Peloton Business Model and SWOT Analysis – How Does It Make Money

Key Takeaway

Peloton is a fitness equipment and media company. It was founded in 2012 in New York with the ambition of providing world-class fitness equipment. It has become a leading brand in fitness equipment since its inception.

Peloton offers exercise equipment in the range of Bike and Treadmills only. It complements its product range with fitness accessories and apparel. The compelling feature that sets Peloton apart from its competitors is the streaming services for its members. Thus, it creates an all-in-one user experience for fitness enthusiasts that want to use hardware with instructors.

Peloton is a publicly listed company on the NASDAQ stock exchange. It reported gross revenue of $ 1,825.9 million for the fiscal year 2020. However, it reported a net loss of $ 71.6 million. The company currently operates in the US, UK, Germany, and selective locations in Canada. It offers direct sales of fitness equipment as well as memberships for fitness training classes in several categories.

Company Profile

Let us briefly explore the company profile of Peloton.

Company NamePeloton Inc.
Websiteonepeloton.com
Founded in2012
FounderJohn Foley, Graham Stanton, Hisao Kushi, Tom Cortese, and Yong Feng.
Key PeopleJohn Foley – CEO, William Lynch – President, Jill Woodworth – CFO
HeadquartersNew York, US.
Business ModelFitness and Training
Products / ServicesFitness Equipment, Training Classes, Apparels.
Competitive AdvantageBrand Recognition, Unique Business Model, Large Customer Base, Sophisticated technology.
Revenue$ 1,825.9 Million for 2020.
CompetitorsPrecor, SoulCycle, Nordick Track, Bkool.

Introduction

Peloton was founded in 2012 by young techies. It combined the idea of physical fitness equipment manufacturing with training classes. Today, its bikes and treadmills come with a large screen that acts as a streaming device for the user.

Peloton offers bikes and treadmills for fitness enthusiasts. It also offers memberships for training in different fitness categories such as Yoga, indoor training, outdoor training, cycling, running, weight, fitness, and so on. Thus, it combines the experience of hardware with its instruction bases classes to offer an all-in-one experience for users.

Peloton currently sells its equipment to the US, UK, and Germany. It also covers selective areas in Canada. Customers can buy equipment without a membership too. Customers also have the option of signing up for the training classes only. It’s a particularly useful feature for users who do not require a treadmill or bike.

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Peloton has been listed on the NASDAQ stock exchange. Its share price is currently trading at $ 96.50 with a total market cap of $ 28.83 billion. It recorded $ 1,825.9 million in revenue and a net loss of $ 71.6 million for the fiscal year 2020.

What is Peloton? What Does it Offer?

Peloton is a fitness and media company. It offers fitness equipment, accessories, training classes, and apparel for fitness and sports users. The company currently operates in the US, UK, Germany, and parts of Canada only.

Source: onepeloton.com

Peloton appeals to fitness and sports enthusiasts with hardware and accessories. However, it has taken the fitness industry to a new level by offering live streaming and recorded classes to its users.

Users can subscribe for monthly subscriptions that allow them to join the classes from virtually any device. Customers can join in through a web login, smartphone app, smart tv, or other supported devices.

Peloton Bike and Bike +

Peloton bike and bike+ are its flagship products. It starts from a $ 1,895 price with a flexible monthly installment option available. Customers can try a free 30-day home trial before making the full purchase.

Peloton Bike comes with a 21-inch screen, 2 GB RAM, and 16 GB internal flash memory. It comes with App access for training classes.

The Bike + comes with a 23-inch screen, 4 GB RAM, and 16 GB internal flash memory. Its price starts at $2,495 with financing options available.

Both bike and bike+ come with financing options, free home trial, and app access features.

Peloton Treadmill and Treadmill +

Peloton’s treadmill products are currently available in the US only. Its basic variant comes with a 59-inch running belt. Its price starts from $ 2,495. It comes with a 23-inch touch screen monitor.

The treadmill + comes with a long 67-inch running belt with shock absorption technology. Its price starts from $ 4,295. It comes with a large 32-inch touch screen monitor. Both variants come with flexible financing options.

Source: onepeloton.com

Accessories

Peloton offers complimentary accessories and equipment with bikes and treads. The range includes dumbbells, shoes, bike accessories, treadmill accessories.

Apparels

Peloton also offers sports and fitness training apparel. It comes with a wide range of apparel products for sports and fitness enthusiasts.

Training Classes

Training classes are flagship product that has become a unique selling proposition for Peloton. Customers can subscribe to different classes all in one place. The membership plans can be subscribed for individual or family pass with different pricing.

