An aspirational brand selling products in the £1,000s diversifies into affordable sub-categories; this sounds like the classic financial model for luxury fashion or jewellery brands, but what about in fitness?
The digital home fitness specialist, Peloton, sold an incredible 600,000 units of branded apparel in its last reported quarter. As a publicly traded it doesn’t break out individual sales figures of its clothing division, but it is fair to say it has seen incredible growth just like the rest of the company.
Peloton debuted on the US stock market in September 2019 with an IPO value of $8 billion at $25 a share, the share price today is just over $117, giving it a market capitalisation of $34.17 billion.
A Peloton Bike costs £1,750 in the UK (includes delivery fee) + £39/month subscription for unlimited live and on-demand classes (its Tread arrived in the UK in February and is priced at £2,295).
Peloton was the most recognised connected home fitness brand pre-COVID. Throw in a global pandemic and gym closures and the brand has sky-rocketed.
Announcing its second quarter earnings last month, Peloton said it had its first billion-dollar quarter ever, thanks to a 128% sales growth. The company also increased projections for this year’s revenue to hit $4 billion, up from $3.9 billion. While a tiny percentage of the business, CEO John Foley said recently “apparel sales are growing faster than the rest of the business”.
So, will Peloton be the new Lululemon?
Jill Foley, VP of Apparel, Peloton, (John and Jill Foley are husband and wife and Co-founders) speaking to TheIndustry.Fashion says: “We launched apparel in May of 2014. Today, we offer a wide collection which covers apparel, including performance-based pieces as well as everyday lifestyle apparel, and accessories for both men and women.
“Peloton has over 4.4 million members globally and our Members are very passionate and engaged with the brand,” she says.
“This enthusiasm and engagement allows our members to want to wear branded apparel both when they’re working out in the privacy of their own home on their Bike/Tread and when they’re out and about carrying on their daily activities.”
Peloton Apparel is premium priced activewear with T-shirts around £40, shorts £65 and sweatshirts £95. Nearly everything is heavily branded. Lululemon is a direct price competitor.
Foley says: “All of our apparel is designed in NYC. We either design in house or we reach out to partners for collaborations.”
Peloton’s apparel team has expanded rapidly. Jill Foley told the Wall Street Journal last year: “I hired eight more people because of our growth and I think the greater Peloton brand realised, ‘Oh, geez, we need to invest more in this apparel. They’re selling like hot cakes’.” It is reported to have currently 24 employees dedicated to Peloton Apparel.
“For one of our recent apparel collections for Black History Month in the US, we collaborated with four Black artists to create 18 custom apparel and accessories pieces, each with its own story. The artists partnered with two Peloton instructors each, including UK-based instructor Hannah Frankson, to create the images featured on the apparel pieces,” says Foley.
Peloton’s instructors have become major influencers in themselves. People like Leanne Hainsby, who has 194,000 followers on Instagram, have become gym style icons for many during lockdown. Accounts such as @pelotoncloset on Instagram, 19.4K followers, has the bio, “Dress like your favorite Peloton instructor!”, describing where you can your favourite instructors’ looks from. Peloton currently has 35 instructors across Cycling, Tread and Yoga (US, UK and Germany).
“Peloton is a member’s first organisation and we’re always thinking about what products will be best to meet their fitness and lifestyle needs; and this is a key consideration when we’re selecting individuals and brands to partner with. It’s also important that the brands we partner with have shared values with us,” says Foley.
Peloton Apparel isn’t currently wholesaled anywhere and sold only through direct channels. “At present, our apparel is sold online at apparel.onepeloton.co.uk and also in our retail showrooms in the UK, US, Canada and Germany,” explains Foley. Peloton has more than 115 retail showroom locations in the US, UK, Germany and Canada. While Peloton Studios London – to broadcast live classes across European timezones – will open in 2021. Peloton recently announced its arrival in Australia with new showrooms in Sydney and Melbourne.
“It’s been great to see our members’ as excited about our apparel as we are and we’re proud of how integral apparel has become to the Peloton experience. In addition, we’re constantly innovating as we continue to focus on creating unique collections that will excite our members, but I don’t have anything specific to share on future plans at this time,” Foley tells TheIndustry.fashion.
In the last reported quarter (Q2) Peloton hit 1.67 million connected subscribers, up 134% from the same period the previous year. The total workouts completed during that quarter surpassed 113 million, up from 26 million sessions last year.
John Rotoni Jr, @JRogrow, investor and writer @themotleyfool posted on Twitter: “Apparel is one more lever Peloton can pull. Apparel (1) strengthens the community, (2) provides an additional source of profitable growth, and (3) turns Peloton enthusiasts into walking billboards (free ads). I think we’ll soon start seeing Pelotoners sporting Peloton tattoos…”
Some have likened Peloton to a cult. These very engaged “members” wax lyrical about the brand and put their money where their mouth is. On Twitter, accounts like @pelotonalerts informs followers of Peloton Apparel drops.
The account is run by Michelle in Seattle, who explains: “So many people have Peloton Boutique referral credits. In the absence of checking the site every day, people would miss getting the limited runs. So, I set up a bot to track new additions to the store.”
Why does she think Peloton Apparel has proved so popular? “It’s a brand people want to associate themselves with. Throw in the collabs with other high-end brands (ie. Lululemon, 4 Laps, Rhone, etc) and the status is even higher,” she says.
Michelle started @pelotonalerts in June and now has over 3,500 followers. “There was a need.” she says. “There’s been no marketing for the Twitter feed.”
Peloton is a hype brand at the moment. Enthusiastic advocates and devotees are buying into the Peloton entire lifestyle with the clothing while an untapped market of people who want a Peloton but can’t afford the equipment makes its apparel a possible entry product for the entire brand. Its pool of on-brand fitness instructors/influencers can push the product daily into people’s homes.
The apparel collection is currently small with around 240 items for men and women online. It is heavily branded and is relies strongly on the name and logo for its lead. Peloton’s price points and direct to consumer route mean it has the margins to be more experimental and directional. It should look at sportswear brands like Falke, 2XU, Lululemon or Nike Training as its direct competition and become as well known for its quality as its design. It could also tone down the branding in some areas in case it becomes the fitness equivalent of buying a Ferrari cap, if you don’t own a bike or treadmill.
Peloton is only going to get bigger and its expensive starting price has also made the brand more premium and desirable. If it can translate its current cool factor and expertise in gym classes into the apparel and activewear then the potential is huge.