Why is Peloton Struggling?
Health
Yesterday, the financial news was awash with the departure of Barry McCartney, the CEO of Peloton and additional staff cuts of 400 positions from those who survived the first round of layoffs. I heard speculation that some shareholders and industry insiders thought Mr. McCartney did something wrong and that may prove correct in the long pull but my opinion is that although he was making the right moves, he just did not make those moves hard enough.
What should he have done? More on that in a moment…
This month, I begin my 38th year in the fitness industry. I have been fortunate to work for both large fitness companies- NordicTrack in the 1990’s before the original company filed for bankruptcy and a small manufacturer- Spirit Fitness before it was sold to a much larger company, Dyaco of Taiwan.
By 1998, I was inspired to start my own company and we have held a unique position in the fitness industry since. Starting as a simple fitness equipment repair company, Treadmill Doctor morphed into an internet-based business that has been a consistent critic of the machinery the various factories build.
More importantly though, I have had the benefit to see the inside of most of the major players in the fitness industry, visiting factories all over the USA, Canada, China, and Taiwan. I have also had the opportunity to see market cycles come and go, all while the fitness industry has grown consistently over decades.
Peloton had a crucial defect from the beginning and that remains to this day…the value of Peloton is not in the equipment they provide, it is in the interface that keeps the exerciser distracted from the absolute, abysmal boredom of exercising on a machine.
When Barry McCartney sold off their Ohio factory, unloaded the Taiwan factory, and put their Precor division up for sale, he simply did not go far enough. From his time at other companies Barry understood IP. He knew that moving to a focus on the IP side of things was the way to go, he just did not realize that the only way Peloton would survive long term would be by shedding all other distractions.
Bikes should go. Treadmills should go. Precor should go. They dabble in other, less important areas but if it is not directly involved in supporting their core IP and USP, it should go!
You might ask, what would they sell? Good question and although it couldn’t happen overnight, the transition to be a simple, dominant player in all fitness equipment should have been the goal. Just like Google and Apple have been battling for years, Peloton on board every piece of fitness equipment sold should have been the goal. Just like Apple Car Play and Android Auto have become a must for automakers to sell their cars, Peloton should have been positioned from the start as a “must have” for the equipment manufacturers to make an integral part of their equipment.
Instead of having 3 million subscribers today, they could have been a fixture on every machine that sells from $150 to $15,000. Just on the consumer side, over 1.5 million treadmills are sold a year and that does not count bikes, ellipticals, and other equipment like rowers. Imagine if Peloton could have been installed on tens of millions of machines by this point!
This strategy would have allowed Peloton to focus upon being the best at producing interactive workouts and developing and solidifying their position as “the community” of the fitness industry.
Instead, they lost focus upon what made Peloton unique and then had to compete with every other equipment maker, which had become commoditized a long time ago. Focusing upon equipment destroyed their ability to grow their subscription base, which is, by far, the most valuable portion of the company.