Peloton, the popular home workout equipment company, has announced that it will start charging a one-time activation fee of $95 for new subscribers who purchased their hardware on the secondary market. This decision comes as Peloton has observed a significant increase in new members who have bought used Bikes or Treads from platforms like Facebook Marketplace. During its fiscal fourth quarter, Peloton reported a 16% year-over-year growth in this segment of subscribers.
Peloton believes that many of these new subscribers are incremental and have lower net churn rates compared to rental subscribers. The company sees this as an opportunity to generate additional revenue and gross profit, which will support its efforts to enhance the fitness experience for its members. The activation fee will contribute to the company’s investment in improving its offerings.
While some people have criticized Peloton equipment for becoming glorified clothes racks due to lack of use, the company sees the influx of budget-conscious members from the secondary market as a unique revenue growth opportunity. Peloton can earn revenue from monthly subscriptions without any upfront cost, in addition to the revenue generated from the original sale.
Ari Kimmelfeld, the founder of Trade My Stuff, a company that sells used Peloton equipment, estimates that there are approximately one million unused Peloton Bikes globally that could be a potential source of revenue for Peloton. Kimmelfeld believes that every used piece of equipment sold could lead to over $500 in new revenue per year for Peloton. With the new activation fee, this number could potentially exceed $600 for the first year.
Trade My Stuff offers significant discounts on used Peloton equipment compared to buying new. For example, a first-generation Bike is priced at $499, compared to $1,445 for a new one. The company also provides same-day or next-day delivery in select cities, making it a faster and cheaper option for buyers.
The purpose of the activation fee is to ensure that new members who purchase used equipment receive the same high-quality onboarding experience that Peloton is known for. Peloton offers virtual custom fitting and a history summary of the equipment’s usage before it was resold. The company also provides discounts on accessories such as bike shoes, mats, and spare parts to new members.
Overall, Peloton sees the increase in new subscribers who purchase used equipment as an opportunity for growth and additional revenue. By charging an activation fee and providing a seamless onboarding experience, Peloton aims to attract more budget-conscious customers and enhance their fitness journey.
