Dick Enrico’s Third Wind
Most people know Dick Enrico as the quirky character in 2nd Wind Exercise Equipment TV commercials with his pitch line, “Why buy new when slightly used will do?”
But within his niche of specialty fitness retailers, Enrico—who came out of nowhere and rose from nothing—became a legend both for his innate marketing acumen and his survival instincts that kept his business afloat through the depths of the Great Recession.
“Specialty fitness” is defined as retailers who sell higher-end products than big-box competitors and specialize exclusively in fitness equipment. Retailers in the niche acknowledge that the industry remains highly fragmented, with regional clusters of small chains. There’s never been a successful national player, according to Tom Staub, vice president of sales and operations of New York-based Gym Source USA LLC, which has 32 retail stores on the East Coast. But Enrico came the closest to making it happen, and he’s well known as a result. “In terms of number of retail stores,” says Staub, “he’s the largest in the industry.”
The success and stamina of the 2nd Wind brand enticed Taiwan-based fitness equipment maker Johnson Health Tech Co. Ltd. to buy the business from Enrico last November, as it pursues a national play in this space.
With about $580 million in annual sales, Johnson ranks as the third-largest manufacturer of fitness equipment on the globe and had a long-standing sales relationship with Enrico’s company. It plans to grow through acquisition; in addition to buying 2nd Wind, the company acquired Leisure Fitness, a retailer with 27 stores on the East Coast, in June.
“2nd Wind has the best track record in the industry,” says Nathan Pyles, president of Johnson Health Tech North America, which has its headquarters in Cottage Grove, Wis. Enrico and Pyles both declined to comment on the terms of the acquisition.
“His personality is irreplaceable,” says Pyles. But, he adds, Enrico is not a one-man show, and he has built a good team: “He has a next generation of leaders within his organization, and that was one of the key drivers to wanting to work with Dick on this acquisition.”
Enrico points to long-term employees Garret Town and Chris Ball. Town started 20 years ago as a salesman. Today he is a regional manager who oversees two district managers who are in charge of 31 stores in five states. Ball started 21 years ago as a salesman; he’s now director of sales training for the company.
After leading Eden Prairie-based 2nd Wind for the past two decades, Enrico agreed to stay with the company under its new ownership. But this month, he’ll leave the business for good. And now, he says, it’s time to try something else—again.
Enrico’s position is fairly common for entrepreneurs who spend years building a business and then sell it. They stay on board for a spell, but soon become restless working under the new boss. Enrico says that the departure is amicable and he’s looking for some new challenges: “It ain’t about the money,” says Enrico. “I got to look in the mirror and say ‘Am I productive? Am I being challenged? Am I using my skill set?’ No, no, no.”
Enrico, 77, already has three new ventures cooking. His startup company Directional Marketing Signs LLC sells the “Fabulous Action Flipper,” a battery-operated machine that anchors a moving sign on a pole. The contraption can be planted on a sidewalk in front of a retail store. Enrico has a patent for it.
His second venture is a partnership in Trifecta Digital Media LLC, which plans to own a national network of monitors for digital ads displayed in restrooms in businesses. Trifecta has partnered with Plymouth-based AllOver Media Inc., a national leader in alternative advertising platforms such as gas pumps and ads on the side of trucks. AllOver will sell the ads; Trifecta will own the machines. “We are going to digitize the United States,” says Enrico. The third idea is one he’s keeping close to the vest, saying only that it’s a new retail concept. Speaking of this article, he says, “Put a little suspense in there.”
2nd Wind was hardly Enrico’s second chance in business. He’s not sure how many failed businesses he started before used fitness equipment. But he says he launched at least 20 other companies. Some people call it failure. Enrico prefers “lack of success.”
And then there was the home run: From its founding in 1992 through 2007, 2nd Wind did better year after year, reaching peak annual sales of $95 million from 103 stores. (They’re all corporate-owned; 2nd Wind has no franchisees.)
Some had their doubts, and at first, fitness companies were wary of Enrico because he was bringing a second-hand goods mentality to the industry.
