Peloton and the fate of the fitness industry

Peloton is spiraling, and its downfall could herald real trouble for an entire industry. The digital home exercise company is one of several that have thrived during the pandemic and promised to change forever how we work. But now, it is not clear if they will be there to finish. the home fitness revolution they started.

There’s no denying that the pandemic made working out at home extremely popular. After gyms were forced to close their doors, people canceled their memberships and invested in exercise equipment and subscriptions to online classes. So much so that companies like Peloton were unable to meet demand, leaving many customers wait months to have their bikes and treadmills delivered. But the Covid-19 restrictions did not last forever. Eventually, when gyms started to reopen, people stopped shopping. and using — exercise team with the same enthusiasm they had in the spring of 2020.

This transition has been brutal for Peloton. Sale of new bicycles. they have collapsedand people haven’t bought enough of the company’s new products, including two models of treadmills Y pesos, to make up the difference. after losing $439 million last quarter, platoon decided in January that it would temporarily halt production of its bikes and treadmills to cut costs, according to internal documents obtained by CNBC. Then on Tuesday, the company said it lay off 2,800 people, cancel its plans for a new $400 million factory in Ohio, and that its CEO, John Foley, would step down. Former CFO of Spotify barry mcarthy will take his place.

Many of the problems Peloton faced were company-specific. Some investors had argument that Foley, who ran the company for a decade, was simply not up to the task of scaling the company so quickly. Peloton also had a series of slip-ups, including supply chain problems, a very public recollection of his treadmillsand a controversial ad campaign.

But Peloton’s demise also coincides with a trend where more people are working out the way they used to: in gyms. Face-to-face demand fitness classes and gym memberships has recovered, while Google searches for home gym equipment in general they have continued to fall since its peak in March 2020. Foot traffic to gyms is now back to the same levels as in January 2020, according to data from SafeGraph, a geospatial data company. planet fitness only saying which, as of November, had regained 15 million customers, which is just half a million fewer customers than its pre-pandemic peak.

In the wake of the return to gyms, Peloton competitors are starting to see signs of trouble as well. The mirror is one of them. The company sells a $1,495 smart mirror which streams virtual exercise classes on the surface of the device while you work out. Just a few months into the pandemic, Lululemon bought Mirror for $500 million in an attempt to capitalize on the big transition to physical activity at home. More than a year later, the athleisure brand has cut its budget income expectations for Mirror in half.

“As you know, 2021 has been a challenging year for digital fitness,” said Lululemon CEO Calvin McDonald. told investors in December. “We have seen increasing pressures on customer acquisition costs that are affecting the entire industry.”

Meanwhile, NordicTrack’s parent company, iFIT, announced it would go public last September, but delayed the move a month later, citing “adverse market conditions.” And Nautilus, which owns fitness brands like Bowflex and Schwinn, does too. reported late last year that some of its products have not sold as well as they used to in the pandemic, though many are still more popular than they were in 2019.

It’s possible that Peloton could find a way forward if a larger company acquires it. But there is reason to believe that will not happen, even with its new CEO. Some activist investors want a larger company to buy Peloton and have suggested at least 19 possible candidatesincluding Apple, Netflix, and Lululemon. But these companies can not be interested in an expensive but specialized fitness business. Apple, for example, is already wary of buying more companies and drawing the attention of antitrust regulations. Netflix isn’t in the device business, and the streaming giant has generally avoided fitness content. Lululemon already has Mirror.

But while Peloton is looking for a buyer, many other companies are creating streaming platforms for fitness content that allow people to wear whatever gear they want, and for a lot less money. These services include Apple Fitness+on-demand home workouts ClassPassand millions of exercise videos on YouTube. These streaming options tend to make money through ads or low-cost monthly subscriptions without pressuring people to buy specialized equipment.

It remains to be seen if other companies will go the way of Peloton. Of course, this wouldn’t be the first time an at-home exercise fad has come and gone. Every generation of technology seems to have its own spin on the home fitness revolution, from VHS aerobics to the exercise equipment sold on QVC. This time, Peloton thought streaming and touch screens would be the breakthrough to keep people engaged. Unfortunately for Peloton, the company may have built another expensive coat rack.

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