10 ms·

It really makes we wonder how we could be on the verge of a recession when companies like this become successful? Maybe I'm just too cheap to ever buy something

by tempsy 7y ago

It really makes we wonder how we could be on the verge of a recession when companies like this become successful? Maybe I'm just too cheap to ever buy something like this but it feels like a mass marketed luxury good that requires a decent level of consumer confidence to have succeeded.

losteric 7y ago
Do economic models distinguish consumer confidence from ignorance?
cellis 7y ago
I bought one. I like it because it's pretty high quality, I didn't have to pay cash ( using Affirm it's 62/mo /39 months), and I was able to test ride 2 of them for free ( apartment complex has a gym with one, but very hard to get a time to ride ). My girlfriend likes it because it saves tons of time compared to driving to e.g. SoulCycle or a spin class and they have nice social features like a competition ladder. But I don't do the classes, I just use it for the free ride.I try to set new PRs in terms of wattage, peak HR etc. Edit: I also like that you can sync your heart rate/ distance to Apple Health and it counts towards your rings in Apple Activity/Apple Watch.
- 8ytecoder 7y ago
  I use the one at our gym and I do like it. I have a decent carbon bike and an indoor trainer that I use Zwift with. However I do like the peloton for the classes/instructors. The machine itself is nice and the ride is smooth. The screen is amazing. It pairs with ANT HRMs and Bluetooth earphones. It’s nice to visually see the metrics and have target numbers. Missing ERG is a problem but not a huge one. I don’t think it’s a fair comparison with juicero. Although I’d admit I won’t pay for it - I’m not the target market. I’m primarily an outdoor cyclist.
- jgys 7y ago
  > compared to driving to e.g. SoulCycle or a spin class Radical idea: rather than choosing between a $2,000 stationary bike for your living room or burning a bunch of fossil fuels to move yourself and your 2,000+ pounds of motor vehicle to a gym to ride somebody else's stationary bike, you could just buy an ordinary bike and ride around outside. You could probably even buy a indoor trainer for your ordinary bike as well, for less than the cost of a Peloton. I mean, you do you, I guess... I just can't comprehend the appeal of paying $2,000 for a bike that doesn't even take you anywhere. ¯\_(ツ)_/¯
  - jdm2212 7y ago
    At least in the US, trying to ride a bike outdoors in a lot of places is a good way to get yourself killed by a car. I've spent the last 5 years in NYC and SF (which are both very bike friendly). I bike rarely and pretty cautiously, but even so all of my closest calls with getting killed by a car have been on a bike.
    - brendanw 7y ago
      How about the Presidio for riding? I am not a cyclist. I incurred a foot injury recently, and have been thinking of ways I can exercise without impacting my feet too much. I've thought riding a bicycle around the Presidio could be pretty nice.
      - raoulj 7y ago
        As long as you stay away from the bridge and the packs of tourists, sure. But I quickly found myself wanting to over the bridge to get different/more challenging routes.
      - ves 7y ago
        It’s not very big, is the problem, and is often full of tourists.
    - ticmasta 7y ago
      >> NYC and SF (which are both very bike friendly). What? You need to visit some more cities. Just because bikes & cars co-exist in a city does not make them bike friendly.
      - javagram 7y ago
        Compared to a lot of cities NYC is doing alright in regard to cycling infrastructure. They’ve put in a lot of lanes and have plans to do more. NYC official statistics claim the number of bike trips has tripled over the last 15 years, so riders seem to be responding. Obviously there are way more bike-friendly European cities but as far as US cities go NYC doesn’t seem that bad to me (I don’t live there, but have noticed all the new cycle paths when I visit occasionally over the years).
- deleted 7y ago
  [deleted]
jimbob45 7y ago
I feel like you're onto something. They take an iPad, slap it on an exercise bike, and charge $2000 for it. I could do that for the cost of the parts. The only thing protecting their business model is their exclusive patent on the idea. Perhaps the patent system is what is truly at fault here?
- wuliwong 7y ago
  Do you have a Peloton or have you at least tried one? I don't/haven't but this seems pretty reductive.
- slap_shot 7y ago
  Comments like this remind of the top comment when Dropbox was announced on HN[0]: "For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem. From Windows or Mac, this FTP account could be accessed through built-in software." No, it isn't just an ipad slapped on an exercise bike. And no, the patent system is not at fault here. There are dozens of competitors in this market. But Peleton won it. [0] https://news.ycombinator.com/item?id=8863 https://news.ycombinator.com/item?id=8863
