Part 2 | How Do You Build a Lucrative Retail Business in Your Gym?
This is the second in a series of blogs on the topic of Building a Lucrative Retail Business in Your Gym, Academy, or School. Adding retail services to your gym can elevate your business by adding to the bottom line, and providing students with the equipment they need to be successful in their training.
The next step to building a retail business is understanding what products to provide, how to manage the inventory of those products, as well as, pricing, profits,& margin.
VIDEO: Here is part 2 of a live recording of myself presenting this exact topic in front of Martial Arts business owners just like yourself. This was recorded at the first ever Muay Thai Business Summit in San Diego, CA.
What Products to Carry?
The brand(s) of products you choose to sell in your gym is important to consider. A well-known, quality brand will create a perceived value that will help you sell them to your students. Which goes along with having a reliable vendor who can provide you with the products you want, when you need them.
To determine what products to carry in your retail space, make a list of all the classes that are taught in your gym, academy, or school. Next, identify the equipment each student will need to safely participate in the class. These are the products you are going to have in stock at all times and sell in your gym.
Last, determine if those products are MANDATORY or PREFERRED. For your beginning classes, products should be mandatory. This will ensure your new students will have the right equipment to learn and be safe. Consider including the price of these products for new students as part of your enrollment/registration fee. This will increase the perceived value students and parents have of you and the gym.
When progressing students to the next level, have your list of preferred products available for your students. Have those products in stock for them to buy. This will make it easier for them to buy them from you. You might consider having good, better and best options at different price points so students feel like they have some choice in their equipment. You also may want to ask your existing students about what brands they want and consider adding these items on a trial basis.
In addition to the equipment needed for classes, you should also carry convenience items like bottled water, hand wraps, or mouth guards. You may also want to think about custom branded items like gym bags, t-shirts, hoodies, or caps. These items are walking billboards of free advertising for your gym, school or academy and students love these things.
Inventory and Ordering
How much inventory should you have on hand and how often should you be ordering new stock? A good rule of thumb is to maintain six weeks of inventory for stock items and three months for custom/specialty items.
See the simplified guide below, knowing how much you sell is important to create your re-order points. Most membership software offers inventory management reports which can help you keep an eye on this.
Pricing, Profits, Margin & Markup
Your vendor will provide you with the MSRP and the Wholesale price when ordering. Make sure to pick a brand that protects their retailers and does not allow undercutting of the MSRP, especially through online marketplaces like Amazon, Facebook, Instagram, Ebay and others. This practice will destroy any possible profits for you.
For a general retail situation understanding how to calculate profit is essential. The Basic Profit Formula is simple:
Sales – Cost of Goods = Gross Profit
To calculate your Net Profit, subtract other expenses related to running your business from your Gross Profit. This would include rent, utilities, supplies, payroll, and so on. The good thing about everything listed is that those costs are already covered in running your gym. This is why selling products to students taking your classes is so simple and a no brainer.
Margin vs Markup
If you buy a product for $50 and sell it for $100. Your margin is 50% and the markup is 100%. Any product with a margin greater than 50% will be a profit builder.
Adding convenience items can benefit the bottom line.
It is important to remember convenience items will sell themselves and should always be in stock.
The important thing to remember here is:
Students will buy from somewhere. Why not from you?