The big opportunity
Fat Americans have become our fastest-growing consumer segment. To many, that's an unpleasant surprise. To entrepreneurial mavericks, it's a market of potentially immense proportions.
by Krysten Crawford, Business 2.0 Magazine

(Business 2.0 Magazine) - Tim Barry had no intention of launching a company, much less building a million-dollar business. He was just frustrated.

Several years ago, as the 55-year-old management consultant boarded a plane in Boston bound for San Francisco, he heard flight attendants discussing how they would handle an especially sensitive problem with seating. At 6-foot-1 and 365 pounds, the stout Barry and several other heavyset passengers needed seatbelt extenders--standard equipment on most airplanes to accommodate larger customers.

But flight attendants didn't have enough to go around, and Barry overheard the humiliating options being considered: They might ask the bigger passengers to squeeze into a standard belt, or, if they couldn't, boot them off the flight.

Crisis was averted after airline workers found some extra belt extenders inside the terminal. But Barry didn't want to ever be put in the same situation again. He decided he would buy his own seatbelt extenders and make them part of his travel kit, along with his noise-reduction headphones and Tom Clancy novels.

Barry hunted around the Web, in catalogs and travel magazines, and even at private airports. No luck. There was, it seemed to Barry, a nationwide shortage of airline seatbelt extenders on the retail market--and it was then that Barry's frustration began to give way to the invigorating tingle that hits every business veteran at the first whiff of an entrepreneurial opportunity.

Extending circumstances

Barry first contacted the manufacturers that supply the airlines. Soon thereafter he began mapping out plans to launch a retail site, called Extend-Its.com, from a small warehouse near his home outside Vancouver, Wash., to provide seatbelt extenders directly to the abundant numbers of people who need them.

To date, Barry has shipped more than 10,000 belt extenders at $60 to $70 a pop. And he's launched two other sites, Scale-It.com and SuperSizeWorld.com, to sell household supplies and hard-to-find convenience items for heavyset customers: $20 Hangerzillas that hold coats weighing as much as 100 pounds, high-capacity scales, extra-large plush bath towels that go for $60 apiece. This year, with just two employees, Barry expects to hit $1 million in sales. "I've done nothing but Google ads," he says. "The demand is there, and the market is wide open."

Large market segment

Indeed it is. There is no polite way to say this: Americans are fat, and they're getting fatter. Government statistics show that more than 60 million Americans already qualify as obese, up from 23 million in 1980. Another 28 million are expected to join their ranks by 2013. Forget the stereotypes: It's not just people in low-income neighborhoods who are packing on the pounds at McDonald's (Research). Researchers at the University of Iowa have found that obesity rates are rising most rapidly among urbanites who earn $60,000 or more per year.

Heretofore, the main business response to this overwhelming demographic trend has been the $49 billion weight-loss industry--huge and profitable, but in many ways narrowly targeted. Now a much broader segment of corporate America has begun to see the nation's fattening for what it is: a potentially powerful driver of consumer demand across a wide swath of the economy. Just as baby boomers have driven business and shaped the economy during the past half century, the "plus-size" population is likely to dictate marketing trends through much of the 21st.

Already, greater girth is forcing American business to rethink--albeit carefully--the way it designs and sells everything from sofas and toilets to clothes and nights on the town. The new Toyota (Research) Rav4 comes with seats up to 3 inches wider than prior models. Select Comfort, the high-end mattress maker, now sells a grand king size that's 30 percent bigger than a traditional king.

Market research firm Mintel estimates that U.S. sales of women's plus-size apparel jumped 50 percent during the past five years to nearly $32 billion. Dana Buchman, Tommy Hilfiger (Research), and Ralph Lauren (Research) now make clothes to fit larger women, and even Jessica Simpson has slapped her name on a new brand of big-bottom jeans. In several major cities around the country, popular new "size acceptance" nightclubs are becoming profit machines, not just safe havens for outcasts.

The opportunities, in short, seem about as unlimited and surefire as these things get. "I just don't see how I can lose," Barry says. "If we know anything about medical history, once you get past a certain weight, you're probably not going to lose it. You'll be my customer for life."

Accelerating trend

It is breathtaking--and, of course, alarming for the state of public health--how rapidly the overweight are becoming a powerhouse consumer class. Up until the early 1980s, Americans' body sizes had remained relatively stable, growing by just a third of a pound between 1962 and 1980.

In 1980 the average adult male weighed in at 174 pounds. The typical woman was 145 pounds. Then came a kind of unholy alliance of societal trends: bigger portions of cheaper, fattier food; more dual-income households that scarfed more restaurant grub and cooked less at home; and suburban sprawl that turned formerly active urban dwellers into sedentary drivers and couch potatoes.

Today nearly a third of adult men and more than a third of adult women are considered obese, defined as having a body mass index of 30 or higher. That's the equivalent of a 5-foot-4 woman tipping the scales at 175 pounds or a 5-foot-9 male weighing 205 pounds. And since no one has yet found a magic cure for weight gain, there seems very little chance that the trend will reverse itself.

