Peloton It said Thursday it will start charging new subscribers $95 if they buy the hardware on the secondary market as more consumers buy lightly used devices at a fraction of typical retail prices. a one-time activation fee.
The used device activation fee for U.S. and Canadian subscribers comes as Peloton begins to see a significant increase in new members buying used bikes or pedals from peer-to-peer marketplaces like Facebook Marketplace.
Peloton said it saw “a steady stream of paying connected fitness users” purchasing hardware on the secondary market during its fiscal fourth quarter ended June 30. The company said the segment is growing 16% year over year.
“We believe that a significant portion of these subscribers are incremental and that their net churn rate is lower than that of leased subscribers,” the company said in a letter to shareholders.
Interim co-CEO Christopher Bruzzo later added on a call with analysts: “It’s also worth emphasizing that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our efforts to improve our membership. Investment in fitness experience.
While many Peloton subscribers are avid users of home exercise machines, some liken them to glorified clothes hangers because many people have stopped using the devices. These people initially paid Peloton for the hardware, but importantly, many of them have canceled their monthly subscriptions, which is how Peloton makes most of its revenue.
Being able to attract new, budget-minded members from the secondary market who are willing to pay a monthly fee is a unique opportunity for Peloton to grow revenue without any upfront costs beyond raw sales revenue.
Ari Kimmelfeld’s startup Trade My Stuff (formerly Trade My Spin) sells used Peloton equipment.
He told CNBC that he had previously met with Peloton executives to discuss cooperation, because every time he sells used equipment, it could bring more than $500 in new revenue to Peloton annually. Add in new used equipment activation fees, and that number can increase to over $600 in the first year.
“We saved our customers over $95,” Kimmelfield told CNBC on Thursday after the new activation fee was announced. “I don’t think it’s going to stop or slow down people from buying secondary equipment… because you can get a bike faster and cheaper on the secondary market, even if it’s $95, let’s call it a tax, From Peloton.
Trade My Stuff The first-generation bike is priced at $499, while the new bike is priced at $1,445. The Bike+ is priced at $1,199, while the new model is $2,495. It also sells used shoes for $1,999, while new shoes are $2,995.
Since starting the business, Kimmelfeld has worked with people looking to sell used Peloton equipment and has sold “thousands” of the bikes. The company offers same-day or next-day delivery in 14 cities across the country, including Los Angeles, Denver and New York. Outside these areas, it will offer delivery within three to five days. By comparison, buying a new Peloton may take longer to deliver.
The company said the used equipment activation fee is designed to ensure new members “get the same high-quality membership experience that Peloton is known for.” Bruzzo said people who buy used bikes or Bike+ can get virtual custom fittings before their first ride, as well as a history summary showing how many rides those bikes had before being resold.
“We also offer these new members discounts on accessories such as cycling shoes, cycling mats and spare parts,” Bruzzo said. “We will continue to leverage this important pipeline and look for additional ways to improve the new member experience, such as providing early education about the broad range of fitness modalities we offer and the many series and programs our coaches offer new members.”
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