  - 8ytecoder 7y ago
    Exactly. I can’t say for sure they’ll succeed but they are definitely onto something here. I explained the things o like in the comments above. It is well integrated. All the pieces work really well together. In comparison it’s a fight to get zwift to connect with my smart trainer, hrm and cadence sensor every single time I hop on it.
    - matwood 7y ago
      I was skeptical until I did some classes on a Peloton, and I was impressed. It’s cheaper than one of the boutique spin studios, and the bike is nicer. It does a great job of making you feel like you are part of the class. I would own one if I already didn’t have multiple other ways I get my daily exercise.
Alex3917 7y ago
On the surface this is basically the Juicero of fitness equipment. If you want a good piece of workout equipment, buy a Concept2 erg. If you want a bike, you can get a carbon-frame bike for the same amount of money and then just get a trainer for it. Ostensibly there is zero reason for this to exist. The one argument in its favor is that youth sports are usually very heavily subsidized by masters sports. So if you weren't on a varsity sports team in high school or college and didn't learn how to work out properly, then it's easily 5x more expensive to do so as an adult. So maybe there is some value in having someone to teach you how to do basic cardio.
- Judgmentality 7y ago
  > Ostensibly there is zero reason for this to exist. It's a lot more convenient to exercise in your living room than go outside or go to the gym. I thought Guitar Hero was stupid and people should just buy a guitar, but people loved it.
  - lonelappde 7y ago
    GH is $50, not $2000
- Brendinooo 7y ago
  It's way too expensive for me and I have no interest in doing cardio indoors, but I think you're missing out on the value of the digital side of the product. I think exercise bikes and treadmills are dreadfully boring, but what Peloton offers is exactly targeted at that problem. Adding an array of things to do and a social aspect has to be a big deal, and if that's all packaged together in a high end package that "just works", and works really well - that seems like a winning formula. There's a lot of fitness subscription services out there, but there's more money to be made on hardware in general. So as long as there's a market for people to pay two grand for a stationary bike and whatever dollars a month for a subscription, it's a winning business model. I'm guessing it stacks up against the SoulCycles of the world very nicely.
  - lonelappde 7y ago
bluesroo 7y ago
Edit: This isn't a commentary on Peloton specifically, but all of the S-1 posts we've been seeing on HN recently. I wouldn't interpret this behavior as success per se. I think a significant motivating factor for going public now would be to provide liquidity for your existing investors (and yourself as the founder) before a recession hits. If you've had significant capital tied up in a company and you're worried a recession is on the horizon, then this is a great time to push your company to go public. If you wait much longer then you risk either: 1. Going public in a recession and losing some of your potential gains. 2. Waiting an unknown amount of time for the economy to rebound and to pull your cash out then. This assumes the company weathered the recession well AND given you the same or better gains than investing in something else during that time. TL;DR: Going public now is a much safer time for investors to divest than closer to or after the coming recession.
deleted 7y ago
[deleted]
dralley 7y ago
"how can we be headed for a recession when my janitor just bought a second house?"
- etjossem 7y ago
  Absolutely this. A bubble doesn't look like one until it pops, so you can't just say "everyone's buying $2000 spin bikes, everything must be fine." For starters, Peloton does a majority of its sales through Affirm and other consumer financing instruments, and books them as revenue. It's more accurate to say "everyone is buying $2000 spin bikes using 30% APR installment loans." In the risks section, Peloton says that their revenue could decline due to changes in credit markets and decisions made by credit providers - a.k.a. if a bunch of people start to default on their expensive luxuries. "In the future, we cannot be assured that third-party financing providers will continue to provide consumers with access to credit or that available credit limits will not be reduced. Such restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results."
  - RobPfeifer 7y ago
    The Affirm loan product for peloton is 0% only (with no late fees in any circumstance).
    - buttcoinslol 7y ago
      Cheap credit will not last forever..
      - scarface74 7y ago
        Tell that to furniture stores that have had 5+ years of no interest financing forever. Of course they raise the prices to pay for the “free financing”.
