Peloton has struck a partnership with Amazon in a bid to expand its customer base and regain investor confidence as revenue growth slows since the height of the pandemic and its stock price falls.
In its first foray outside its core direct-to-consumer business, Peloton will, starting Wednesday, sell a selection of its connected fitness equipment and accessories on Amazon’s US website
This will include his original bike, which retails for $1,445. He will also sell his strength product known as the Peloton Guide, which costs $295. Excluded from the tie-in are the more expensive Bike+ and Tread treadmills.
Peloton shares rallied to end the day up more than 20%.
Peloton Chief Commercial Officer Kevin Cornills said there are already about half a million Amazon searches each month for Peloton products, based on research by a third-party consultancy, despite the lack of a presence on the site before Wednesday.
“Post-Covid, the retail environment – online and in-store – continues to evolve and that’s something we’re trying to understand better to make sure the Peloton of the future is properly calibrated for it,” said Cornills in a telephone conversation interview.
“We want to make it as easy as possible to get Peloton,” he added.
This will mark Peloton’s first partnership with another retailer to sell its merchandise. Until now, the company has relied on its website and physical showrooms, selling directly to consumers. But under CEO Barry McCarthy, who took over in February, Peloton is committed to expanding its global reach and reducing customer acquisition costs to return the business to profitability.
Peloton began an $800 million restructuring plan when company founder John Foley stepped down as CEO in February as costs spiraled and losses mounted. Since then, it has been testing a subscription model for its equipment as another way to increase sales. Peloton also exited all of its in-house manufacturing to streamline its supply chain.
Earlier this month, the company announced additional cost-cutting measures, including more layoffs, store closures, price hikes and an exit from the last-mile delivery business.
Peloton’s stock price was down about 62% year-to-date as of Wednesday’s market close. Its market capitalization has fallen to around $3.7 billion from as much as $50 billion at the start of 2021.
The move to Amazon signals that McCarthy, a former Netflix and Spotify employee, isn’t afraid to take risks to get his business back on a stronger footing. McCarthy also said Peloton’s goal is to one day have 100 million members, a goal Foley set for 2020. Peloton ended its most recent quarter with about 7 million members.
Testing the waters
In addition to the bike and guide, Peloton will sell a selection of accessories on Amazon, including its branded cycling shoes, bike mat, weights, yoga blocks, water bottle and heart rate monitor. Shoppers will also see an assortment of her signature apparel, including sports bras, leggings, shorts, tank tops, hats and sweatpants.
“It’s a really good start for us, with a digital retailer, to test the waters,” explained Cornills.
Over time, Peloton may adjust its Amazon assortment as it learns what people are looking for, he said. It’s also possible Peloton will look to other retailers for similar deals to expand its reach, he added.
It could also make sense for Amazon and Peloton to consider making the fitness company’s live and on-demand workout content another perk for paying Amazon Prime customers. Cornills did not confirm whether this was possible.
Analysts speculate that Peloton is considering ways to expand its content distribution under McCarthy, the content and subscription guru.
Buyers who purchase the Peloton Bike from Amazon’s site will be able to choose a self-assembly option instead of scheduling time with a professional to assemble it. The expert installation option will be available for people who would prefer it.
Cornills said it will be a rewarding experience for the company to see what customers prefer and how they respond to the self-assembly option. It’s not something Peloton has offered before, but it’s another way the company can cut costs.
Peloton’s support team will manage ongoing customer service requests related to repairs, support requests, subscriptions and general inquiries, according to the company, while Amazon’s customer service team will provide support for product purchases, shipping, installation and return.
“Physical retail will always be an important part of our strategy,” Cornills said. “It’s more a reflection of us trying to deal with the consumer.”
Peloton is set to report its fiscal fourth quarter results before the market opens on Thursday. Analysts expected the company to post a loss of 72 cents a share on revenue of $718.19 million, according to the Refinitiv consensus.