“Everybody was kind of wondering about this guy who was selling used equipment,” recalls Dennis Lee, co-founder of Brooklyn Park-based Octane Fitness LLC, who has known Enrico since the earliest days of 2nd Wind. Lee worked in fitness equipment sales for a manufacturer at the time. “The thing people were trying to work through in their minds was . . . ‘Is that good positioning for my brand to be in a store that sells used equipment?’ ”
Read more from this issue
It turned out it was. And though he started out as a purveyor of used and rental equipment, Enrico starting adding new equipment to the mix in 1995. “I had a hard time convincing anybody to sell to me,” says Enrico, “because I was an embarrassment to the industry.”
Octane, founded in 2001, developed a line of elliptical exercise machines. Lee recalls one cold November day in 2002 when he was delivering Octane’s first product to 2nd Wind stores in Coon Rapids, Maple Grove and St. Louis Park. During the deliveries, he received a call with news that the Maple Grove store had sold its first Octane product. “That was the start of the momentum that we had,” says Lee. “He became our largest customer.”
Enrico offered business advice as Lee ramped up Octane, emphasizing the importance of recognizing top salespeople; Lee says that his company makes a point of rewarding them with trips and the like.
(Octane Fitness was also recently sold. At the end of 2015, Vancouver, Wash.-based fitness manufacturer Nautilus Inc. acquired it for approximately $115 million.)
Not everything has gone smoothly for 2nd Wind, however—particularly when the Great Recession hit in 2008. Sales and store count dropped by more than half within three years.
“In the month of February 2009—this is unbelievable—I closed, closed 20 stores! Twenty in one month,” recalls Enrico, as if he still doesn’t quite believe it himself. “The next four years I dealt with landlords.” During the economic downturn, many retailers simply walked away from leases or filed bankruptcy, which leaves property owners with nothing. Store by store, Enrico says, he worked out settlements with landlords.
“Dick took every phone call from every landlord, went to every landlord and told them that his business was being affected by the recession,” says Rick Plessner, a commercial real estate broker who has represented 2nd Wind. “It would have been a whole lot easier just to file for reorganization and he never did. I think that landlords as a whole appreciated the fact that he wasn’t hiding, he wasn’t filing [bankruptcy] and he wasn’t threatening to file, either.”
By 2011, Enrico says he was down to 41 locations and sales of $44 million per year.
Going out of business was a real threat. “The respirator was unplugged,” says Enrico of market conditions, “and somebody was standing on the hose at the same time.” But by the time Enrico sold the company, he was back up to 60 stores in 11 states, including 13 Minnesota locations. Within the last four years, 2nd Wind expanded to two new states, opening in Arizona and Oklahoma. There are now 10 2nd Wind locations in the Phoenix area. Not bad for a guy who never wrote a business plan.
Longtime friend David Tolchiner says that while many people know the arc of 2nd Wind’s success, the story of how Enrico navigated the economic downturn got much less attention. “When the recession hit and he had to dance and come up with ideas to work with his landlords, that’s what was impressive to me. That’s what kept him in the game while the rest of his counterparts around the country were folding,” says Tolchiner, owner of Tolch Properties LLC, which owns local commercial properties.
How did Enrico survive where others failed? “The answer sounds almost clichÃ©: “Dick is a survivor,” says Tolchiner. “Right now he looks really smart. But when you’re up against the wall and you have to adapt every day . . . that’s where the survivors come through.”
The Earlier Years
Enrico was born to Italian immigrants in Chisholm, on Minnesota’s Iron Range. Like nearly everyone on the Range at that time, his father worked in the mines. While Enrico was flailing around trying to find a business concept that would work, his younger brother Roger was operating at much higher altitudes. Roger Enrico became president and CEO of PepsiCo’s Beverages and Food Division in 1983 and went on a series of leadership roles, including serving as CEO and chairman of PepsiCo Inc. from 1996 to 2001. He later served as chairman of DreamWorks Animation SKG Inc. from 2004 to 2012.
“I took a different path, right?” says Enrico. Roger Enrico died at 71 in early June. His passing prompted an obituary in the New York Times, among many national outlets. The younger Enrico lived in Dallas, where the Dallas Morning News described the late executive as “internationally respected for his marketing genius.” He had also served on the Target Corp. board from 1990 to 2005.
