By Andrew Patterson
Ten years ago, sports supplements were the domain of body builders and professional athletes.
These days they’re a multi-million business allowing recent start-ups, such as Hamilton based online retailer Sportsfuel, to service a growing demand for these products globally; particularly by gym aficionados.
The huge increase in gym memberships in recent years has, in itself, spawned a whole subset of retail businesses covering clothing, exercise equipment, healthy food options and dietary supplements; all designed to service the needs of those who have embraced the healthy living message.
Last year the business recorded a huge 240% increase in its sales placing it at number 29 in the Deloittes ranking of the country’s fastest growing companies. It’s the second successive year the business has featured in the Fast 50 rankings.
Stumbling on an idea
Starting out as a part time business in a spare bedroom, CEO and founder Andrew Bailey says that it was his own personal experience playing rugby and wanting to ‘bulk up’ that made him realise he had stumbled on an unexpected business opportunity.
“I had used supplements myself previously and knew how effective they were and realised that a lot of sports people or those just going to the gym weren’t using them. So that’s how we started off. We had a real belief in the product, we knew they worked. And we saw a little bit of a gap in the market that wasn’t really being served properly so that was really where the spark came from to establish the business.”
“At the time, products like ours were quite hard to find. There was also this stereotype that they were only for body builders, and that was something that we thought needed to change because anyone could use them. “
The demand for the product also reflects a growing change in the attitude of many young people, in particular, towards fitness.
“There’s definitely been a big mind-set change in terms of staying healthy. Perhaps wanting to do a little bit better in your sports; whether it's a serious sport or just a fun sport. So we’ve seen that mind-set change from just being a little bit healthier to being a whole lot healthier and fitter from one end of the body to the other.”
“In my own case, I found from using supplements the difference that it gave me at the time when I first tried them was massive. So I felt like, I'd kind of stumbled on to something that nobody knew about, or maybe only body builders knew about at the time. I also became aware of the performance increases that you could have just by playing a social sport like rugby or league. They were pretty outstanding, and I knew no one else, especially in my teams, were using supplements.”
Everything in balance
Understanding that these products are in fact supplements and are not intended to replace a normal healthy diet is an important message the business reinforces to its customers in an effort to avoid enthusiastic amateurs thinking that consuming more product leads to faster results.
“We try to remind everyone that they are called supplements for a reason because they should supplement your natural food. Natural food has got tons of benefits and supplements should be used to complement those benefits. Just give you that little extra edge or mainly in terms of convenience. But yes, it’s important to realise that if taking one serve works well, four serves is not going to give you four times the benefit. So you've always got to keep that in mind.
The products themselves don’t come cheap and like most things fitness comes at a price for those who are serious about remaining in top physical shape.
“The average purchase might be around a $100 and while that sounds like a lot it might be that you’re only having, say, one shake a morning so a container of product can last you up to three months. These days there’s also a lot more choice, so you can grab a tub of protein for $20-$30 that may last you a month.”
Customer service focus
Sportsfuel’s business model is primarily based online with a small retail shop in Hamilton.
“We've tried to keep things pretty simple, and just focus on the basics of business, particularly offering really good customer service. When we started out supplements, came at a massive premium here in New Zealand. So you paid a lot more for the same product here than you would from somewhere else in the world. So we've worked pretty hard with our distributors to bring the prices down, so you can order locally, rather than from overseas and you're still getting value for money.”
“Online is definitely the way we do everything. We offer really competitive pricing, free shipping, and we try and get orders out to our customers really quickly. We’ve modelled our whole business around those points so anytime there is something we think we can improve on that is going to benefit the customer then we’ll do it.”
Arriving at Sportsfuel’s warehouse on Hamilton’s busy Te Rapa Road just after 9am, couriers were already picking up orders that had been packed that morning allowing for delivery in the Auckland and Waikato regions to occur in less than 24 hours from the time the order was placed.
In the world of online retail speed of delivery is vital and the company’s focus on maintaining a high quality service offering is clearly working, judging by this feedback from one satisfied customer included on its website.
“Honestly, I can't get over how quickly you’re able to dispatch your products out to your customers. I placed an order at 9:45am this morning and the goods were delivered [same day] by 2:30pm. This is TOP service and I thank you. Truly blown away with the A+++ service you provide.”
Limited advertising spend
In keeping with its online business model, Andrew Bailey says marketing and advertising costs have been kept contained with only limited above the line spending.
“We haven't done a huge amount of advertising apart from some online placements. The most effective form of advertising for us is word of mouth. If our customers tell a friend about how good we are or how quickly they got the product, then that’s a large part of the job done. We also have our own rewards points scheme because it’s the type of product that becomes a repeat purchase and we obviously want to build loyalty.”
Finally, best bit of advice for small entrepeneurs thinking of following in his footsteps.
“When I was at University trying to think of what type of business I would run or what I would do, I was always trying to dream up some crazy new idea or invention I could come up with, that was going to do really well. It wasn't until sometime later that I realised that just sticking to good business practice and finding a small niche in the market is actually the way to go.”
Most successful business owners will agree that it’s difficult to argue with that logic.
Sportsfuel was placed 29th in the 2012 Deloitte Fast50 Awards.
|Sector:||Online retail / supplements|
|Annual growth:||240% (2012)|
|Domestic / Export split:||100% domestic|
|Likely to IPO:||Possibly|