When I picked up a copy of the April 2005 issue of Yoga Journal yesterday, which I only did after reading *every* other alternative available to me, I had no idea that I would find it fascinating, much less be writing about it. Sure, it’s a magazine dedicated to yoga. As such, it features pictures of extremely flexible people assuming extremely out-of-the-ordinary positions, some with names like khanjanasana and ardha baddha padma paschimottanasana. That was to be expected. What I found remarkable is that the magazine also included an article by Laura Shin, titled "Free-Market Yoga," which is also featured at her site and could just as easily have found a home in the Harvard Business Review.

The article focuses on Yoga Works, which is rapidly coming to the forefront of the U.S. yoga industry by consolidating independent yoga studios around the country. But what really makes the article interesting is that it offers a case study of how the independent yoga studios reached a point of market saturation, in which the only viable alternatives available to them are to sell their centers to a stronger entity or to go out of business.

Entering a Death Spiral

Here is how the independent studios arrived at their current predicament. Typically run by individuals more excited by teaching and practicing yoga than in the day-to-day requirements of operating a business, many of the independent yoga centers struggle to make ends meet. Seeking to keep afloat, many of these struggling studios turned to the practice of training enthusiasts to become yoga masters and instructors, which brings in good money.

The problem is that once trained, the newly minted instructors have no need to continue their training and often seek to open their own studios, where again, many struggle financially. Soon, the new studios also begin training new instructors. As this process repeats, the numbers of independent yoga studios proliferate, and eventually reach the point of saturation in which not even the lucrative practice of training new yoga instructors is able to keep the studios afloat. Hence, the independent yoga studios entered a death spiral, with many being forced out of business. The article describes this situation in Seattle, Washington:

Seattle’s Queen Anne neighborhood recently exemplified how this is playing out: By mid-2001, the historical neighborhood was home to three yoga studios: Jai Ma Yoga Studio, Moment Yoga, and Queen Anne Yoga all opened within a few blocks of each other. By early 2004, Moment had closed, Jai Ma had relocated to a space the teacher and owner rented by the hour, and only Queen Anne remained – under new ownership.

An Alternative of Assimilation

For many distressed independent yoga centers, the alternative to going out of business altogether is to sell their studio to a stronger entity undertaking a growth by acquisition strategy. The article indicates that many of the independent studios are opting for this process of consolidation since it offers many advantages. It reduces their need to focus on the business aspects of running a studio, since the new parent company provides many of the necessary mundane business functions, such as accounting, permitting, etc. The joined entity enjoys economies of scale, since the parent company may provide these services at much lower cost in time and expense than an independent studio otherwise could.

Individual studios within this consolidated network also find themselves better positions to experiment with new programs. The overall financial strength of the chain allows them to take risks they could not as independents, since they are no longer effectively “betting the business” by trying out new ideas. One example of this benefit is in Huntington Beach, California, where a studio opened by Yoga Works was losing $10,000 a month, and was considered for closing:

But the manager said she could turn things around by offering lower prices to a new-to-yoga community, so the studio began offering an inexpensive starter program…. Within six months, the studio saw its average attendance per class jump from 5 students to 12, the number of new students per month go from 50 to 175, and revenues triple. The studio is now profitable.

There are also benefits for the formerly independent studio’s members as well. Members seeking particular classes at times convenient to them find they are able to use their membership cards at other locations operated by the same parent company. This transferability of services pays dividends to the consolidated network as well, since they are more likely to retain members rather than losing them to other studios should they not be able to find their desired services.

Coping with Change

There is resistance to the growing "corporatization" of yoga centers around the country. Citing many of the same arguments advanced against the coffeehouse chain Starbucks, fast food giant McDonalds and mega-retailer Wal-Mart, the concept of "McYoga" is frequently cited by independent yoga instructors in their opposition to consolidation. Laura Shin notes the potential for Yoga Works success as a business in reducing the number of styles of yoga that may be practiced:

If Yoga Works dominates other cities, the company could affect the popularity of specific styles of yoga across the nation. Yoga Works doesn’t train Ashtanga or Iyengar teachers, and the studios don’t currently offer Anusara or Kundalini classes. In cities with few offerings apart from the local Yoga Works, whatever Yoga Works decides to teach will determine the styles people learn.

Speaking for myself, I think that Yoga Works lack of offerings in these areas would suggest market opportunities that those wishing to maintain the independence of their yoga studio could pursue. Then again, they could continue to fall victim to the situation that precipitated Yoga Works rise, not to mention the attractiveness of consolidation in the first place. Which alternative offers greater satisfaction? Which offers greater success? All-in-all, it’s a classic case study of the choice between maintaining independence and joining into a larger entity.

Labels: business

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