How Nordictrack Lost Its Footing

An infomercial pioneer's fast ride from mega-sales to Chapter 11

Not so long ago, an insomniac could barely get through a late-night channel surf without running into an ad for NordicTrack. And the saturation-ad strategy worked. By 1993, sales of its cross-country-ski machines were heading toward $500 million a year. By last October, NordicTrack was in Chapter 11. In this day of bulging bellies and short attention spans, fitness machines come and go like so many post-holiday diets. But how did this pioneer of infomercials fall so far so fast?

For starters, NordicTrack was a victim of its machine's durability. Lots of golfers and tennis players, for example, never stop looking for a longer-driving club or a racquet with a sweeter spot. But once you have a NordicTrack, you never need another one. In an industry in which impulse buyers seek get-thin-quick solutions, NordicTrack got hammered by a barrage of contraptions to flatten stomachs and harden thighs.

NordicTrack's somewhat complicated machine cost an average of $599, hundreds of dollars more than many of its rivals. Requiring coordinated movement of the arms and legs, it pushed users harder than the less daunting treadmill, whose sales have recently been revived by aging baby boomers. Besides all that, management fumbled an expansion into retail. "We weren't as nimble as we should have been," says NordicTrack Inc. President William E. Shepard with some understatement. Shepard, who was sent in by CML three months ago, is dismantling its nearly empty Chaska (Minn.) headquarters, which once housed 400 workers. It's now down to 25.

PALTRY BID. From a peak of $477 million in 1993, NordicTrack sales slid to $267 million in 1997, a 44% decline. Over the past three years, NordicTrack posted nearly $217 million in operating losses for its parent, CML Group Inc. in Acton, Mass. CML also owns the Smith & Hawken gardening-products catalog and retail stores, which turned a small profit this year. One measure of NordicTrack's descent came on Nov. 30, when ICON Health & Fitness Inc., the Utah-based owner of brands like Weider weight-training products and the HealthRider aerobic machine, offered a paltry $6.6 million to the bankruptcy court, mostly to use NordicTrack's well-known brand name.

Still, compared with most exercise gizmos, NordicTrack was a marathoner in the $4 billion-a-year market for fitness machines. Started in a basement by Minnesota inventor Ed Pauls in 1976, the company rode the first wave of the fitness boom and quickly made a mark with innovative direct marketing, print ads, and an 800 number. By 1986, aided by a spike in cross-country skiing, Pauls sold out to CML for $22 million. Growth was meteoric.

By the time NordicTrack peaked in 1993, the home-fitness biz was diversifying and newcomers, such as abdominal tighteners and aerobic riders, were stealing NordicTrack's advertorial tricks. As the competition intensified and the costs of making commercials rose, NordicTrack strayed from direct marketing. It moved into traditional retail, setting up 125 permanent stores in high-rent shopping malls across the country and 100 mall-based kiosks during the November-to-February eat-too-much holiday season. The stores, small and carrying only NordicTrack machines, offered little room for customers to try out the equipment. And those who wanted to carry home their new toy had to wait for it to be shipped.

HOME RUNNERS. That clumsy expansion was "an invitation for disaster," says Gregg Hartley, executive director of the Fitness Products Council, the industry's trade association. But Shepard believes that NordicTrack can resuscitate itself at the mid-to-upper end of the home-fitness market by changing its retail approach. ICON, for example, sells its products at places like Sears, Roebuck & Co. and Sam's Club. "We need what Volkswagen did," Shepard says. "We need our own new Beetle."

Maybe, but the only fitness machine with any staying power seems to be the treadmill, with about $2 billion worth sold at retail outlets last year. "The people who are turning 45 now are the ones who started the running phenomenon 20 years ago," says Tom Doyle, research vice-president for the National Sporting Goods Assn. So these days, says Doyle, they're jogging in their rec rooms between taking the kids to soccer, sweating it out on the stationary bicycle, or huffing through weight training on a home gym. Sales of both bikes and gyms were up 15% last year. That's another reason why NordicTrack looks like roadkill on the baby boomers' fickle highway.