    - etjossem 7y ago
realshowbiz 7y ago
On the other hand I wonder what effect easily accessible credit cards have on overall sales for products like this. On a personal level it would be a stretch for me to spend $2200 when I could get a used airdyne and an ipad for less than half.
- scarface74 7y ago
  Companies have been offering “0% financing” for decades regardless of economic conditions - see furniture stores and more recently phone companies. I’ll probably end up buying a Mid range NordicTrack stationary bike ($1800) within the next year to go along with my NordicTrack treadmill and elliptical. I don’t currently subscribe to IFIT, but I might seeing that I could potentially use it across three pieces of equipment. The IFIt modules are an optional piece for the elliptical and treadmill and I believe it is built into the elliptical. As far as cost, between the cardio equipment I have (and plan on purchasing), the kettlebells, weight bench, weight bars, tv, wall mount, AppleTV, etc, by the time all is said and done, I will have spent close to 8 grand. It’s well worth it for the convenience of just being able to go to the spare bedroom and workout anytime that we want to while catching up on TV or in my case watching technical videos without having to go through the ceremony of going to the gym.
gcbw3 7y ago
luxury design is well stablished field. And it is not that impacted by world crisis and recession. The trick here is fooling common investors into into without realizing it is a luxury market. Basically, there is a small but lucrative market. You know that you have to milk it while you can and move on. This kind of startup, exploit this small market mostly to inflate the numbers. Probably they already have 100% of their real market cap, but they will claim that they can still expand to billions of people that pay $5/mo gyms all around the world and only increase their growth (when they very might be already at 100% and realistically their future growth is zero ...or until the pile of money they get runs out) ...a funny exercise: search for the first anecdotes from the first clients of juicero here on HN ;)
paxys 7y ago
Being "on the verge of a recession" means nothing. There have been people constantly predicting the next recession since 2011. And there was zero talk of an economic downturn in 2007.
- foldingmoney 7y ago
  That's not true. The yield curve inverted in 2006, people talked about recession for a while, then the general conclusion was that 'it's different this time', and right after everyone forgot about the inversion, the recession hit. But don't worry, it's different this time. ;)
013a 7y ago
They became successful in the bull market. Markets and debt cycles don't act like sine waves. They build up to a peak, and then they fall dramatically, then they build up again, and they fall.
gniv 7y ago
That's exactly why bubbles form and lead to economic cycles: people get too confident and overextend themselves. In this particular cycle, more companies seem to be using this profitable business model: charge huge margins for your product and sell it on credit. Bikes, SUVs, higher education (phones, too, but that's not new). When the economy hits a blip -- say, due to a trade war -- people start losing their jobs, default on the loans, and things spiral down. (To be clear, I'm not saying it will happen soon. It might, and probably will take years and be a mild pop.)
- MuffinFlavored 7y ago
  > people get too confident and overextend themselves. It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. What if you look at it from the flip side and say "people buying $2.4k in-house bikes have a lot of money and all is well in the world"?
  - Traster 7y ago
    People with lots of money don't buy on credit because the credit is expensive. So it really comes down to whether most purchases are on credit or not. US consumer debt peaked in 2008/9, dropped until 2014 and started rising again - it's now higher than 2008/9. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...
    - wastedhours 7y ago
      > People with lots of money don't buy on credit Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. Someone elsewhere in the thread mentioned that the Affirm rate is de-facto 0% if you factor in the subscription for the full-term. Taking that as fact (apparently it's changed now, so can't 100% confirm), you'd have to be pretty anti-debt (or lacking in cashflow) to pay in full on that rather than earn interest on the balance for 3 years if you intended to book the subscription anyway.
pbreit 7y ago
Do folks who profess not understanding why something is successful ever use such data to improve their outlook?
S3an12 7y ago
The company is selling the bikes and treadmills at a 43% gross margin. This company somehow sells its bicycles at a higher gross margin than Apple(38%). How!

