Peloton has announced a new $95 “used equipment activation fee” for secondhand bikes purchased outside of its official channels in the US and Canada. This one-time fee will apply to customers who buy a used bike from sources other than Peloton or its authorized distribution partners. However, those purchasing directly from Peloton or its third-party partners will be exempt from this charge.
During Peloton’s fiscal Q4 2024 earnings call, interim CEO Christopher Bruzzo explained that the activation fee would generate additional revenue and gross profit, supporting the company’s ongoing investments in enhancing the fitness experience for its members. Peloton also emphasized in a letter to shareholders that the fee is intended to ensure that customers who purchase used bikes receive a consistent and high-quality onboarding experience.
Although Peloton doesn’t earn revenue directly from secondhand sales, it benefits significantly from subscriptions purchased by users of secondhand equipment. In its Q4 2024 shareholder letter, Peloton reported a 16 percent year-over-year increase in paid connected fitness subscribers, driven in part by secondhand bike sales. Additionally, the company noted that customers who buy used bikes exhibit lower churn rates than those who rent Peloton hardware.
Despite these positive trends in subscription revenue, Peloton has faced declining hardware sales and a significant drop in valuation since its peak during the COVID-19 pandemic. The company’s Q4 2024 earnings report revealed a 4 percent year-over-year decline in hardware sales, while subscription revenue grew by 2.3 percent. Peloton achieved modest overall revenue growth of 0.2 percent year-over-year, but still reported a net loss of $30.5 million, an improvement from the previous year’s loss of $241.8 million.
The introduction of the activation fee reflects Peloton’s efforts to bolster revenue amid ongoing financial challenges. However, the fee may deter potential buyers in the used market, which has historically provided more affordable access to Peloton products. Critics argue that this move could undermine the savings associated with purchasing secondhand equipment, making Peloton’s offerings less accessible to cost-conscious consumers.
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