Peloton's demise is another in a long line of failed fitness fads

The at-home cycling company was riding high during the pandemic. What went wrong?

I think about the Peloton instructors an unusual amount. I not only see them during my workouts but also follow a bunch of them on Instagram, where I try to suss out which ones secretly hate each other based on who is or isn't invited to whose wedding. A friend and I have a text chain that's often just Peloton instructor-isms, which include, "You are the CEO of your body," "I already have my stank face on," and "You are a nasty bitch," which was somehow said in reference to push-ups. The Peloton teachers can be cheesy and weird, but I love them. Given this level of attachment, I've also started to wonder what will become of them if and when Peloton goes kaput.

The connected-fitness company is struggling. Its CEO, who joined the company in February 2022, is already stepping down. It recently announced plans to lay off 400 people, which is about 15% of its workforce. Private-equity sharks are reportedly circling. The stock is near record lows. Peloton isn't going under imminently, but let's be real here: No fitness fad lasts forever. At least culturally, the Peloton graveyard is probably on the horizon, right next to the Tae Bo cemetery and ThighMaster crematorium.

Peloton was a bit of a pandemic Cinderella story. The company launched in 2012 and started shipping bikes in 2014, but for much of its history, it operated as the creator of a product designed for a certain type of well-off fitness nut. Its initial equipment wasn't great, and it had a hard time finding investors. Eventually, it took off. It went public in September 2019 — the same year it did that viral holiday ad with that pained-looking woman who gets a Peloton from who we can assume is her not-so-great husband.

When COVID-19 hit in 2020 and gyms shut down, demand for its products skyrocketed. Customers complained of monthslong wait times to get their bikes and treadmills, and Peloton scrambled to get its supply chain in order. Despite the pain points, times were pretty decent: Peloton booked its first $1 billion in quarterly sales in the last three months of 2020, and its market cap peaked at about $50 billion.

But what goes up often comes down, and in Peloton's case, the comedown was hard. While there was a lot that went wrong, the long and short of it is that Peloton failed to read the room on its pandemic popularity.

"The narrative and hype overshadowed its actual market opportunity," said Rina Raphael, the author of the book "The Gospel of Wellness" and of the newsletter "Well To Do," about the wellness industry. "It's not that Peloton isn't a good business model; it's that it simply isn't a mass product but more of a niche, luxe one," she said.

The pandemic pulled forward a lot of demand, meaning people who would have considered buying Peloton equipment down the road decided to go ahead and pull the trigger in 2020. Much like other pandemic business darlings, Peloton thought the level of demand was a long-term shift, rather than a one-off event, so it invested accordingly. The problem is, by the time the company got its manufacturing and supply chain up to speed, it wasn't necessary.

"Peloton saw their strength in COVID and ran it forward in perpetuity, and that simply is not reality," Simeon Siegel, an analyst at BMO Capital Markets who covers Peloton, said.

Peloton didn't respond to a request for comment for this story.

Beyond cratering demand, the company has faced various headaches in recent years. It has issued multiple recalls of its devices and has been the subject of public-relations debacles. It's slashed staff and outsourced logistics in an attempt to get on steadier financial footing. It now says it's trying to cut $200 million from its annual expenses by mid-2025, but it's unclear whether that will be enough. Investors have soured on the company, and Peloton's once $50 billion market cap has fallen to under $2 billion.

Its troubles don't necessarily mean all is lost. Siegel thinks Peloton is just too focused on growing instead of looking at its user base and squeezing cash out of that.

"The primary focus should be on bear-hugging their brand loyalists, as opposed to trying to find new, money-losing customers," he said. "This is a business that convinces people to pay over $40 a month to get on a piece of equipment in their home. That's an incredibly profitable story, and yet the company loses money."

Peloton's subscriber business on its own isn't the problem — it's everything else. The company has thin margins on hardware, as in selling bikes and treadmills and rowers and whatever else, but it has more robust margins on subscriptions, Paul Golding, an analyst at Macquarie Capital, said. Instead of spending on getting more bikes into people's homes, it could just keep its attention on discouraging people from unsubscribing. But it's not doing that, so other costs are eating into its subscription margins.

