This year may not have started off so great for Peloton, but the company’s fortunes have since reversed thanks to a surge of interest in at-home fitness during the pandemic. Popularity can be a double-edged sword, however, as Peloton has struggled to keep up with demand, resulting in delivery delays and long wait times. But even that might soon ease up: On Monday, the company announced it’s plunking down $US420 ($558) million to acquire Precor, one of the world’s largest commercial fitness equipment makers.
This is big news in terms of Peloton’s supply chain. By snapping up Precor, Peloton is essentially gaining Precor’s production facilities in the U.S., on top of its existing third-party manufacturers located in Taiwan. Last month, Peloton noted that despite a 232% increase in growth, the company would be operating under supply constraints “for the foreseeable future.” This acquisition, however, would mean that Peloton can now make its bikes and treadmills in the U.S., thereby reducing shipping delays from overseas manufacturers.
The deal also includes Precor’s 100-member research and development team, which signals we might start seeing some new Peloton hardware down the line. Earlier this year, Peloton began offering its new Bike+ and a cheaper version of its treadmill. Precor is known for producing both cardio and strength equipment, so it’ll be interesting to see whether Peloton uses this as a means of competing with other connected fitness gadgets like Tonal and Hydrow.
On another note, the announcement also hints at Peloton’s commercial aspirations — specifically, hotels, apartment complexes with fitness centres, colleges, and corporate campuses. According to the Wall Street Journal, once the deal closes in early 2021, “Peloton’s products will be made available to Precor’s commercial customers in Peloton’s existing markets.” As in, in one fell swoop, Peloton just got access to an extensive network of public fitness spaces. Generally speaking, this is a pretty ingenious way of hooking curious users onto its platform. Even if someone’s not fond of shelling out roughly $US2,000 ($2,659) for a bike or treadmill, they can use one in their apartment’s gym and only have to pay the $US13 ($17)/month subscription for the app. Either way, it’s money, money, money for Peloton.
But what about when the pandemic is over and gyms reopen? It’s a fair concern, but it’s one that doesn’t seem to have put a dent in Peloton’s projections for 2021. At this rate, it’d take a holiday ad with unprecedented levels of cringe to knock Peloton off its stride. (And for the love of everything holy, 2020 doesn’t need another Peloton ad.) CNBC reports that the Precor deal could boost Peloton’s sales to $US500 ($665) million, as Precor itself will still operate under its own brand name in addition to making Peloton products. In any case, the Precor deal very much looks like Peloton setting itself up to continue its momentum into the post-pandemic world.