I have been the owner of an independent tennis and health club business for over forty years. Being an entrepreneur has always been a super challenging job that is filled with obstacles, mistakes, lack of capital, increased competition, and the list goes on—the 80-20 rule applies here for sure.
Competition in an industry is of course the way of capitalism—competition makes us all better. Every new business idea and entrepreneurial venture that enters the health club and exercise industry forces current club owners to not rest on our laurels, not take our customers for granted, and to find new and innovative ways to serve our community. Successful entrepreneurs are naturally fearful and always keeping an eye on current and new competition–it’s a never-ending battle and it makes our businesses stronger and more resilient. Entrepreneurs aim to keep and hopefully grow our market share of our industry because this is a requirement for long term success and financial sustainability.
Five years ago, we learned that the largest big box health club chain in the US was building a $35 million health club right between (within three miles) two of our health clubs in MA. This chain is highly capitalized and has been a category killer in communities all over the nation. We were always fearful of them moving to our market and when we learned they were coming to town, we immediately sprang into action. We were determined to develop a plan that would differentiate ourselves from a big box chain and keep our members happy and our business alive.
Other than the Covid Pandemic, this was the most difficult obstacle we ever had to take on as a business. The large chain had resources to build a mammoth and beautiful, brand new club that would shine compared to our 40-year-old business and they had 100 times the marketing dollars to reach our communities with their slick advertising. We realized that their size and money created a playing field that wasn’t level and that like clubs in other areas they could potentially push us out of business. However, with the help of a consultant and our inspired management team we realized that we were the David who could indeed beat the Goliath. Our personal local and independent ownership and management team had spent 40 years building close relationships with all stakeholders, extraordinary community support, a remarkable staff, exceptional customer service, and we raised $1.3 million in capital upgrades that enabled us to win the battle—our business survived and is once again thriving.
Our `legacy business’ lived to tell this story, but other businesses have not been so lucky. I share this story because fortunately the health and exercise business is what the `big guys’ call a `fragmented industry’. To independent and local owners this translates to mean that corporate chains (as much as they try) don’t monopolize nor dominate the industry. In this sector of our economy, small and mid-sized independent businesses that are agile and obsessed with extraordinary customer service have many pathways to succeed and grow.
All this being said, unfortunately in many industries modern commerce has been taken over by monopolies or near-monopolies and control over 90% of the market share of an industry. As a result, the number of small businesses in certain industries have dramatically diminished or disappeared completely.
In today’s US economy a business sector is monopolized when a small number of the big guys work together with price-fixing or other anti-competitive practices that results in the closing down of thousands of small independent businesses. When people think of a monopoly, they often think of the board game Monopoly where one player wins and everyone else loses. Well, some of us have played team Monopoly where more than one player gangs up on others and two or more dominate and share in the spoils. Team Monopoly accurately describes several industries where a few giant corporations own 90% or more of the market share.
There is a growing movement to break up monopolies and create a level playing field where a vibrant ecosystem of small independent and local businesses that provide a cornucopia of innovative products and services is encouraged and supported by fair business practices mandated by the federal government. One of the beautiful parts of the tradition of the US economy is when there is a fertile space where creative and innovative entrepreneurs can sprout, go for their dream, and grow an enterprise that sells a valuable and needed product or service.
Entrepreneurship has been central to the very core of the US economy, and the growing power and domination by large corporations makes it even more difficult (in some cases nearly impossible) to start and grow a sustainable enterprise. Free enterprise doesn’t mean there are no rules, free enterprise means that entrepreneurship is democratized and everyone has a fair shot at building a business that meets the needs of their community.
Industries that are being hammered every day with non-competitive practices include:
- Toy stores
- Lumber yards
- Stationary stores
Some of these have been able to find ways to provide services and special programs that enable them to survive and thrive in the face of the anti-competitive practices that many of the giant corporations regularly employ. For example, even though bookstores have found ways to succeed they constantly are facing unfair competition from Amazon which in some cases has forced bookstores out of business and in every case has made creating a profitable bookselling business close to impossible.
Laury Hammel, Founder and Owner of the Longfellow Health Clubs