Peloton has announced a new one-time “used equipment activation fee” for buyers of its pre-owned exercise machines in the United States and Canada. This move aims to maintain the company’s revenue stream and ensure new users have access to the high-quality onboarding experience Peloton is known for. This fee applies exclusively to purchases made through secondary markets not associated with Peloton’s official channels or third-party partners.
Previously, Peloton has faced various challenges in its business model, including fluctuating subscription numbers and market competition. The company has made efforts to stabilize its financial performance through partnerships and enhanced customer experiences. This new fee for pre-owned equipment buyers appears to be another strategy to secure consistent revenue and customer satisfaction. In the past, Peloton relied heavily on direct sales and subscriptions from new equipment purchases, which created a more predictable revenue stream.
The new activation fee will be $95 in the U.S. and $125 CAD in Canada. Peloton will offer buyers of pre-owned equipment additional perks, such as deals on accessories and a virtual custom fitting to optimize their first ride. According to the company, the activation fee will help ensure new members receive the same high-quality onboarding experience as direct purchasers.
Secondary Market Significance
Peloton identified the secondary market as an essential source of paid connected fitness subscribers.
“The secondary market is an important source of subscribers for us and continues to deliver a steady stream of paid connected fitness subscribers, which were up 16% year over year in Q4,” Interim Co-CEO Chris Bruzzo said.
The activation fee is also expected to add incremental revenue and gross profit, allowing Peloton to reinvest in improving the fitness experience for its members.
Subscriber Trends and Performance
Peloton reported that subscribers who purchase pre-owned equipment exhibit lower net churn rates compared to those who rent machines. At the end of the fourth quarter, Peloton had 2.997 million paid connected fitness subscriptions and 828,000 paid app subscriptions. In total, the platform’s membership reached 6.5 million.
“We’ll continue to lean into this important channel and find additional ways to improve the new member experience,” Bruzzo added.
Peloton’s extensive range of exercise machines, including bikes, treadmills, and rowing machines, plays a crucial role in retaining and expanding its subscriber base.
Peloton’s latest move to implement an activation fee for used equipment reflects the company’s strategy to maintain a steady revenue stream while ensuring a consistent onboarding experience for new members. This fee also addresses the importance of the secondary market in Peloton’s growth strategy, contributing to higher subscription rates and lower churn. The company’s focus on enhancing the customer experience, combined with its diverse range of exercise machines, positions Peloton to continue its growth trajectory in the competitive fitness industry.