by tempsy 7y ago

losteric 7y ago

Do economic models distinguish consumer confidence from ignorance?

cellis 7y ago

I bought one. I like it because it's pretty high quality, I didn't have to pay cash ( using Affirm it's 62/mo /39 months), and I was able to test ride 2 of them for free ( apartment complex has a gym with one, but very hard to get a time to ride ). My girlfriend likes it because it saves tons of time compared to driving to e.g. SoulCycle or a spin class and they have nice social features like a competition ladder. But I don't do the classes, I just use it for the free ride.I try to set new PRs in terms of wattage, peak HR etc. Edit: I also like that you can sync your heart rate/ distance to Apple Health and it counts towards your rings in Apple Activity/Apple Watch.

8ytecoder 7y ago
I use the one at our gym and I do like it. I have a decent carbon bike and an indoor trainer that I use Zwift with. However I do like the peloton for the classes/instructors. The machine itself is nice and the ride is smooth. The screen is amazing. It pairs with ANT HRMs and Bluetooth earphones. It’s nice to visually see the metrics and have target numbers. Missing ERG is a problem but not a huge one. I don’t think it’s a fair comparison with juicero. Although I’d admit I won’t pay for it - I’m not the target market. I’m primarily an outdoor cyclist.
jgys 7y ago
> compared to driving to e.g. SoulCycle or a spin class Radical idea: rather than choosing between a $2,000 stationary bike for your living room or burning a bunch of fossil fuels to move yourself and your 2,000+ pounds of motor vehicle to a gym to ride somebody else's stationary bike, you could just buy an ordinary bike and ride around outside. You could probably even buy a indoor trainer for your ordinary bike as well, for less than the cost of a Peloton. I mean, you do you, I guess... I just can't comprehend the appeal of paying $2,000 for a bike that doesn't even take you anywhere. ¯\_(ツ)_/¯
- jdm2212 7y ago
  At least in the US, trying to ride a bike outdoors in a lot of places is a good way to get yourself killed by a car. I've spent the last 5 years in NYC and SF (which are both very bike friendly). I bike rarely and pretty cautiously, but even so all of my closest calls with getting killed by a car have been on a bike.
  - brendanw 7y ago
    How about the Presidio for riding? I am not a cyclist. I incurred a foot injury recently, and have been thinking of ways I can exercise without impacting my feet too much. I've thought riding a bicycle around the Presidio could be pretty nice.
    - raoulj 7y ago
      As long as you stay away from the bridge and the packs of tourists, sure. But I quickly found myself wanting to over the bridge to get different/more challenging routes.
    - ves 7y ago
      It’s not very big, is the problem, and is often full of tourists.
  - ticmasta 7y ago
    >> NYC and SF (which are both very bike friendly). What? You need to visit some more cities. Just because bikes & cars co-exist in a city does not make them bike friendly.
    - javagram 7y ago
      Compared to a lot of cities NYC is doing alright in regard to cycling infrastructure. They’ve put in a lot of lanes and have plans to do more. NYC official statistics claim the number of bike trips has tripled over the last 15 years, so riders seem to be responding. Obviously there are way more bike-friendly European cities but as far as US cities go NYC doesn’t seem that bad to me (I don’t live there, but have noticed all the new cycle paths when I visit occasionally over the years).
deleted 7y ago
[deleted]

jimbob45 7y ago

I feel like you're onto something. They take an iPad, slap it on an exercise bike, and charge $2000 for it. I could do that for the cost of the parts. The only thing protecting their business model is their exclusive patent on the idea. Perhaps the patent system is what is truly at fault here?

