansion to improve member retention
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California Fitness & Yoga, one of the most popular high-end gym chains in Vietnam, is suspending its expansion to focus on retaining members while its competitors’ race to open more facilities.
“We are not perfect,” said Dane Fort, CEO of FLG Vietnam, which operates California Fitness & Yoga. “We developed and expanded too fast and had to face certain difficulties. That is why we have not opened new clubs in recent years.”
With 35 facilities, California Fitness & Yoga was the biggest gym chain in Vietnam. However, it has now been overtaken by 25 Fit, which has 41 facilities. Third-ranking Curves only serves female members and has 27 facilities around the country.
Fort said that anyone with money could build a gym chain with quality similar to that of California Fitness, but what his company is focusing on now is retaining members.
It costs 10 times more to acquire a new member than to keep a current one. California Fitness, with 250,000 subscribers (including 30,000 daily users), accounts for more than three-quarters of the market in Vietnam.
According to FLG, its members account for around 72-73% of the market. This is why Fort plans to invest $2 million into upgrading the current clubs to retain members.
Fort said that staff training is important as new salespeople could make customers have a negative view about the chain during their sales pitch. Fort wants to train his staff more deeply for the next two years to increase their professionalism and consistency.
Vietnam’s gym market is estimated to reach $3.5 billion by the end of next year, according to a forecast by Ken Research in June 2019.
But this forecast was made before Covid-19 hit and forced many independent gyms to shut down.
“This is why Fort plans to invest $2 million into upgrading the current clubs to retain members.”
Gym chains, however, seem to have been expanding in the last two years.
Fort said that the pandemic has made people take better care of their health and that this is giving the fitness industry new opportunities.
FLG has been seeing growth compared to pre-pandemic levels in some areas, such as the number of active members, new members and revenues, he said.
Growth potential in Vietnam remains, he said, adding that the penetration of the health and fitness industry among the middle-class is 14% in Hong Kong, 17% in the U.S. and 23% in Australia, while in Vietnam it is still below 1%.
By the end of this year, the rate is set to rise to 1.25%, and in the next five years it could reach 5%, Fort said.
FLG Vietnam has been making moves to assert its market dominance, such as importing new technology from Australia and opening Jetts Fitness, a 24-hour gym chain, which is set to expand to 12 facilities in the next two years from the current two.
Questions & Answers
Q.Why has California Fitness stopped opening new gyms in Vietnam?
Why has California Fitness stopped opening new gyms in Vietnam?
The company decided to suspend expansion because it grew too quickly in the past, leading to difficulties. It now wants to focus on retaining its existing members rather than opening more facilities.
Q.How does California Fitness plan to retain its current members?
How does California Fitness plan to retain its current members?
California Fitness plans to invest $2 million into upgrading its existing clubs. Also, it will provide deeper staff training over the next two years to improve professionalism and consistency, especially regarding sales pitches.
Q.What is the market penetration of the health and fitness industry in Vietnam compared to other regions?
What is the market penetration of the health and fitness industry in Vietnam compared to other regions?
The penetration rate in Vietnam is currently below 1%. This is significantly lower than Hong Kong (14%), the U.S. (17%), and Australia (23%), indicating substantial growth potential for the market.
Q.How much of the total fitness market in Vietnam does California Fitness currently account for?
How much of the total fitness market in Vietnam does California Fitness currently account for?
California Fitness accounts for over three-quarters of the market in Vietnam, with its members making up around 72-73% of the total. This includes 250,000 subscribers, 30,000 of whom are daily users.
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