Impact Lab


Subscribe Now to Our Free Email Newsletter
June 1st, 2018 at 9:47 am

The Cult of Peloton: Reinventing the Fitness Industry, and Becoming a Microcultural Phenomenon

IMG_7131

High-tech cycling platform creates a connected community.

At Peloton, Robin Arzon, vp, fitness programming, says classes are known as ‘shows’ and instructors as ‘talent.’

Until a month ago, I had never taken a spin class. While friends and colleagues made regular pilgrimages to boutique fitness studios like SoulCycle or Flywheel, the allure of sweating buckets and feverishly cycling en masse to the beat of Beyoncé as an all-too enthusiastic instructor shouts encouragement about “feeling the burn, baby!” eluded me.

Mostly, I prefer to exercise alone.

But there I was at Peloton’s New York cycling studio. Inside the windowless room one wall was lined with mirrors while discreetly located cameras trained on the high-octane instructor. We gathered on the sleek, steel, high-tech bicycles arranged in a semi-circle facing him. A Peloton employee helped me clip my shoes into the pedals and explained how to manipulate settings on the bike’s sweatproof touchscreen. Then the overheads dimmed, the spotlights came on and our teacher welcomed us to the studio as scores of riders streamed the class live in their homes.

It was a ’70s (the Clash, Bowie) rock ride—and within minutes my heart was thumping, my muscles were engaged and sweat poured down my face. We increased resistance to the beat of “Who Do You Love,” pedaled hard, used hand weights to do bicep curls and on the instructor’s command alternated our speed. Half an hour later, it was over. I was drenched but elated, awash in the twin senses of achievement and excitement that seasoned Peloton fanatics know so well. I was hooked.

In the exploding “boutique fitness” category, Peloton, an interactive cycling platform, is the latest spin. But make no mistake, Peloton is not just another indoor bike studio. More than SoulCycle 2.0, this is a tech startup that is reinventing the estimated $83 billion global fitness industry. The 6-year-old company’s business model is based on digital content and a growing rider community—1 million at last count (celebs like Michael Phelps and Neil Patrick Harris are fans)—connected through Wi-Fi and social media that does the heavy brand lifting.

IMG_7132

Daily classes can be taken at a studio, beamed on demand at home on a Peloton bike or directly via app to an iPhone or iPad. Sweatproof touchscreens monitor metrics like distance traveled, calories burned, heart rate, resistance and output exerted as measured in watts. A leaderboard allows riders to compete against others.Peloton

Last year, Peloton generated $400 million in sales—more than doubling its revenue in 2016—via its proprietary bikes ($1,995) and subscriptions ($39 a month for unlimited classes, live and archived), as well as its apps, custom shoes and apparel. One of the most talked about startups, Peloton has gone through five funding rounds, most recently tallying $325 million. During its latest round, Noah Wintroub, a Peloton rider and a vice chairman at JPMorgan, who worked on the deal last year, told Business Insider, “Oh my god, these guys are the Apple of fitness.” And, with its recent $1.25 billion valuation, Peloton is now officially a unicorn. In the midst of a growth spurt with new products and executive hires, including new CFO Jill Woodworth, a former JPMorgan managing director, the company appears poised for an IPO.

IL-Header-Communicating-with-the-Future

Peloton is the brainchild of John Foley. A Harvard Business School graduate whose résumé includes stints at the top of Evite.com, Pronto.com and Barnes & Noble, in 2012, Foley—a triathlete and new father—found it surprisingly challenging to schedule a spin class. Either shut out of the classes he wanted or in one, just not with his preferred instructor, he realized there had a to be a better way. “We said, ‘Let’s democratize this. Let’s let everyone who wants into that class get in. You didn’t have to premeditate it.’”

Taking advantage of the popularity of fitness trends like spinning, Foley designed Peloton with a nod to the on-demand, binge habits of consumers, Wi-Fi connectivity and the exploding use of smart devices. “When we were growing up,” he says, “you went to Channel 3 at 10 and it was Magnum P.I. Now media is shifting. It’s your time. Your location. You’re the boss. You get to control how you consume your media.”

Foley put together a team that built a bike prototype and software to allow for livestreaming and on-demand classes, established social media channels, hired instructors, engineers, sales reps and other staff. They also built their own showrooms, contracted with manufacturers and devised product delivery channels—effectively excising middlemen and maximizing potential for profit. In 2014, Peloton sold its first bike for just under $2,000 and opened its first studio in New York, outfitted for 57 riders.

