Opinion | California Fitness was pumped for growth, but not fit for purpose
Jason Ng says the slow decline and eventual demise of the ambitious but questionably run chain should be a lesson, not a source of schadenfreude, for its remaining rivals
Twenty years ago, a Canadian entrepreneur walked down Lan Kwai Fong and had a Eureka moment. Eric Levine spotted an opportunity in gym-deficient Hong Kong and opened the first California Fitness on Wellington Street, a few steps away from the city’s nightlife hub. Business took off and by 2008 the brand had flourished into two dozen health clubs across Asia. There was even talk about taking the company public on the stock exchange.
Hong Kong chief executive looks to improve consumer protection in wake of California Fitness collapse
Then things started to go south. The chain was sold, broken up and resold a few times over. Actor Jackie Chan got involved and exited. The Wellington Street flagship was evicted and shoved into an office building on the fringe of Central, while key locations in Causeway Bay and Wan Chai were both lost to rival gyms. What was once the largest fitness chain in Hong Kong began a slow death that preceded the actual one that stunned the city this week.
California Fitness operated on the so-called Gillette business model. Like a cheap razor, gym membership was offered at a low rate – sometimes as little as HK$100 a month – to get consumers on the hook. The real money-maker was the overpriced razor blade: personal lessons at up to HK$800 an hour. The strategy encouraged aggressive sales tactics and over the years devolved into a Ponzi scheme: staff were pressured to constantly recruit new members to subsidise the existing ones who tended not to fall for their sales pitches.
The strategy encouraged aggressive sales tactics and over the years devolved into a Ponzi scheme
Blame it on the competition, at least in part. Pure Fitness, a better-run alternative, threw its hat into the crowded ring in 2005. Within years, the formidable new entrant peeled away the high-end clientele. Haemorrhaging customers and revenue, California Fitness had little choice but to take the hard selling up a few notches.
Hong Kong chief executive looks to improve consumer protection in wake of California Fitness collapse
Still, members who relented and purchased expensive plans didn’t always get their money’s worth. Trainers often wasted paid time on mindless chit-chat with clients or put them on a cardio machine while they played with their phones.
