Peloton is implementing a new fee for buyers of used exercise machines, according to a shareholder letter released for the fourth fiscal quarter of 2024. The fitness company will now charge a one-time “used equipment activation fee” for purchases of pre-owned Peloton machines in the United States and Canada.
For U.S. buyers, the activation fee will be $95, while Canadian buyers will pay $125 CAD. This fee applies to used Peloton machines purchased through channels not owned by Peloton or its third-party distribution partners. In exchange for this fee, customers will receive various perks, including discounts on Peloton accessories such as shoes, mats, and replacement parts. Additionally, purchasers of a used Peloton Bike or Bike+ will benefit from a “virtual custom fitting.”
Peloton explained the rationale behind the fee in the shareholder letter. “Although these secondary market sales are not from Peloton-owned channels or any of our third-party distribution partners, we want to ensure these new members receive the same high-quality onboarding experience Peloton is known for,” the company stated.
The introduction of this activation fee highlights Peloton’s recognition of the secondary market’s role in its growth strategy. The company has seen a 16% increase in subscriber numbers in the fourth quarter, and it notes that the churn rate for buyers of pre-owned equipment is lower compared to subscribers who rent machines. By implementing the activation fee, Peloton aims to capture some of the revenue lost from secondary market sales and to support its continued investment in enhancing the fitness experience for its members.
“It’s also worth highlighting that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our investments in improving the fitness experience for our members,” Interim Co-CEO Chris Bruzzo told FOX Business.
The move comes amid broader changes at Peloton. In May, then-current CEO Barry McCarthy announced his departure from the company. Alongside this leadership shift, Peloton revealed plans to cut its workforce by 15%, impacting nearly 400 jobs worldwide.
Despite these challenges, Peloton’s subscriber base remains robust. As of the end of the fourth quarter, the company had nearly 3 million customers with a connected fitness subscription and 828,000 paid app subscribers. The total member base for the quarter stood at 6.5 million.
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Peloton’s decision to charge an activation fee for used equipment reflects its strategy to integrate secondary market sales into its business model while maintaining a high level of service for new customers. The fee not only provides a revenue stream but also aligns with the company’s goal of delivering a consistent and premium experience across all channels.