IMG_7133

SoulCycle was founded in 2006 by Elizabeth Cutler, Julie Rice (a former talent manager) and Ruth Zukerman with a single Manhattan studio. The trio revolutionized fitness, offering indoor cycling classes known as “spinning” in candlelit rooms set to high-energy music; a 45-minute class costs $34. Today, there are 89 locations in the U.S. and Canada. Equinox Fitness acquired SoulCycle in 2011, which reportedly netted Cutler and Rice $90 million each.SoulCycle

Today, Peloton has two studios in New York, one for tread, and 33 bike showrooms across the country. They produce 14 hours of live classes beamed out to people across the U.S. and around the world. The bike’s touchscreen allows for riders to track their metrics, but they also contain mics and cameras so that users can communicate with fellow riders. A leaderboard monitors and pushes competition among participants. The Peloton app can be downloaded to stream classes on iPhones or iPads—transforming any stationary bike into the Peloton experience.

“We sell a bike to every state every week,” says Carolyn Tisch Blodgett, Peloton’s svp for brand marketing. She joined the startup two years ago, persuaded by Foley’s pitch about “truly revolutionizing the fitness industry through technology.”

At this juncture, Foley says the emphasis is on scaling the business, fast. “We need to stay out in front and stay ahead in order to take advantage and be the category winner,” he says. (Last year, Flywheel launched its own high-tech cycling platform for $1,699.)

“The name of the game is convergence—across all areas of the industry, of consumer land, the convergence among different elements of the industry,” says Mortimer Singer, CEO of Traub, a business development and strategy consulting firm. “Those who know how to mix media and disciplines—it’s there where the alchemy is made.”

Singer, however, doesn’t think there’s a showdown looming between Peloton and SoulCycle or Flywheel. (Last week, SoulCycle dropped its long delayed plans for an IPO). “Where there’s Coke, there’s Pepsi,” he says. “There’s definitely a culture behind all of them. I think that there will be over time some consolidation in that space. But for the time being there’s a lot of room to grow.”

During the Consumer Electronics Show in January, Peloton unveiled a high-tech treadmill priced at $4,000 (the rollout is scheduled for this fall). Though officials won’t disclose retention rates, they “are unparalleled in any industry,” according to Jessica Kleiman, the company’s vp of global communications.

IMG_7134

Founded in 2010 by SoulCycle co-founder Ruth Zukerman, Flywheel Sports offers both indoor cycling and barre classes in 45 studios in the U.S. and two in Dubai starting at $36 a class. Last year, Flywheel launched its own $1,699 home-cycling platform, FLY Anywhere, with livestreaming classes to compete with Peloton.Flywheel Sports

To help attract new subscribers, Peloton is offering financing options to entice less affluent riders. The company has also created corporate partnerships, introducing commercial-grade bikes at high-end residential buildings and hotels—making Peloton an “everywhere, whenever” proposition. Earlier this month, it announced a global expansion into Canada and the United Kingdom.

“The challenge with fitness classes is they’re inherently inefficient,” says Tim Calkins, author of Defending Your Brand and a marketing professor at Northwestern University’s Kellogg School of Management. “It’s tough to pay an instructor a lot of money if they’re only teaching 30 people at a time. Nor can the instructor commit too much to that class because they have to teach a lot of other classes” to make a living.

By contrast, Peloton has found a way to scale the instructors that “improves the quality of the offerings.” And, Calkins points out, the hefty price tag can be seen as a plus from a bottom-line perspective. “If they can get the treadmill placed at $4,000, then you’ve really locked people in,” he says, adding that though fitness is a saturated market, Peloton “captures both the convenience of at-home exercising and they tap into all the fun and joys of being part of a class and a broader community. That combination is quite unique.”

One of the most intriguing aspects of Peloton is how the company has transformed the experience of a stationary bike into a unique (scalable) customer experience. It starts with the spin. According to Robin Arzon, Peloton’s lead instructor and vp, fitness programming, the company collects a tremendous amount of data on its riders, from heart rate to workout frequency to in-studio attendance, analyzing it on a daily basis to see what length or type of classes repel or attract riders. Peloton is constantly developing new classes based on such intel. It’s what Arzon calls the “little kernels we can deliver in our content that make people more powerful and confident.” That said, the company is keen to assure its members that their data privacy is not at risk. It deploys encryption and firewalls to minimize the threat of possible breach and does not sell user data.

Peloton’s high-octane classes are taught by instructors that the company goes to great lengths to recruit and cultivate. “We refer to our classes as shows and to our instructors as talent,” explains Arzon, “And that is an approach to wellness that has not been done before, certainly not at this high level of tech programming. It’s essential that the person who joins our team can be both entertaining and a brand ambassador as well as a credible instructor. That’s a very small window.”

