Last week PYMNTS reported that Peloton is preparing for a rebranding effort as it expands its knowledge of its customer base and their workout preferences. The company’s executives have suggested that this rebranding may not involve hardware modifications, but instead focus on revamping the app and introducing fresh subscription choices.
This week, we’re hearing the fitness company is addressing a potential safety concern with its original bike model, leading to another filing with the Securities and Exchange Commission.
Here’s an update on how the fitness hardware brands that prospered during the pandemic are faring today.
Last month, reports surfaced that even athletic apparel brand Lululemon was considering selling its hardware division, formerly known as Mirror but rebranded as Lululemon Studio, which it had acquired during the peak of the pandemic.
When the acquisition took place in July 2020, it was viewed as a departure from the typical approach to mergers and acquisitions, which often prioritize scale and market share growth in retail deals. However, such “scope” deals were identified as a new trend in the M&A landscape.
Although both companies maintained their traditional business models of selling products, this acquisition represented a significant change for Lululemon, as the retailer shifted towards prioritizing experiences over products. This marked a paradigm shift for the company, which had previously prioritized the product over experiences.
Like other fitness-hardware companies, the two brands have faced challenges in sustaining momentum, particularly as consumers gravitate towards in-person experiences, such as returning to the gym.
Now Lululemon is considering the possibility of selling Mirror due to its underperforming hardware sales, which fell short of the company’s projections. Consequently, Lululemon incurred impairment charges totaling $443 million for the business in the fourth quarter.
See also: Lululemon Reportedly Seeks to Sell Mirror Hardware Division
While Mirror and Lululemon are grappling with business challenges, Tonal, a fitness technology company based in San Francisco and recognized for its stylish wall-mounted strength training machines, is restructuring its leadership team as it maps out its next phase of expansion with new funding.
In early April, it was announced that Aly Orady, the company’s founder, has resigned as CEO and will assume the position of chief technology officer. Krystal Zell, who previously held the role of Tonal’s chief operating officer, will take over as CEO in Orady’s place.
Alongside Zell’s appointment, the company has also disclosed the conclusion of its latest funding round, in which it secured $130 million in fresh capital from current investors, such as Cobalt, Dragoneer, Kindred Ventures, L Catterton, and THVC.
The funding announcement comes after the company’s previous funding round in 2021, which raised $250 million and increased its total funding to over $450 million. The business was valued at $1.6 billion at that time.
Earlier this month, Peloton revealed that the company would be reimagining its fitness app and its subscription tier offerings. In its fiscal Q3 2023 earnings report on Thursday, May 4, Peloton’s CEO, Barry McCarthy, stated in a shareholder letter that the company would be launching a rebranded version later this month to better convey the brand’s value proposition.
Additionally, Peloton is expected to reintroduce its app with a multitiered membership structure, which will serve as a mobile access point for its exceptional fitness content, including strength training, meditation, and outdoor running.
“Our goal in relaunching the app is to engage new categories of customers, drive top-of-the-funnel awareness for Peloton, and become a meaningful contributor of revenue for our business,” he added.
See also: Peloton Readies for Rebrand and App Relaunch as Fitness Gear Treads New Channels
During the Q&A session with analysts, McCarthy said Peloton is known primarily as a bike company, but the behavior of its members extends well beyond cycling into various categories of exercise, and a significant portion of them do not use hardware at all. He acknowledged that the company has not effectively communicated this to potential members, and they are actively seeking to improve on that.
Peloton’s Chief Financial Officer Liz Coddington also stated that the company’s main focus is to grow its subscribers efficiently. Although the company expects to target a lower lifetime value to customer acquisition cost ratio in Q4 than in Q3, it plans to maintain financial discipline and not overspend on media or cutting prices to acquire unprofitable subscribers. However, she did not provide many details about the upcoming rebranding.
Furthermore, no details given about the new subscription tiers and pricing, and it is unclear how an open ecosystem will affect Peloton’s connected fitness equipment business.
Coddington explained that the new subscription tiers will have different content experiences at different price points. Peloton’s current offering is all-access, which includes all content on their hardware and app. The company aims to protect the all-access membership.
The future of fitness hardware appears to be in flux, with companies like Peloton, Lululemon, and Tonal facing their own unique challenges. These developments suggest that companies in the fitness hardware industry are seeking to adapt and evolve to meet changing consumer demands.
One potential trend that may emerge is a greater emphasis on mobile access to fitness content. As Peloton and other companies expand their app offerings and subscription tiers, users may be able to access high-quality fitness content from anywhere, without necessarily needing specialized hardware.
At the same time, hardware companies may need to find ways to differentiate themselves and offer unique value propositions to consumers. This could involve integrating new technologies such as virtual and augmented reality (AR) or creating more personalized and customizable workout experiences — perhaps leaning into their fitness instructors as influencers as more and more consumers are gravitating towards specialized influencers.
See also: How Brands Are Collaborating With Experts, Influencers and Nonprofits to Connect With Consumers
Is Peloton’s lean into subscriptions the right move? If so, how do they compare to health and fitness companies that have reported an 11% drop in revenue due to payment failures?
And for brands like Lululemon, is the return to core strengths — a shift we’ve seen many retailers take recently, the right play?
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