The AOP Category Cost Drivers Series is a new content offering created in partnership with ProcurementIQ.
Today we will uncover the primary cost drivers impacting corporate gym memberships.
The Numbers
The top cost driver for operators of gyms is overhead (48%), which comes as no surprise given how equipment and location-intensive this type of business is. Gyms have been hit particularly hard by the past and ongoing challenges presented by COVID-19. They have faced shut-downs, operational restrictions, and labor shortages, all while being focused on trying to cover their high, fixed overhead costs.
Location is perhaps the most important factor in driving overhead at 15.7%, since few gyms own their facilities. Instead, they must compete with retail and restaurant operations who have very different business models and revenue streams. The upside for gym operators is that retail locations and restaurants were also affected by COVID, potentially lowering available rental rates and/or making new spaces available.
How to Use this Information
Although the prices paid by procurement are affected by general supply and demand, supplier cost drivers are an important data source. They not only provide procurement with insight into how large or small the savings opportunity is likely to be, they also illustrate the relative efficiency of each prospective supplier’s operation. Procurement can request this information in an RFP and benchmark against their responses, as well as using it as a point of discussion in subsequent negotiations. Once a contract is in place, procurement can track the underlying input costs to support cost reduction negotiations or to understand the validity of supplier cost increase requests and respond appropriately.
Dig Deeper
We have partnered with ProcurementIQ to dig into their treasure trove category intelligence reports, with new insights every Friday. To dig deeper into corporate gym membership services, and over 1,000 other indirect spend categories, visit procurementiq.com.
