Earlier this month, Peloton quietly removed the original Bike from their rental program. Though they did not make any announcements or provide any insights into the decision at the time, their latest earnings call shed light on the business dynamics that led to this shift.
At the core of the decision lies the challenge of maintaining profitability with the original Bike rentals, especially as Peloton’s inventory of refurbished bikes has dwindled.
Interim Co-CEO Karen Boone explained that for the original Bike rental program to be financially sustainable, the company relied heavily on renting out refurbished inventory. With fewer refurbished bikes available, Peloton found it challenging to support the rental program using new inventory, as the economics simply did not add up. Boone explained:
“We’ve shared previously that the ability to use refurbished inventory is key to achieving sustainable unit economics for our original bike rental offering in the U.S. and Canada. As our refurbished inventory levels have come down, we no longer have sufficient inventory to support the original bike rental program, so we ceased this offering as of August 1.”
This decision has led Peloton to focus on other avenues to attract cost-conscious consumers, such as the Bike+ rental program, refurbished bike sales, and financing options for new bikes. According to Boone, these alternatives present stronger economics, as they offer more cash paid upfront and demonstrate stronger retention.
In a separate call with investors later on, Peloton’s Chief Financial Officer (CFO) Liz Coddington expanded on this. There, she said that Peloton essentially only has enough refurbished original inventory now to support either the rental program or the refurbished program. Peloton made the decision to use that refurbished inventory to focus on sales, instead of rentals, as that is a more profitable avenue for the company.
While the original Bike is no longer available via the rental program, Peloton remains optimistic about other offerings. The Bike+ rental program, in particular, has continued to perform well, driven by both refurbished and new inventory. Boone shared that the Bike+ program is financially sustainable even when using new devices, making it a key component of Peloton’s rental strategy moving forward.
In fact, early results from the United Kingdom’s rental program – which launched this past May with only the Bike+ – have exceeded expectations. Peloton reported that the rental program has driven incremental subscribers, improved retention, and reduced churn.
Beyond rentals, Peloton has also seen increased demand for refurbished original Bike sales and financing offers for new bikes, both of which cater to consumers seeking more affordable entry points into the Peloton community.
During the earnings call, an analyst raised the question of whether Peloton might toggle the original Bike rental program on and off depending on the availability of refurbished inventory. CFO Liz Coddington clarified that while the company has no plans to revive the original Bike rental program in the near future, it remains a possibility. According to Coddington:
“Our return rates are still quite low. And the way that we replenish the inventory for our refurbished program is primarily through people who return their bikes through the 30-day home trial. And since that’s so low, we don’t expect to have a huge amount of inventory.
So our plan for now is to just use that to supply the refurbished original bike program and then not to return to rental. But we may, at some point, decide to change our minds on that, but that’s where we are for now. We do still plan to keep the Bike+ program for rental in place. The economics work quite well for us there, both with refurbished and new inventory.”
This does potentially leave the door open for future adjustments and the addition of the original Bike back into the rental program. For now, however, Peloton is clearly focused on the Bike+ as the best rental opportunity.
You can read a full overview regarding Peloton’s Q4 2024 earnings via our recent article, and catch up on any news you may have missed, such as the imminent announcement of a new CEO and the potential evolution of hardware and subscription pricing.
Support the site! Enjoy the news & guides we provide? Help us keep bringing you the news. Pelo Buddy is completely free, but you can help support the site with a one-time or monthly donation that will go to our writers, editors, and more. Find out more details here.
Get Our Newsletter Want to be sure to never miss any Peloton news? Sign up for our newsletter and get all the latest Peloton updates & Peloton rumors sent directly to your inbox.
Leave a Reply