Beyond weight loss

Outside of the lucrative trade in peddling diet aids and health club memberships to people eternally searching for ways to lose weight, U.S. business was slow to pick up on the trend. But as in any new industry, there were pioneers--namely retailers who realized that bigger bodies still had to be clothed.

At first, most department stores and top retailers had little to offer larger customers and were happy to let niche players like Lane Bryant, which began as a seller of maternity clothes more than a century ago, handle the market. And as the nation's waistlines expanded, Lane Bryant expanded right along with them.

By 2000 the chain had grown to more than 690 stores and $930 million in sales. The following year Pennsylvania-based Charming Shoppes (Research), now a $2.8 billion retailer that owns two other plus-size clothing chains (Catherines Plus Sizes and Fashion Bug), snapped up Lane Bryant for $335 million.

The acquisition was a turning point. "Clothing retailers didn't think it was chic to be fat," says Kurt Barnard, president of Barnard's Retail Consulting Group. "But then they realized they were losing tons of business." Now women who wear sizes 14 and larger make up more than half of the overall market, and plus-size apparel is the fastest-growing segment of the clothing industry.

Retailers big and small are launching new plus-size lines for brides, shorter women, and expectant mothers. San Francisco-based Old Navy has rolled out a line of oversize clothes for adults to 250 stores over the past two years; it recently added "husky" sizes for teenage boys and plus sizes for girls. Wal-Mart (Research), too, made sure to include plus sizes last year when it launched Metro 7, its new line of hip fashions for adult women.

The trend has also given rise to at least one successful niche player: Torrid, a division of the $725 million youth clothing retailer Hot Topic, sells Baby Phat tube tops and Hot Kiss gaucho pants to large women in their 20s at mall-based stores around the country. Betsy McLaughlin, Hot Topic's CEO, decided to launch a separate brand after her female customers started clamoring for bigger sizes in the late 1990s. "There was no place they could shop," McLaughlin says. "They either made their own clothes or wore men's clothes." Since launching with six stores in 2001, Torrid has seen its revenue grow to more than $70 million, according to analysts, and it plans to end 2006 with 130 stores.

Charming Shoppes, meanwhile, is fast becoming a retail giant on par with Limited Brands and Abercrombie & Fitch. Already the country's third-largest specialty retailer, the company recently announced plans to do battle with Victoria's Secret by opening 50 Cacique lingerie shops in 2006.

Sales of its 48DDD bras and other intimates hit $227 million last year, up from nothing a decade ago, according to Gayle Coolick, Charming Shoppes's director of investor relations. "And that's when lingerie was hidden in the back of the store," Coolick adds. When Charming Shoppes tested the Cacique line in select stores last year, undergarment sales took off and the effort drew even more customers into Lane Bryant outlets. "Women are starved for this product," Coolick says. So are investors: Charming Shoppes's share price has doubled in the past year.

Loyal customers

The prize for retailers isn't just increased sales but also loyal customers who aren't as price-sensitive as their slimmer counterparts. That's especially important at $4.8 billion fashion brand Liz Claiborne, where growth of mainstream lines has stalled in the face of fierce competition from department stores and big-box retailers. The company is counting on specialty stores, such as its 29 plus-size Elisabeth boutiques, for future growth. "This business was so underserved for so long," says Barry Zelman, general manager of specialty retail. "A plus-size woman sticks with a brand she likes, and she doesn't mind paying full price for it."

That kind of loyalty can extend well beyond clothes. Anne Corning, a 40-year-old Seattle resident, describes life as an overweight consumer as a series of seemingly endless frustrations and hassles. Buying clothes, she says, has been getting a lot easier. What she really wants now are conveniences like chairs without armrests, spas that offer bigger robes, restaurants with wider booths, and couches that don't sink so much. "There are definitely moments when I'm in a low-slung sofa and I'm thinking, 'Oh, shit, how am I going to get out of this?'" Corning says.

Entrepreneurs--many of them overweight themselves--have begun racing to alleviate those kinds of nightmares. While Tim Barry and several other retailers sell household convenience items, Aitan Levy is making the same kind of bet with bathroom fixtures, another market that big business has been slow to adapt to the obese.

Product line extension

The owner of a small plumbing manufacturer based outside Los Angeles, Levy had heard people complain for years that standard toilet seats are too small, uncomfortable, and fragile for stout customers. So three years ago he designed the Big John Toilet Seat, a 19-inch throne made of reinforced plastic, and started making the seats himself. In the first two months, he sold about 2,000 commodes at $88 apiece, and he has since rolled out a newer $170 model and added a $160 open-front version. Demand has doubled over the last six months. "All you have to do is look around to see that people are bigger," Levy says. "But where are all the products and services?" Levy's toilet line is not yet profitable, but he expects it to be by year's end. Industry heavyweights Kohler and American Standard, meanwhile, have yet to unveil rival products.

Seating for overweight consumers is just as big a problem in the living room or office as it is in the bathroom--and businesses are starting to tackle that too. Brayton International--a subsidiary of Steelcase, the world's largest office furniture maker, with $2.9 billion in annual revenue--began selling waiting-room chairs designed for heavier builds in 2003 and is looking to add wider, sturdier office chairs in response to growing demand. "We're taking a hard look at what it's going to take to accommodate a larger-framed society," says Cia Mooney, Brayton's VP for product development.

