Peloton's CFO shares how the fitness company's digital subscription service has become a 'powerful sales funnel' for purchases of bikes and treadmills and reaching new markets

  • Peloton is leaning on its rapidly expanding digital membership base to increase sales of its bicycle and treadmill products and convert subscribers to full-fledged connected fitness users. 
  • Speaking at the Barclays Global Technology, Peloton CFO Jill Woodworth said the digital business has served primarily as a sales tool for its products, as well as a vehicle for reaching new consumers and entering new markets. 
  • "In a cost effective way, we've said let's get as many members as possible into digital, but ultimately the point is to drive value by getting them to convert to connected fitness over time," Woodworth said
  • Though Woodworth said "the global opportunity is massive" for Peloton, the company is being "very judicious" in determining how and when it enters new markets.
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Though Peloton's digital subscription service has become a lucrative revenue stream for the company, CFO Jill Woodsworth said she views the platform more as a vital marketing tool for its more than 3.6 million global members rather than a standalone product. 

Speaking at the Barclays Global Technology, Media, and Telecommunications Conference on Thursday, Woodworth said digital memberships have become integral to converting users — particularly those that don't yet own a bike or treadmill — to full-fledged Peloton acolytes. As the virtual fitness market becomes increasingly crowded, she said Peloton's ability to use its digital platform as a means to get users to buy its "high margin, connected fitness" products will continue to set itself apart from its competitors. 

"Today we're treating [digital memberships] like an incredibly powerful sales funnel for connected fitness," she said. "Maybe over time, digital can be millions and millions and millions of subscribers, but in my humble opinion, our focus right now is taking our digital members and helping them convert into connected fitness."

She continued: "Most of them tend to use a wide variety of programming, and the good news is in order to get an indoor cardio workout on a bike or tread, you need a bike or tread."

Read more: Peloton salaries revealed: We found out how much engineers, analysts, product managers, and more make at the at-home fitness company

While membership acquisition will broadly continue to be a priority for the company, Woodworth said membership will continue to serve largely as a vehicle to reach new users. For example, earlier this year, Peloton began offering a three-month free trial of its subscription service in an attempt to raise awareness of the brand.

"In a cost-effective way, we've said let's get as many members as possible into digital, but ultimately the point is to drive value by getting them to convert to connected fitness over time," she said. "I see it as a great sales channel as opposed to a great long-term business model, just given all the challenges like competition, lower margins, and higher churn." 

Looking ahead, she said digital memberships will also be integral to entering new markets, and soft-sounding regions where supply chain infrastructure may not yet be implemented. 

"You may see us do more foreign language programming ahead of our expansion into international markets," she said. "I've always thought digital is a great way to start to seed a market internationally. There's a lot of great ideas that we're thinking about as we think about international growth, but again, I think the important thing is just to be cautious as we go."

Though Woodworth said "the global opportunity is massive" for Peloton, the company is being "very judicious" in determining how and when it enters new markets. While the company currently operates in four countries — the US, Canada, the US, and Germany — Woodworth said to expect international expansion at the pace of  "a couple markets every couple of years." 

"Going into international markets has taken a tremendous amount of effort," she said. "We are in four of the largest fitness markets in the world today that cover half of the world's population that belong to a gym. So it was important for us in those markets to have a fully vertical stack — logistics, showrooms, national media spend — in order to really drive adoption and accelerate our growth." 

 

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