pelogone

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10 ago i clipped into my 1st peloton class in their chelsea studio with my classpass coworkers. i was new to the city & so impressed by the gorgeous studio, charismatic instructors, malin+goetz products, & bottomless free water bottles.

they later opened a tread only studio in west village that took over an entire crunch gym.

living in nyc, i had no space for a peloton bike & took my classes irl during peak spin studio days with flywheel, monster, cyc, & more.

but when i moved to austin & went the entrepreneur route, the peloton bike made a lot more sense. $40 for 1 soul cycle class of $45/month for versus $44/month for unlimited peloton after the hardware cost? the math mathed & i got full roi on the hw.

i still have & love my bike.

but i rarely spin.

i use it for strength, stretching, running, & meditation almost every day. jess sims, katie wang, rebecca kennedy, and cody rigsby are my favorites. fun fact: cody and i did our meditation teacher training together in nyc.

if you’re on the platform, please reply as i’d love to follow you in my attempt to better understand & use the community features.

despite all my love of the brand, peloton’s retail strategy was… a spin out.

proven by the fact that as a loyal customer, i never went out of my way to go to a store. still watching them 86 their 135 retail locations across the us, canada, uk, australia, and germany breaks my retail-loving heart.

the numbers don't lie

let's start with the damage:

• peak market cap: $50 billion (january 2021)

• current market cap: $2.5 billion

• stock price collapse: $171 to $8 (95% decline)

they just got a new ceo & announced a price increase driven by new ai features, a breathwork app, & honestly i'm not entirely sure what else. we could dissect their overall business strategy all day, but i want to focus on retail because it's a rich history lesson for anyone thinking about physical stores.

the one-time purchase problem

peloton stores were beautiful. it felt like walking into the apple store for workout endorphins. the lighting was perfect. the staff was enthusiastic. every detail felt premium, from the headphones to the towels.

the issue is simple. the economics never worked.

they claimed 35% four-wall margin performance pre-pandemic, but that was with a much lower store count. i’m willing to be their four-wall margin was in the single digits for the past several years.

the showrooms were very expensive to build & operate.

and selling a $2,000+ product once a decade to customers cannot justify the cost of operations. they also put their staff on commission, which i’m in general against, but an extra poor choice for a brand with limited repeat visits.

ego death 101

peloton’s retail downfall is a story of ego meeting reality.

the showrooms were about brand building, not economics. they wanted to be seen as premium, so they opened in premium malls next to tesla & apple.

i'm not surprised. the peloton founder/ceo once claimed that peloton would be bigger than facebook in market cap. he was really growth-at-all-costs.

a price the company is still paying for.

but peloton isn't selling cars or phones—products with upgrade cycles, multiple SKUs, & accessories that drive repeat visits. they're selling a single high-ticket item that lasts a decade, attached to a digital subscription that requires no physical presence whatsoever.

peloton strengths are as a media company that uses hardware to deliver content.

once the pandemic ended, hardware became a loss leader.

they needed humility to shift sooner.

what’s working out

peloton finally stopped pretending to be apple and started acting like peloton.

embracing what’s actually working out.

soon they will have shut down all the fancy large showrooms. doubling down on what actually moves bikes.

• amazon exposure with 500k+ monthly searches

• dick’s sporting goods placements driving 74% more units

• costco bike+ launch tapping the value crowd

• micro-stores like nashville’s 300-sq-ft kiosk outperforming full showrooms

• nyc and london studios pulling double duty as content hubs for 6.8M members

• european markets going fully wholesale through amazon and partners

pro tip: if you’re looking to buy any other equipment (bike, row, tread, weights), check craigslist or fb marketplace first.

the takeaway

i still love my peloton (mainly the app). it’s one of the most joyful at-home fitness tools i’ve ever owned. i truly can’t imagine working out a home without their lovely coaches.

but peloton’s story is a warning for brands that confuse fans with foot traffic.

a similar problem with dtclosures brands from monday.

the 2010s were about brands buying credibility through aesthetics. marble floors, millennial pink, “community.” what we’re living through now is the hangover.

because buzz doesn’t mean business model.

peloton chased the apple halo without apple’s repeat revenue. they built a showroom empire for a one-time-purchase product. that might work when the world’s stuck at home, but not when leases come due and traffic dries up.

the lesson isn’t “retail is dead.” it’s that retail math always wins.

if your product isn’t frequent, your story has to be.
if your story isn’t sticky, your economics better be.

brands that survive this next chapter will need to prioritize profit a lot sooner.

p.s. image what would have happened if peloton bought a boring business instead?