"There are other expenses that the business incurs, including marketing expenses, general administrative expenses, and research and development, given that they are a tech platform as well," Golding said. "Over the last few quarters, there's been stagnating expectations of connected-fitness subscribers as well as declines in the more entry-level app. Those economies of scale have not been working in favor of outpacing the cost structure that the company has been left with."

The path ahead is rocky. Peloton has a decent subscriber base, with more than 3 million paid connected subscribers (meaning people who have the device and a subscription) and 675,000 paid app users (they didn't buy equipment and have the app only) at the end of its most recent quarter. But there is churn. It expects its subscriptions to fall in the current quarter, and its paid app use has been on the downslope. When I went to look up Peloton on Google Trends for this story over the past month, "how to cancel peloton subscription" was the second search listed.

Peloton has plenty of direct competitors in the connected-fitness-hardware space, including Echelon and Tonal. It also has to contend with the gym, which has all sorts of classes and fitness equipment that let people mix things up, including, in many cases, Pelotons or other connected-fitness devices.

"If you can get competing content and do it on demand at your gym and just pay the monthly membership fee of the gym and also be able to use a bunch of other things when you're not feeling a spin ride today, then does that change the value proposition for you when you're thinking about whether it makes sense to buy a $2,000-plus piece of equipment?" Golding said.

There are options if you're shy about working out in public and worried about spending cash on expensive gear or any sort of membership.

"Want to work out from home?" Raphael, the wellness author, said. "Then just log on to YouTube for free."

Beyond the issues specific to Peloton, the company faces an age-old reality of fitness: Trends come and go quickly, whether it be Jazzercise, Zumba, CrossFit, Pilates, Cardio Barre, or, well, you get the point. Fitness is a lot like fashion.

America is a capitalist, consumerist nation, and as such, we experience fitness as a capitalist, consumer product. Yes, the science changes somewhat — we didn't really think cardio was for everyone until the '60s and '70s, or really push strength training until the '90s — but the different packages in which it's presented to us change much faster. As Natalia Mehlman Petrzela, a fitness historian, a professor at the New School, and the author of "Fit Nation," put it to me in a 2022 interview, "There is this constant cycle of exercise trends mostly because there's the need to keep creating new products and flashy experiences for people to spend money on."

Fitness companies are good at capitalizing on basic human nature when it comes to exercise. People get bored with their routines and are often eager to switch it up. Fitness requires variety for most people. Hope springs eternal that this workout will finally be the one that gets us in shape and doesn't burn us out. The best fitness advice is to find something you like and stick with it, even if it's just going for a walk. The trouble is, there's no money in that. And regardless, trends just evolve. The spin craze has been on the downswing for a while. High-intensity training isn't entirely out of vogue — some people are getting into whatever Hyrox is — but there's also more emphasis on and interest in gentler, feel-good workouts at the moment.

"It's not uncommon to hear more consumers, especially women, say they're working out for the psychological benefits rather than, say, killer abs or a bikini body," Raphael said. "So you see a share of the market moving towards modalities like yoga or venturing outside."

I personally like my Peloton, and while I don't think I've ever hit a cultlike level of fanaticism, I do some sort of Peloton class most days of the week. But I follow enough people on the app to notice just how many of them have fallen off, and I come across used bikes on Facebook Marketplace regularly. I recognize that, someday, I will move on. Once the bike breaks, I can't imagine I'll get a new one, or maybe the company will cease to exist, and then I will have a bike-sized brick on my hands.

As for the instructors I now care a smidge too much about, I've noticed a lot of them are undertaking other business ventures, whether it be landing sportscasting deals or appearing on "Dancing With the Stars" or just doing more run-of-the-mill influencer stuff. I imagine they see the eventual writing on the wall, too, or at least I hope they do.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.