Closure of California Fitness in Singapore: What went wrong?

Closure of California Fitness in Singapore: What went wrong?

As beleaguered fitness chain California Fitness shutters its outlets in Singapore, one question is raised: How did things go wrong?

SINGAPORE: When California Fitness first opened in Singapore in 1998, former members like Mr Melvin Ng were attracted to its convenient locations, and added frills like saunas and shower rooms.

“It was a new concept then, and there was some status that came with it,” he said. “They also had a lot of classes, so it’s not just lifting weights or using equipment. That’s why I went for it.”

But the lustre dimmed as the years went by.

On Wednesday (Jul 20), it was announced that all California Fitness gyms in Singapore would be closed with immediate effect, until further notice. The liquidators of JV Fitness, which owns and operates the outlets at Bugis, Raffles Place and Novena, said the company does not have adequate liquid resources to continue its operations. Last week, the chain closed all its 12 outlets in Hong Kong.

Mr Ng said as the gym recruited more members, it got more crowded and started losing its “luxurious feel". He signed a three-year membership package in 2004, paying about S$1,500 in fees upfront.

When his membership expired, he did not go back and now works out at 24-hour fitness chain Anytime Fitness.

Other former members Channel NewsAsia spoke to agreed that businesses with niche offerings like Anytime Fitness have been giving mega-gyms like California Fitness a run for their money.

Like Mr Ng, former California Fitness member Daniel Chak also left for Anytime Fitness. “Anytime Fitness is more of a no-frills type of gym, with no extra facilities,” he said. “But what attracted me was their opening hours and the convenient locations of their outlets in the heartland.”

KEEPING UP WITH THE TRENDS

Large chains like California Fitness could also have been affected by the rise of niche boutique gyms offering specialised training in the latest fitness trends, like strength and conditioning program CrossFit.

Ms Ailyne Halim tried out mega-gym chains like Fitness First and True Fitness, but made the switch two years ago to CrossFit, and now works out at CrossFit gym CrossFit Mobilus. “When you go to a bigger gym, you’re more or less on your own unless you pay for a personal trainer. When I went there I realised I didn’t know what to do, and I wasn’t sure how to use the equipment. At some point, I just got really bored.”

Another CrossFit convert, Ms Zoe Teo, is considering giving up her membership at Fitness First after four years, citing similar reasons. “The thing about CrossFit is that it’s always something new and you never know what you’re going to get,” she said. “When I go to a BodyCombat class at Fitness First, I know exactly what to expect and I know how hard I’m going to work out. But with CrossFit, you could be doing heavy weights one day, and cardio another. It’s more interesting and I learn more things.”

Nowadays, people are also more exposed to the latest fitness trends, according to personal trainer Caster Beh. “Fitness no longer means signing up with a mega gym. People who know what they want can look out for specialised trainers and gyms, and I think these mega gyms are losing out on that.”

Strength and conditioning coach Muhammad Azrie also brought up the rise of fitness apps like KFit and GuavaPass, which allow members to pay a nominal fee each month to access fitness classes with multiple gyms. “It’s cheap and users can try out what they want without hurting their pockets.”

But others say there could be deeper reasons behind California Fitness’ fate.

FINANCIAL MANAGEMENT, RATHER THAN MARKETING

There could have been underlying problems with California Fitness’ business model, with one expert highlighting the issue of financial management, rather than marketing. “The business model of California Fitness and other fitness chains relies largely on upfront payment of fees, or package deals,” said Dr Leng Ho Keat, Assistant Professor of Physical Education and Sports Science at the National Institute of Education.

He added that while this business model allows them to have a large infusion of cash at the start, most of the cash is unearned income, or money paid for services that have not yet been rendered. One example, he said, would be the selling of lifetime memberships.

“If you’re selling a lifetime membership to a 20-year-old, he can exercise there for free for the next 60 years of his life,” he said. “So you need to be very prudent and calculate how much it costs to offer such packages.”

When businesses fail to recognise this, they may use up the money thinking it is profit and this could result in cash flow issues in the future, he added.

“So it’s not about not getting enough customers, but not managing their cash flow properly.”

The company's financial strategy was an issue that Channel NewsAsia wanted to discuss with California Fitness, but it did not respond to requests for comment for this article.

Meanwhile, an ex-employee at California Fitness said that news of the chain’s financial woes did not surprise her. “I know the pioneering batch of members were paying extremely low fees for their memberships, and even the current newer batch of members are paying a lower than market rate for their memberships,” said the former staff member, who requested not to be identified. “How do you pay rent and pay for your gym equipment?”

CAMARADERIE AND COMMUNITY

When it comes to working out, what some users really want is to feel that they are part of a community, according to people Channel NewsAsia spoke to.

CrossFit fans like Ms Halim and Ms Teo highlighted the strong sense of camaraderie at their CrossFit gym as one of the reasons why they prefer working out there, as compared to the larger gyms. “Every time we go to a class there are 15 to 18 people there at the most,” said Ms Halim.

“It’s normally the same few faces you see each time, so you build friendships, people cheer you on, and there’s that sense of camaraderie.”

It is in response to this that fitness businesses with niche offerings are focusing their energies on giving clients exactly that.

“We’re a lot more intimate in our relationship with our customers and clients, and we know almost everyone who goes through our doors by name or at least by face,” said Mr Clement Tan, founder of indoor cycling studio Anthem.

“Our front desk staff are trained in a different way, where their task is a lot less operational, and a lot more focused on building relationships,” he added. “I’m sure the bigger gyms do this at some level, but it’s probably easier for us to do it because they’re a much bigger machine.”

While the 24-hour model of Anytime Fitness gives the chain a niche advantage, customer service is still of paramount importance. “We’ve noticed over the years that people tend to frequent gyms they’re more comfortable in, and they want to see people who work out with them,” said Mr Muhammad Amirudin Jamal, manager of the Anytime Fitness branch at Kallang Wave Mall.

“The truth is, accessibility can be copied. In the US, there are many gym franchises operating with the 24-hour model. So we want to make sure that we build a community not just between the staff and members, but between the members themselves.”

But as smaller businesses focus on building their unique brand, other mega-gyms like Fitness First are not resting on their laurels.

“In recent years, we’ve seen that our clients are less driven by vanity-driven workouts, and more focused on exercises that help them take on the rigours of daily life,” said Mr Percy Reynolds, Head of Fitness at Fitness First Singapore.

“Members are interested in taking their fitness beyond the four walls of their health club provider, and Fitness First continues to adapt to these changing needs by offering solutions like the CustomFit app, a digital training system designed to keep users fit and motivated anytime, anywhere.”

Source: CNA/lc