Enrico acknowledges that his relationship with his brother was “not very good” and says: “We just went different ways.” Did he ask his brother for business advice? “Never.”
But how did both brothers ultimately find success in business? Their father only made it through the eighth grade. Enrico says he has no quick answer. “Is an artist born with a paintbrush? Not really. He couldn’t work the street like I did, and I couldn’t sit in a boardroom like he did.”
Just out of high school, Enrico started small, selling cookware—“pots and pans,” he says. Nearly 60 years later, he’s still chasing the next sale. “When it’s all said and done, I’m a peddler. A salesperson.”
One of his challenges has been timing; Enrico was ahead of his time in some instances. For example, his HandiHut operation circa 1980 sold wooden storage sheds, which he touted as “the storage solution to garage pollution.” But it didn’t fly: “Disappointing,” says Enrico. “Last year Home Depot did $100 million in wooden storage sheds.”
Over the years, Enrico kept opening and closing businesses, moving from one idea to the next. There was an Italian restaurant venture (Scarpelli’s), a stereo store (The Sound Inn), a retail waterbed concept (AquaKnight) and a magazine (Entertainment Directory).
In the late 1980s, Enrico was selling a new technology: cellular telephones. No matter what, it seems, Enrico had a catchy name. His company, CarTel Mobile Communications, sold car phones. When he started, the phones sold for $3,000.
“Dick was the same guy he is today. Very engaging. He had a different twist on it,” recalls Tolchiner, who was also selling car phones. “If you bought a phone from him, you got a license plate in the mail with your name on it. And people got a kick out of that.”
As the car phone business faded, Enrico needed a new plan. 2nd Wind started as another of those what-if ideas. “I was 52 years old, recently divorced, living in an apartment,” recalls Enrico.
As Enrico was testing out his idea, he ran a few small classified ads in the Star Tribune. “NordicTracks were a hot item. I run an ad: ‘NordicTracks for rent.’ If I got one call, I got 500 calls. I says, ‘I’m on to something’,” recalls Enrico. “But I didn’t have any NordicTracks.”
What did Enrico tell the callers? ‘We’re putting together a waiting list’,” he recalls with a laugh. But the response to the three-line newspaper ad convinced Enrico that he had stumbled upon an untapped market.
He sold his Corvette for $15,000 and used the money to buy NordicTrack machines at garage sales. He then opened his first store—a mere 1,200 square feet—in St. Louis Park, in 1992. “Ten o’clock in the morning I made the first sale, Enrico says. “I sold a rowing machine to a gal for 119 bucks.”
“Eight, ten years ago I found her and I bought it back for 150 bucks. The same machine I sold her, right?” he says, smiling. The machine is mounted in the entryway to 2nd Wind’s headquarters. It’s a reminder of the obstacles he first faced with 2nd Wind, and how he overcame them. Today, he’s enthusiastic about his new business ventures because they bring their own, different set of obstacles to tackle.
“I like to feel the wind in my face—pressure, pressure, pressure. I function best under pressure, I function best under the unknown, I function best under the challenges,” says Enrico. “And I love being able to, hopefully, overcome the challenges. That’s what gets me excited.”
Enrico’s Slogans Never Stall
Enrico’s mind is wired for marketing. He speaks in slogans. He has used restroom advertising for years to promote 2nd Wind. But now Trifecta Digital Media, which includes Enrico as a partner, will own a network of digital display machines for restroom advertising, putting him on the other side of the transaction. Enrico believes this is rich material for Twin Cities Business.
Enrico: “I got a great line for ya, if you want to use lines, OK? You can kind of massage it the way you want. You might say something to the effect of ‘After 30 years, Dick Enrico’s on the other side of the urinal.’ ”
TCB: “Or ‘His career’s in the toilet.’ ”
Enrico: “Well. Something like that. Or, ‘Enrico’s just flushed another deal.’ Or whatever, right?”
Burl Gilyard is TCB’s senior writer.