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Peloton, Connected Fitness Companies Chart New Course And Face New Problems

It has been a good year for connected fitness company Peloton. For Q3 it saw sales grow by 232 percent to $757.9 million from $228 million a year ago. Analysts had been forecasting sales revenue of $748.1 million.

That massive bump was driven by fitness-oriented consumers who have increasingly turned to connected bikes and treadmills to rebuild their exercise routines at home in a world where going to the gym feels a bit like a risk to one’s health.

It’s growth Peloton has been reporting throughout 2020 as the pandemic has raged on, and it is a trend the firm is forecasting to continue. It is officially expecting holiday 2020 to mark its first ever billion-dollar quarter for sales. Good news to be sure, but it’s perhaps a little bit more good news that Peloton can handle. The year has also been marked by soaring sales and difficulty with scale. Delays have plagued consumer orders — delays that will continue to constrain the supply chain for the “foreseeable future,” according to Peloton.

“As we rapidly scale our organization to meet the extraordinary demand for our products, we realize that some of our members have faced extended delays associated with receiving our products or having support requests fulfilled,” CEO John Foley said in a letter to shareholders.

And that extraordinary demand for Peloton has been mirrored by extraordinary demand for a host of connected fitness products from it and other companies. The market is now flooded with smart bikes, smart mirrors, smart rowing machines and treadmills. Individual variations vary, but the emerging class of connected fitness tech generally comes with an embedded screen that allows users to take part in virtual exercise classes with other enthusiasts and upload their fitness data to mark their progress over time.

It’s a segment that once looked like a niche offshoot in the gym-dominated fitness market — but since the outbreak of COVID-19 has become an increasingly attractive segment for startups, investors and even established players drawn to a rapidly growing market.

In July Lululemon announced its intention to purchase connected fitness firm MIRROR for $500 million. MIRROR’s particular specialty was interactive fitness classes proffered via its connected tech — a device that, when turned off, looks like a normal mirror. But when turned on, users can see their reflection and other class participants while working out.

“The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities,” Lululemon CEO Calvin McDonald said in the announcement.

And the consumers’ rapid transition to home-based fitness experiences bolstered by connective tech that virtualizes the group part of the experience is changing more than just the front end of the industry. The supply chain behind the industry is now “doing summersaults,” according to Eric Goldapske, senior director of operations at Horizon Fitness. At an industry event, he said exercise equipment suppliers like himself have had to quickly shift from mostly serving public gyms to serving individual consumers.

“We’re in the process of opening additional warehouses to allow us to have the flexibility to have those products available to the consumer and we’re actually increasing our inventory,” Goldapske said. “The plan longer term is to carry larger amounts of stock for situations just like this.”

Michael Campese, senior vice president of sales and marketing for Estes Forwarding Worldwide (EFW), said his company is responding to big changes in its consumer base due to the pandemic, Freightwaves reports. “It forces us to rationalize our asset network and look at where we have those warehouses,” he said. “We’re getting a lot of pressure from our customers to provide more warehousing capacity.”

And in fact, Peloton’s most recent earnings report focused on the firm’s new need to expand its manufacturing capability and warehousing facilities to meet demand as the holiday season continues to heat up, which has meant delivery delays have been an issue and will likely persist through the end of the year.

The question that remains as Peloton is planning for a big finish for 2020 is what will happen to gyms nationwide as consumers are becoming more invested in working out at home — and apparently enjoying the experience as the low churn rates are very much indicating. We already know that the early reopening period has been a rocky road for gyms so far — a road that will likely only be made rockier as the second wave continues and consumers remain concerned about their own health and the health of those around them.

The pandemic will of course be over someday, but will consumers go back to the gym? Or will Peloton and other connected tech habits they are building now become their new normal when it comes to fitness pursuits?

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