IMG_7135

A thousand fans came to New York last month for Peloton’s third annual Home Rider Invasion, a three-day gathering of classes, meetups and cocktails.Peloton

Another instructor, Matt Wilpers, a former auditor for KPMG who ran track at Georgia State and deferred medical school to teach at Peloton full-time, is in awe of the scope and reach his classes have. He puts in hours determining what music to use as well as answering riders’ comments and posts on various social media platforms. “I teach a class and there’s 500 to 1,000 in every class. That’s a whole different scale, and it’s all about using technology to increase my reach,” he says.

More than just a fitness brand, Peloton also has become something of a microcultural phenomenon. Many members self-select into subgroups or “tribes” on Facebook (its official page currently has 363,089 members) based on age, height, profession, location, dedication to a particular instructor and any number of other characteristics. They communicate online, arrange to meet at local showrooms and travel cross-country to take a class in the New York studio. They congratulate one another on reaching new riding and personal milestones. They also offer advice and comfort when members are in need.

“I had no idea what ‘loyalty beyond reason’ was until I joined Peloton,” says Brad Olson, svp of member experience who arrived two years ago, leaving Starwood Hotels where he oversaw brand loyalty initiatives. “Members were showing up with the logo tattooed on their body. “There’s something special about Peloton versus a traditional consumer brand because of the endorphins, and the community just makes people feel they’re part of something bigger than themselves.”

Olson recalled the story of a Peloton member who posted on the OPP (Official Peloton Page) about needing to sell his bike to cover his wife’s medical expenses just 30 days after he first bought it. Fellow riders wouldn’t have it. One set up a GoFundMe page that raised $25,000 in 48 hours.

“It blew us away,” he says. “There is a sense of community in some boutique fitness places; you might see the same person at every Sunday night ride, but your relationship begins and ends in those 45 minutes. Building relationships that endure between workouts is what makes Peloton as a brand and as a community so sticky.”

Indeed, the whole ethos of the company is that it is not merely selling a bike, but that taking time for yourself to move and get your heart pumping makes you a better version of yourself. It’s a lifestyle. A celebration. That’s the story Peloton told in a TV spot it ran during the Winter Olympics, and that it continues to tell. Since its release on YouTube in February, the spot has been viewed more than 3 million times.

That emotional connection was evident in early May in a function hall at Chelsea Piers in New York. A thousand people had converged for Peloton’s third annual Home Rider Invasion, or HRI, a three-day gathering that included classes, tours and a lively cocktail party. It was a kind of ComicCon for Peloton riders where they emerge from the virtual space to engage in the flesh and stand in line for Pelotinis (vodka and grapefruit cocktails) and to snap selfies with favorite instructors. (Twelve bike instructors are endowed with near rock-star status—well, indie rock star, anyway—in the Peloton community.)

IMG_7136

Orangetheory Fitness was founded in 2007 in Fort Lauderdale, Fla., and is known for its high-intensity, one-hour, full-body workouts focused on interval training. Participants wear heart monitors; their heart rates are shown on large displays throughout the studios. Co-founder Ellen Latham is a former editor at Women’s Fitness magazine. As of last year, Orangetheory had franchised 728 studios in 45 states and 16 countries, and says it plans to reach 1,300 studios in 17 countries this year.Orangetheory Fitness

According to Foley, HRI and the informal meetings organized by riders have proved crucial to shaping the company. So much of what Peloton does, including software tweaks, new social components, Peloton-branded clothes, takes its lead from its customers.

Peloton doesn’t take its clientele’s affection for granted. It closely monitors complaints and compliments, since growing and strengthening the Peloton community makes good business sense—a strategic buffer against potential competition. “Our community is a moat,” Foley says. So is the brand, the patents and, with 33 showrooms and counting, the retail footprint.

The emergence of this robust community caught Foley off guard, he concedes, though the conscious inclusion of engagement features like a leaderboard and rider video chat at the outset certainly laid the groundwork for it.

“What has surprised us is how much they loved that and how much that motivates people and has driven them to share their experiences,” he says. Foley believes engaged customers and organic sharing will help recruit more members.

Remember Jane Fonda’s aerobics videos? How about rollerblading? Tae Bo or some other other fitness craze? What’s to stop Peloton from burning brightly, then out? How can Foley and his team make sure they’re not eclipsed by the competition?

Peloton is nimble, Foley says, and brushes off concerns that it might fade into the annals of fitness trends. “We talk about the ’80s, there were sitcoms,” he says. “Today there are still sitcoms but the sensibility and the content are dramatically different. In that same way, Peloton media is going to evolve. The classes we stream five years from now could be extremely different from the classes we stream today. But biking as a form of exercise is, I think, fad-proof.”

Via Adweek

IL-Header-Communicating-with-the-Future

Comments are closed.

22 predictions square