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Some of the available workouts and training classes include:

  • Meditation
  • Cardio
  • Yoga
  • Stretching
  • Walking
  • Running
  • Strength

The Peloton all-access membership starts at $ 39.0 per month. It comes with access for all family members. Customers can log in with multiple devices simultaneously.

The digital membership starts at $ 12.99 per month. Customers can access from one device only. Digital memberships cannot be accessed from Bike or Treadmill products.

Peloton Business Model

Peloton didn’t introduce the fitness equipment or online training model. But it took the idea of fitness and training to a whole new level by combining the hardware and classes.

Customers can access the training classes from the installed monitors or from any other device while purchasing the hardware. Peloton generates major revenue from sales of its bike and treadmills. However, it has a significant proportion through its membership subscriptions.

Peloton has expanded its services to the UK, Germany, and Canada. Its membership services are also increasing with expansion. The company reported subscription revenue of $ 363.7 million for the fiscal year 2020.

Peloton appeals to fitness enthusiasts in a two-dimensional way. For its quality equipment, and online or recorded training sessions. Members can subscribe to a single or family plan. Customers can enjoy access from literally any device from a smartphone, smart tv, or other devices. You can stream music from a variety of available choices.

How Does Peloton Make Money?

Peloton makes money through its equipment sales mainly. It also makes significant sales through memberships and accessories.

The company reported a sales figure of $ 1,462.2 million from its equipment sales for the fiscal year 2020. It recorded sales of $ 363.7 million from subscriptions. The total revenue figure for the fiscal year stood at $ 1,825.9 million for the fiscal year 2020.

Although the company operates in different countries now, its sales come from the US market mainly. It serves in selected areas of Canada. The treadmills are sold in the US only.

Peloton Unique Selling Proposition

Peloton’s appeal to fitness enthusiasts started with the production of quality bikes and treads. It went a step ahead by offering online training classes with live and recorded sessions. The classes cover a variety of fitness workouts, exercises, training, and indoor/outdoor activities.

Peloton has become one of the leading brands in fitness equipment. Its brand recognition is surely a key selling proposition, despite having a short working history of only 9 years.

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It offers music and content for fitness followers. It prides itself on offering original content with continuous content development efforts. Thus, Peloton combines world-class features of fitness equipment, technology, and media in one place.

A wide range of fitness workout categories and skilled instructors are other key selling points for Peloton. Although currently, its membership sales offer a small proportion of its total revenue, however, the sales have been growing over years.

SWOT Analysis of Peloton

Peloton is a recognized brand in the fitness equipment industry. It has enjoyed a large market share in the US market. It’s growing in popularity in other countries like the UK, Germany, and Canada also.

Let us briefly explore the SWOT analysis for Peloton.

Strengths

Peloton’s key features and strengths are:

  • It has brand recognition with millions of membership users and equipment sales in the US.
  • It offers a unique business model that combines technology, fitness equipment, and media in one place.
  • Its products come with competitive pricing and flexible financing options for US customers.
  • Customers can enjoy multi-device access for family members by listing different accounts for one package.
  • Customers can choose to subscribe to the digital membership only for training classes.
  • It offers quality content for fitness trainees through live and recorded sessions.
  • The company offers an innovative subscription-based model with easy access.

Weaknesses

Like any other successful company, Peloton also comes with some weaknesses in its business model.

  • It serves mainly the US customer base, with a slow expansion to other countries. For instance, it does not fully cover the Canadian market yet.
  • The company has mainly two fitness training products bikes and treadmills with two variants each.
  • Its accessories and apparel range are limited as compared to some of its competitors.
  • Despite being a listed company and a recognized brand, it has incurred losses for several years.

Opportunities

There are obvious growth opportunities for Peloton in several areas.

  • It can expand its innovative equipment range to other products beyond bikes and treads.
  • The company has an opportunity to expand globally with an established history and brand recognition.
  • The company can improve its finances to reduce net losses.
  • The company needs to invest in research and development for continuous improvement as it operates in a highly competitive market.
  • It depends on third-party services for its customers with live streaming and some other key features that can pose substantial competitive risks.

Threats

Like any competitive company, Peloton also faces business threats for its survival and growth.

  • The company relies heavily on the sales of bikes. A decline in sales or a new entrant can pose significant threats to its survival.
  • A new entrant or existing competitor can easily challenge its market position.
  • It depends on the seasonal sales that can be a risk factor.
  • The company relies on many third-party licensing and services such as music content, suppliers, and logistics.
  • Consistent net losses can also pose financial risks for the company.
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