Most likely, that means more market research. Nemschoff, a privately held maker of health-care equipment based in Sheboygan, Wis., started offering extra-large furniture several years ago when surgery became a popular treatment for obesity. As the number of surgeries rose, hospitals have raced to build bariatric wings with wider door frames, bigger gurneys, and sturdier waiting-room furniture.

But when Nemschoff came out with its first plus-size seating--a line of reinforced chairs that didn't appear much different from standard chairs--heavyset customers mistook them for standard equipment that might buckle. "We didn't want the chairs to scream out 'I'm the one for you' when a heavy person walked into a room," says CEO Mark Nemschoff. Understanding the goof, he followed up with newer, wider models. Nemschoff sold 1,800 bariatric chairs last year--a 40 percent jump from 2004.

Nemschhoff's early mistep underscores some of the difficulties in marketing to the obese. Large consumers want the mass market to respond to their needs, but products that reflect too much reality--that remind them that they're overweight--often bomb.

At the same time, companies don't want to be seen as enablers of an increasingly fat society. For some, the answer is to design bigger products for big people without advertising them or even talking about them. When Toyota outfitted its Rav4 mini SUV with tilting steering wheels and wider seats--popular features with heavyset drivers--it billed the cars as nothing more than "roomier." Paul Williamsen, Toyota's product education manager, puts it delicately: "Some products of ours may be seen to be more appropriate for different body shapes."

Other companies have tackled the challenges of marketing products for the obese using traditional Madison Avenue savvy. Last year Unilever plastered New York and several other U.S. cities with ads for new Dove skin-firming creams that featured women flaunting their curves in bras and panties. Lost to many consumers was the fact that the models were smaller than the average adult woman is today.

"So you're celebrating who you are--but selling an anticellulite cream?" says Mira Kaddoura, an executive at ad agency Wieden & Kennedy. "That's weird." Maybe. But it works. According to Information Resources, Dove's sales jumped more than 12 percent in the United States--far outpacing growth in its category. Those results suggest that plus-size consumers, like the rest of us, respond better to pretty portraits of themselves in ads than to what they see in the bathroom mirror.

Despite success stories like Dove's, some businesses remain reluctant to make themselves more fat-friendly. The airlines, for instance, face a rising number of large passengers--but as Tim Barry's experience shows, the industry has been among the least willing to openly market to the overweight, out of fear of alienating smaller passengers.

Southwest Airlines, for instance, still enforces a 30-year-old policy that requires extra-large passengers to buy a second seat if they can't fold down their armrests. Brandy King, a Southwest spokeswoman, says the airline gets more complaints about encroaching seatmates than it does about the two-ticket policy. Mike Boyd, an independent aviation consultant in Evergreen, Colo., explains that the obesity epidemic won't hit airlines anytime soon. "If the average American's girth is growing a couple of centimeters a year," Boyd says, "are airlines going to have to accommodate that? No, they're not."

The headaches associated with air travel help explain why another nascent plus-size market--vacation resorts--hasn't taken off. Three years ago Julio Rincon, a longtime hotel manager in Cancun, Mexico, opened the world's first "fat friendly" resort. Called Freedom Paradise, it was a beach complex with 112 rooms where extra-large vacationers could relax in the sun away from the disapproving stares of others. (The resort's slogan was "Live large, live free.") Rincon spent $2 million outfitting the place with features like reinforced beds, wide restaurant chairs without armrests, and a staff that had undergone sensitivity training.

But after Freedom Paradise launched with much fanfare and press coverage, the crowds never materialized. Rincon says he seldom got the vacancy rate below 50 percent. His mistake, he says now, was underestimating how much plus-size travelers dread long-distance air travel, especially during peak months when planes are packed.

So last fall, Rincon abandoned the fat-only concept, renamed the resort Maya Tankah, and opened the place to all comers. The rooms are now full, but Rincon isn't giving up on his original idea. He's been checking out resorts closer to the U.S. border, as well as in Spain and Germany. "I'm convinced the market is growing, and not just in the U.S.," Rincon says. "But right now a lot of plus-size people do their vacationing close to home."

That isn't to suggest that they're homebodies, though. On a recent Saturday night in the Orange County, Calif., suburb of Costa Mesa, luxury cars jam the parking lot of the Butterfly Lounge as stretch limos glide along the palm-lined street. Inside the club, young couples bump and grind to Usher's hit "Yeah!," while bartenders pour vodka-and-Red Bulls. The club is no magnet for the rail-thin blonds and buff hunks you'll find on The O.C., though. Butterfly advertises itself as a "size acceptance" nightspot, with high stools set around elevated tables to make seating easier. Almost everyone weighs more than 250 pounds. The club is profitable, drawing crowds of 300 or more on weekends. "Ninety percent of the folks here have tried everything to be thin," says one male customer who's come to the Butterfly after reading about it on the Web. "At some point you've just got to live."

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.