Peloton and other home “smart bike” makers are experiencing a sharp increase in sales as a result of the Covid-19 pandemic. The machines, which allow riders to stream live spinning classes or compete with other users in immersive digital environments, are in sudden demand now that much of America can’t get to the gym.
The temporary bump is much-needed in an industry that has long suffered from intractable obstacles: the core product is an expensive one-time purchase, the number of potential consumers are limited, the market is saturated and competitors are seemingly more interested in exchanging lawsuits than broadening their customer bases.
This month, however, business is booming. “Our sales are up ten-fold,” said Lou Lentine, chief executive of Chattanooga, Tennessee-based Echelon, in an interview last week. “We did more sales in the last three days than we expected to do in a month.” The company, which offers a US$839 entry level home smart bike, is currently working to ramp up production.
Peloton - known for its US$2,245 bike, ill-advised marketing tactics and aggressive litigation strategy - declined to comment on its current sales numbers. But a clue as to how the supply chain of the biggest name in smart home bikes is doing can be gleaned from a warning on its website: expect delivery delays of up to a month.
Unsurprisingly, those who already have smart bikes appear to be riding them more. Echelon app class attendance spiked 40% during the third week of March, and the company has added daily rides just for children (who are also stuck at home).
Analysts, however, aren’t as enthusiastic, and warn that the sales spike may not survive the end of shelter-in-place orders.
"This an outlier,” says Matt Powell, a vice president and sports industry adviser at NPD Group. While the home exercise bike segment grew 6% last year, the overall home fitness industry dropped 2%, he said.
For one thing, the devices can be complicated, even for those accustomed to modern electronics. Depending on which smart bike they purchase, riders often must assemble the product themselves, adjust it to fit their body and connect multiple sensors (like a heart rate strap, for instance) to either a phone, tablet or computer through which classes are streamed.
“At least 50% of our customers call back saying, ‘I can’t figure this out’,” said Brandon Smith, the online sales lead at River City Bikes in Portland, Oregon. “Or they think it’s broken, and they’re just not using right.”
While River City has sold hundreds of home smart bikes and trainers (which allow riders to attach a normal bicycle to a stationary stand and ride indoors) in the past three years, they only made up 5% of its total sales. Sales have spiked in the last few weeks, Smith said.
“It’s important to defend your patents as much as possible.”
At the high end, you don’t need to go to a bike shop. Peloton offers white glove delivery service, assembling its bike in customer homes and walking them through its use. Though given social distancing, the company last week promised a new “contactless method”.
Peloton has also become known for legal fights with foes ranging from rival bike brands (for allegedly offering similar features in their equipment or apps) to the American Association of Music Publishers (which litigated over the company’s choice of music in its streaming classes).
“They want to be category king,” said analyst James Hardiman, managing director at Wedbush Securities. “In the early stages of a company like this, it’s important to defend your patents as much as possible.”
Peloton last month settled a lawsuit with struggling mid-market competitor Flywheel Sports. That company - which began as a New York City spin studio in 2010 - was co-founded by Ruth Zukerman, who had previously co-founded competing studio SoulCycle.
Flywheel initially took off thanks to its in-class technology, tracking and displaying rider power and speed. Its gamification of spin class attracted droves of devotees, but as competitors cropped up, Flywheel foundered.
In an attempt to diversify, the company launched its own home smart bike with on-demand spin classes in 2017, putting it squarely in Peloton’s legal crosshairs. Peloton sued in 2018 for patent infringement of its bike and app experience. Last month, Flywheel settled, agreeing to shut down its class offerings as of March 27. Customers will be allowed to trade in their Flywheel bikes for refurbished Peloton bikes. Flywheel didn’t respond to a request for comment.
Peloton also sued Echelon. The complaint, filed in a Delaware federal court, alleged Echelon mimicked everything from the appearance of its bike to its name, logo and app experience. Echelon denied the allegations, saying it’s preparing to challenge the validity of the patents. “We are confident we will be the prevailing party,” said Lentine.
There’s a reason everyone is suing over the apps and the software. Bikes are one-time purchases that can be shared by multiple users, but monthly app subscriptions provide steady revenue and lock in subscribers. In its most recent earnings report, Peloton projected it would have 920,000 to 930,000 connected fitness subscribers this year, compared with its previous projection of 895,000. Subscribers own a piece of the company’s hardware (like a bike or treadmill) and pay higher subscription fees than customers who pay only for the company’s app and fitness classes alone.
Still, subscription revenue has limits. “If the goal is to keep expanding,” said Simeon Siegel, managing director at BMO Capital Markets, these companies may find the number of people who want the physical product is “less than they might hope”. And raising subscription fees - Peloton offers both a US$39 household subscription and a US$13 personal subscription - may alienate existing customers.
Meanwhile, competitors keep coming. Spin company SoulCycle entered the home bike arena earlier this month. Its US$2,500 bike comes paired with an app full of class offerings from parent company Equinox.
Experienced and professional cyclists are increasingly riding indoors, and companies focused on these serious enthusiasts have recently released home bikes as well.
Both Wahoo Fitness and Tacx (which started making smart trainers years ago) now offer bikes with US$3,000 to US$4,000 price tags. The higher prices are palatable to cyclists who may already own several traditional bikes costing that amount or more. It’s a strong but limited market. “We are definitely seeing more people riding indoors than we would expect at this time of year,” said a Wahoo spokesperson.
While the global pandemic may spur smart bike sales in the near-term, Siegel doesn’t expect that trend to continue. “Anyone who has been on the fence about the bike will probably get one,” he said. “But I wouldn’t expect an acceleration of their demand.” Hardiman disagrees. The new coronavirus, he said, will make working out at home the “new normal”.
Adam Zuckerman, a business consultant in Washington, bought a secondhand Peloton bike a month ago. He and his wife share a US$39 household subscription with two others outside their home, giving the company just under US$10 per month per user.
“We’ve got friends added onto our account,” he said. During their current social distancing stint, both he and his wife aim for shorter classes twice-a-day, around which they schedule their work calls. “I’m sure the longer we’re cooped up inside, the more we’ll ride.”
- Bloomberg
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024
Created by Tan KW | Aug 16, 2024