Peloton CEO: Sales increased after we raised prices to $2,245 per bike
Peloton, which filed confidentially for an initial public offering on Wednesday, might not have gained a cult following had it not raised the price of its in-home exercise bike to $2,245 early on.
“It was interesting psychology that we teased out,” Peloton CEO John Foley recalled in an interview last year with Yahoo Finance. “In the very, very early days, we charged $1,200 for the Peloton bike for the first couple of months. And what turned out happening is we heard from customers that the bike must be poorly built if you’re charging $1,200 for it. We charged $2,000 dollars for it, and sales increased, because people said, ‘Oh, it must be a quality bike.’”
Foley is ready to take Peloton to the next level, this time, as a publicly-traded company. Peloton on Wednesday announced it had filed confidentially for an initial public offering, but the company has not yet determined the price for the IPO or the number of shares that will be offered. Peloton last raised a $550 million Series F round of funding, led by venture capital firm TCV, in August 2018, valuing the company at $4 billion.
It’s a stark difference from nearly seven years ago, when Foley, a serial entrepreneur and former Barnes and Noble (BKS) executive, found himself turned down by over 400 investors, who didn’t see a viable business in developing and selling fitness equipment for the home, including yet another exercise bike.
“I was just always pitching and always getting ‘No,’” Foley recalls. “Finally, over the course of five years, we became capitalized enough to build what is now Peloton. But I am proud to the extent that I went through those tough times, that we’ve shown there will be great returns for capital that comes into the fitness space, to the extent some of these other fledgling niche companies are getting traction or getting capital.”
A crowded market
Now, the situation is different for the in-home fitness market, which is even more crowded with quality devices, ranging from — yes — more exercise bikes like the cheaper $800 Echelon Fit to even a $1,500 mirror with a virtual trainer.
The New York City-based Peloton, which now has over 900 employees, has seen its business grow, driven largely by sales of its slick, internet-connected stationary bikes that stream thousands of live and pre-recorded SoulCycle-esque group classes into people’s homes. The company has sold over 400,000 Peloton bikes, according to a CNBC report earlier this year, which start at $1,995 (plus a $250 delivery fee and $39 monthly membership), earning a cult following of users who include Mark Zuckerberg, Richard Branson, Ellen DeGeneres, David Beckham, and Sean “Diddy” Combs. Along with the membership fee, Peloton offers an app with videos for spinning, running, strength training, and stretching.