Peloton needs more willing riders to improve future growth
However, in an Interview with Third Bridge Forum, a former senior manager at the company told us the easing of restrictions would not necessarily hurt spending on home fitness. The specialist said both home fitness and gym memberships could “co-exist” and that TAM for home fitness will continue to grow – to USD 8-10bn this year, and potentially USD 12-14bn in the next 3-5 years.
The specialist said Peloton’s recent production halt was related to earlier “beefed up inventory production” based on high demand during the pandemic. This halt wasn’t necessarily linked to a steep drop in demand, the specialist said, but rather problems around planning, and that Peloton was “too optimistic” about its “COVID success”. The specialist said Peloton’s YoY growth is “still pretty solid” but that it has “huge bumps in their charts on pretty much everything because of COVID”.
Finding new customers given its price point is a challenge for Peloton, according to the specialist, who told us it was “hard to believe” those who wanted Peloton equipment would not have already purchased it. The specialist said a rebrand or slightly lower pricing might help Peloton find new customers but that its Customer Acquisition Cost will remain “higher than they want [it] to be” until it finds them.
Expanding further into the strength equipment market could also help attract new customers, but the specialist said it faces strong competition from fitness company Tonal, as well as changing customer perceptions given how synonymous the company is with exercise bikes and treadmills.
On rumours of a potential sale, the specialist said this was being driven by “over the top” press reports and that shareholders would get “terrible value” if it was sold. However, the specialist said it was “very reasonable, if not necessary” for changes in leadership at the company, and while they speculated “some heads will roll”, they didn’t think they would be the right heads.
To access all the human insights in Third Bridge Forum’s Peloton – waning demand risks & subscriptions outlook Interview, click here to view the full transcript.
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