Rethinking Retail: Sunshine Fitness offers a smorgasbord of all things active

Think of Sunshine Fitness as a smorgasbord for those hooked on all things active, indoor or out. Customers who walk through the doors of the Anchorage, Alaska, store can buy scuba gear, mountain bikes, swim suits and all matter of fitness equipment from treadmills to rowers to barbells, all under a single roof.

As retailers across the country seek creative ways to reel in shoppers, Sunshine (www.sunshinefitness.com) is leaning on its wide variety of offerings to try to ride out the recession's rough waters.

"It's been a good way to diversify," said John Bice, owner of the 6,000-square-foot store. Sales "are up modestly," he said, which in this economy is no small feat.

SNEWS® knows the current economic state is having a huge impact on the specialty retail business. This is one look at different ways retailers are rethinking their retail strategy to become better at serving customers and keeping their bottom line intact. We will take a look at different retail concepts we find in a periodic and ongoing series of stories in SNEWS. This time around we focused on a new fitness retail store with an emphasis on fitness that includes equipment but speaks to the well-rounded needs of a fit and healthy lifestyle. Stay tuned for more in-depth reporting on the current situation both economically and at retail as it develops and changes.

Non-traditional mates
While it's true that what flies in Alaska might not fly in other parts of the United States, Sunshine's experience provides insight into the ups and downs of pairing non-traditional offerings.

"It's a nice mix if you think about it," said Brad Lally, global product development manager for San Diego-based Scubapro diving gear, which Sunshine Fitness has carried for years. "They're going after people in the active lifestyle. If you're outside biking in Alaska, you're definitely into nature and staying fit."

Lally noted that in Florida or California, it's not unusual for a store to combine scuba, snorkeling and swimwear.

"But in other regions of the country with weather extremes, you need to have something else in the store to complement you and sustain sales through the different seasons," he said.

That's pretty much the model that has worked for Sunshine Fitness. Bikes and fitness machines are good seasonal offsets, Bice said, and the state's competitive swimming events help keep sales of suits, caps and goggles strong throughout the year.

Scuba, which Bice called the "odd duck," actually is the bedrock of the store's many offerings. Sunshine Fitness opened 36 years ago in the southeastern Alaska city of Sitka as a scuba shop. The store relocated to Anchorage in 1980.

"Selling scuba in Alaska is probably like selling (snow) skis in Florida," he said. "It's a small, but profitable business."

Diversification to survive
Bice said the decision to diversify came as much from business necessity as it did from a desire to reach new customers. (He said he'd sell the scuba business in a heartbeat if someone offered a fair deal!)

Sunshine began selling fitness equipment five years ago because Bice was eager to unload the ski/snowboard business, which had become so competitive that margins were slim. Sales also were more closely tied to weather than other departments, and the bulky equipment took up valuable floor space. Sunshine officially closed out its line of skis and snowboards last winter.

"It was just a race to the bottom," Bice said of the fragmented ski/snowboard industry. "There was a huge amount of manufactured product, more than the market could handle. It was like selling potatoes."

Bice said he entered the fitness business at the top of the market. And while it remains a profitable and growing part of the business, Sunshine's home and commercial fitness sales have been "off tremendously" this year, Bice said, which is in keeping with most others in the 48 contiguous states. Scuba and bikes make up about 10 percent of sales, and swim a bit less than that, he said.

Tim Porth, co-founder of Octane Fitness, said Sunshine Fitness has stretched farther outside the box than most retailers who carry his company's ellipticals. Porth said it's more common to see fitness retailers branching out into supplements and offering enhanced service packages to try to keep customers coming back to the stores.

But with fitness industry sales plunging some 20 percent in the fourth quarter of 2008, Porth said retailers must get creative, yet remain wary of overreaching.

"You don't want to dilute your offerings too much," said Porth. "You gotta be an expert in fitness categories and you gotta believe in your equipment. If people are paying you that much money for a piece of equipment, you need to gain the respect of your customers."

Octane regional sales manager Dan Rahmann, who works directly with Sunshine Fitness as part of his 18-state coverage area, said Sunshine's location outside the continental United States means it faces some unique challenges.

"Shipping from Minneapolis to Anchorage incurs quite a bit more costs for the product than someone in, say, Denver," Rahmann said. "Dealers can save money through a container program by bringing in great quantities of a product and not paying freight on it. But you're not going to place big orders if you think it could take you a year to sell through it. The manufacturer wants to get paid in 30 to 45 days."

Planning for downturn
Bice said he saw the downturn coming and started making plans to cut inventory and shift his showroom floor in early July 2008. Getting rid of skis and snowboards allowed him to reduce some of his retail space, while also freeing the business of a high-risk category.

The diversity of offerings, he said, is helping him weather the slumping economy better than some of his competitors, though his outlook is far from sunny.

"We're not selling as much as we'd like," he said, "but every department is profitable."

--Jackie CrosbySNEWS® View: Even in the sporting goods category, some areas may sell better than others so for Sunshine offering a number of seemingly odd companions has served a purpose. Perhaps rather than thinking of Sunshine as a specialty dealer who is doing a number of categories, he should be thought of as a sporting goods dealer who is specializing. The broader but still selective offerings allow him to have more things for more people while still being a specialty retailer in dealing with customers. Not a bad model in today's times. --SNEWS® Editors