wuliwong 7y ago
Do you have a Peloton or have you at least tried one? I don't/haven't but this seems pretty reductive.
slap_shot 7y ago
Comments like this remind of the top comment when Dropbox was announced on HN[0]: "For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem. From Windows or Mac, this FTP account could be accessed through built-in software." No, it isn't just an ipad slapped on an exercise bike. And no, the patent system is not at fault here. There are dozens of competitors in this market. But Peleton won it. [0] https://news.ycombinator.com/item?id=8863 https://news.ycombinator.com/item?id=8863
- 8ytecoder 7y ago
  Exactly. I can’t say for sure they’ll succeed but they are definitely onto something here. I explained the things o like in the comments above. It is well integrated. All the pieces work really well together. In comparison it’s a fight to get zwift to connect with my smart trainer, hrm and cadence sensor every single time I hop on it.
  - matwood 7y ago
    I was skeptical until I did some classes on a Peloton, and I was impressed. It’s cheaper than one of the boutique spin studios, and the bike is nicer. It does a great job of making you feel like you are part of the class. I would own one if I already didn’t have multiple other ways I get my daily exercise.

Alex3917 7y ago

On the surface this is basically the Juicero of fitness equipment. If you want a good piece of workout equipment, buy a Concept2 erg. If you want a bike, you can get a carbon-frame bike for the same amount of money and then just get a trainer for it. Ostensibly there is zero reason for this to exist. The one argument in its favor is that youth sports are usually very heavily subsidized by masters sports. So if you weren't on a varsity sports team in high school or college and didn't learn how to work out properly, then it's easily 5x more expensive to do so as an adult. So maybe there is some value in having someone to teach you how to do basic cardio.

Judgmentality 7y ago
> Ostensibly there is zero reason for this to exist. It's a lot more convenient to exercise in your living room than go outside or go to the gym. I thought Guitar Hero was stupid and people should just buy a guitar, but people loved it.
- lonelappde 7y ago
  GH is $50, not $2000
Brendinooo 7y ago
It's way too expensive for me and I have no interest in doing cardio indoors, but I think you're missing out on the value of the digital side of the product. I think exercise bikes and treadmills are dreadfully boring, but what Peloton offers is exactly targeted at that problem. Adding an array of things to do and a social aspect has to be a big deal, and if that's all packaged together in a high end package that "just works", and works really well - that seems like a winning formula. There's a lot of fitness subscription services out there, but there's more money to be made on hardware in general. So as long as there's a market for people to pay two grand for a stationary bike and whatever dollars a month for a subscription, it's a winning business model. I'm guessing it stacks up against the SoulCycles of the world very nicely.
- lonelappde 7y ago

bluesroo 7y ago

Edit: This isn't a commentary on Peloton specifically, but all of the S-1 posts we've been seeing on HN recently. I wouldn't interpret this behavior as success per se. I think a significant motivating factor for going public now would be to provide liquidity for your existing investors (and yourself as the founder) before a recession hits. If you've had significant capital tied up in a company and you're worried a recession is on the horizon, then this is a great time to push your company to go public. If you wait much longer then you risk either: 1. Going public in a recession and losing some of your potential gains. 2. Waiting an unknown amount of time for the economy to rebound and to pull your cash out then. This assumes the company weathered the recession well AND given you the same or better gains than investing in something else during that time. TL;DR: Going public now is a much safer time for investors to divest than closer to or after the coming recession.

deleted 7y ago

[deleted]

dralley 7y ago

"how can we be headed for a recession when my janitor just bought a second house?"

