Peloton Interactive (PTON 9.89%) just released its latest piece of connected fitness hardware, and it looks as though the equipment maker is stumbling yet again.
The new strength training Guide is a camera that connects to your TV to allow users to see themselves follow along with a fitness instructor and better compare their form, while their movements and progress are tracked by a machine learning-powered feature.
Previously Peloton lowered prices on its connected treadmill and stationary bike to try to break the perception that its equipment was just luxury items, and at just under $300, the Guide marks yet another attempt to attract consumers with a low-cost device. Yet even this is a misstep, one of several Peloton has made in recent months.
A new, lower-cost workout option
Peloton announced the Guide last November as a device that "demystifies strength training to create a more engaging experience that will help Members stay motivated."
As part of the package, the kit was supposed to come with Peloton's new heart rate monitor. This wireless band would allow users to see how much time they spend in a specific heart rate zone to maximize their workout, which would also work seamlessly across all of Peloton's product platforms. It would also include a workout mat, and the entire bundle would cost $400.
However, when the Guide was unveiled, the band and the mat were missing, which is why the device is cheaper now. But it still represents a high-cost option compared to the competition, and now lacks a component that was touted as a key part of the package. While the monitor is available for purchase separately for $90, as is the mat ($75), a Guide purchaser will still need to purchase a subscription to Peloton's workout classes for $13 a month if they're not already members.
Funneling consumers to its real profit center
Connected fitness classes are Peloton's profit center. Where gross margins on its Bike and Tread are 6.4%, subscription contribution margins are 71%, and are expected to remain in that range because of the relatively low overhead costs associated with them.
It seems clear Peloton developed the Guide as a means of attracting consumers who recoil at the thought of a stationary bike starting at just under $1,500, but might sign up for one if a cheap device were available.
Certainly spending $1,000 less on a Guide might be more enticing, but similar products like the Tempo Move are available for $500, and also come with a set of weights. You can cobble together a package from Peloton that also includes dumbbells, but it starts at $545.
The question becomes whether consumers are willing to be tied into the Peloton ecosystem for the cost of a fancy, though pricey, smart camera. It doesn't seem likely.
A tough sell
Ever since the economy reopened, Peloton sales growth has plummeted, and the Guide doesn't seem like it will reignite that growth. The connected fitness guru is still expanding, mind you, but at an anemic 6.5% rate, far below the triple-digit rates investors had grown accustomed to, especially during the pandemic.
The latest attempt to jolt sales is admirable, but falls short. Peloton Interactive at least realizes it needs cheaper products if it wants to fight back against gyms and fitness centers to keep growing, but seeing yourself on TV working alongside an instructor, however helpful, is a lot to ask consumers to plunk down three C-notes for.
Coupled with the recent decision to essentially put Bike sales on a monthly subscription plan indicates Peloton is continuing to see market penetration fall, and it is grasping at any straw to lower the cost of ownership. What it really needs is a true low-cost fitness machine, and that just doesn't appear to be in Peloton's immediate future.