"I’m out on the warehouse floor driving around, that’s why I’m having a hard time hearing," says Joel Löwenberg over the phone, before turning to a colleague in the background: "Where do you want the Body Solid?" and the colleague replies in the background, "to the left, we’ve put it over there."
The move, which involves thousands of pallets of fitness equipment, is happening under time pressure. The workforce is working to minimize disruptions to deliveries to customers.
Today is the big moving day, you could say. Today we're doing the final major cleanup. Tomorrow is a public holiday, but on Friday the business needs to be functioning from the new location. So today we’re moving everything most important, says Joel Löwenberg.
The Shift Towards a More Expensive Assortment
Growth in recent years has been driven by a wider range of cheaper basic goods. However, for the coming years, the company is choosing to redirect its strategy and bring in more expensive premium products, particularly in the cardio segment. This decision is based on an observation of shifting consumer behavior in the home gym market.
In a way, it’s more fun to sell premium goods, you have to admit. You can sell a five-kilogram iron plate, those old dumbbells that your grandfather had and you screw on, he says, pointing out that this basic item is still the company’s best-selling article and will remain in the range.
But when we look at new things, I think customers are starting to be more eager to spend money on their home gym. They don’t just want something to work out with, they want a gym they can be a little proud of. I used to say there was a time when everyone wanted a jacuzzi, and then a time when everyone wanted a sauna. Now it’s the gym that people want.
This development means that customers are increasingly requesting equipment designed to last a long time.
People are more willing to spend a little money and then they buy large, more complex racks and the like, often of better quality, he says.
If we’re going to think long-term, it’s always positive to use these periods to boost the brand. It’s better to be at a higher level in awareness than to go from budget and try to work your way up to premium, because that’s difficult.
Redirecting an e-commerce assortment to premium products is a step that requires the right timing. Instead of waiting, the CEO chooses to act now. He feels that the current market situation, where the industry is slowly leaving the toughest downturn behind, creates an open window for the business.
People say you shouldn’t waste a good crisis, but you shouldn’t waste a good period either. That’s when you can get the margins up a bit, get a wider and better range and test some new things. It’s a little more forgiving than it was during the downturn, so I’m going for it now for a few years.
The Balancing Act Between Own Brands and External Supply
Dealing with heavy fitness equipment in the premium segment means that capital is tied up in the warehouse for long periods. Lead times from factories are often long and purchases require volume to keep prices down. However, this risk model is a central part of the company’s business.
That’s just the way it is, of course. At the same time, that’s our business. If we were afraid to tie up inventory, what would we be doing? We have long lead times and heavy purchases, he says over the sound of the pallets.
In our industry, it’s a bit like if you have goods in stock, it’s often quite positive. If you can build up inventory and make large purchases, you can bring prices down a bit. We are very much a volume game.
Currently, the majority of Gymkompaniet’s sales consist of products manufactured under its own brands. At the same time, external brands serve a logistical and strategic function.
By offering products from other manufacturers, the company can evaluate customer interest before investing in its own production.
Now it’s probably around 70 to 75 percent, which is pretty good, and I think we’ll want to stay there. There’s an advantage to having other brands. If you only sell your own brand, it’s a bit dangerous.
External brands give the e-commerce business flexibility. They can use different distribution methods to maintain a wide range without tying up their own space.
We use other brands to test the range and maintain the breadth of the assortment without having to develop products ourselves. We can do a bit of dropshipping, and if you see that a product works very well, you can then develop that product yourself, says Joel.
It’s not negative to have a side assortment. I think it’s dangerous to become black or white in that regard. There are advantages to both.
This working method functions in practice as a strategic filtering for the company’s new warehouse shelves. Instead of immediately tying up physical space, the e-commerce retailer lets customer demand guide which products actually deserve a permanent place in the facility.
We use it as our test thing. If it doesn’t really pick up speed, then it can stay as another brand and we can buy much smaller volumes. When you buy gym equipment, you often have to buy a whole container of 20 tons. It’s not great to tie yourself to such products, he says.
Market Distribution and Future Expansion
Sales are divided between private individuals and corporate customers. The B2B segment currently consists primarily of company gyms and housing cooperatives, a market that has changed since the pandemic. However, the company does not plan to adjust its focus at the moment.
Right now, we have no plans to change that split. During the pandemic, there was a huge surge in private customers because everyone wanted a home gym, he says.
Then we went into a downturn, but companies still had decent money and wanted to lure their colleagues back to the office by building gyms.
The distribution between customer groups has now leveled off.
Now it feels like it’s stagnated a bit, so it’s been standing still for about a year in the shift between private and corporate. About two-thirds are private and one-third are corporate.
"Just an E-commerce"
As Gymkompaniet moves into the new 8,300 square meter premises, opportunities open up to eventually target a new audience within the B2B sector.
The idea is that we will start moving a little more towards hotel gyms and real commercial gyms. But that’s a very small part of our sales, so we have a lot left to do there, says Joel and continues:
That’s perhaps a growth we’ll see in three years. It requires a slightly different range and a sales organization. So far, we’re pretty much just an e-commerce.
The fact that the company has exceeded the 100 million turnover mark does not lead to any new grand growth plans. The goal is to continue the business at the same pace as before.
We’ll grow by about 15 to 20 percent next year, as we always do. And what will that be then? It’ll be about 135 million or something like that, he says about the company’s next milestone and adds:
We don’t really have a milestone. I’m going to do this for 30 years. In ten years, I won’t care what milestone I had this year. What does it matter really? It’s a thing to get over 100 million, but above all, we need to maintain it and continue to grow. We’ve never gone without growth. I’m more careful that we grow a little at a time than that we hit a specific number. If I’m being blunt, if we grow by a krona, I still feel like we’ve grown.
The interview is coming to an end, and so is the move of the e-commerce business, which is ahead of schedule, even though the new spaces are not yet fully completed.
The move is going well. It was supposed to take three weeks, but it took two weeks, so we’re starting on Friday. We’re actually ahead of schedule. But there are two gates that are breaking down after being strained, we don’t have any fiber installed, they’re painting the rooms and we don’t have chairs for the kitchen or a microwave. But we’re working on it, concludes Joel Löwenberg with a smile before the truck rolls on.