etjossem 7y ago
Absolutely this. A bubble doesn't look like one until it pops, so you can't just say "everyone's buying $2000 spin bikes, everything must be fine." For starters, Peloton does a majority of its sales through Affirm and other consumer financing instruments, and books them as revenue. It's more accurate to say "everyone is buying $2000 spin bikes using 30% APR installment loans." In the risks section, Peloton says that their revenue could decline due to changes in credit markets and decisions made by credit providers - a.k.a. if a bunch of people start to default on their expensive luxuries. "In the future, we cannot be assured that third-party financing providers will continue to provide consumers with access to credit or that available credit limits will not be reduced. Such restrictions or reductions in the availability of consumer credit, or the loss of our relationship with our current financing partners, could have an adverse effect on our business, financial conditions, and operating results."
- RobPfeifer 7y ago
  The Affirm loan product for peloton is 0% only (with no late fees in any circumstance).
  - buttcoinslol 7y ago
    Cheap credit will not last forever..
    - scarface74 7y ago
      Tell that to furniture stores that have had 5+ years of no interest financing forever. Of course they raise the prices to pay for the “free financing”.
  - etjossem 7y ago

realshowbiz 7y ago

On the other hand I wonder what effect easily accessible credit cards have on overall sales for products like this. On a personal level it would be a stretch for me to spend $2200 when I could get a used airdyne and an ipad for less than half.

scarface74 7y ago
Companies have been offering “0% financing” for decades regardless of economic conditions - see furniture stores and more recently phone companies. I’ll probably end up buying a Mid range NordicTrack stationary bike ($1800) within the next year to go along with my NordicTrack treadmill and elliptical. I don’t currently subscribe to IFIT, but I might seeing that I could potentially use it across three pieces of equipment. The IFIt modules are an optional piece for the elliptical and treadmill and I believe it is built into the elliptical. As far as cost, between the cardio equipment I have (and plan on purchasing), the kettlebells, weight bench, weight bars, tv, wall mount, AppleTV, etc, by the time all is said and done, I will have spent close to 8 grand. It’s well worth it for the convenience of just being able to go to the spare bedroom and workout anytime that we want to while catching up on TV or in my case watching technical videos without having to go through the ceremony of going to the gym.

gcbw3 7y ago

luxury design is well stablished field. And it is not that impacted by world crisis and recession. The trick here is fooling common investors into into without realizing it is a luxury market. Basically, there is a small but lucrative market. You know that you have to milk it while you can and move on. This kind of startup, exploit this small market mostly to inflate the numbers. Probably they already have 100% of their real market cap, but they will claim that they can still expand to billions of people that pay $5/mo gyms all around the world and only increase their growth (when they very might be already at 100% and realistically their future growth is zero ...or until the pile of money they get runs out) ...a funny exercise: search for the first anecdotes from the first clients of juicero here on HN ;)

paxys 7y ago

Being "on the verge of a recession" means nothing. There have been people constantly predicting the next recession since 2011. And there was zero talk of an economic downturn in 2007.

foldingmoney 7y ago
That's not true. The yield curve inverted in 2006, people talked about recession for a while, then the general conclusion was that 'it's different this time', and right after everyone forgot about the inversion, the recession hit. But don't worry, it's different this time. ;)

013a 7y ago

They became successful in the bull market. Markets and debt cycles don't act like sine waves. They build up to a peak, and then they fall dramatically, then they build up again, and they fall.

gniv 7y ago

That's exactly why bubbles form and lead to economic cycles: people get too confident and overextend themselves. In this particular cycle, more companies seem to be using this profitable business model: charge huge margins for your product and sell it on credit. Bikes, SUVs, higher education (phones, too, but that's not new). When the economy hits a blip -- say, due to a trade war -- people start losing their jobs, default on the loans, and things spiral down. (To be clear, I'm not saying it will happen soon. It might, and probably will take years and be a mild pop.)

MuffinFlavored 7y ago
> people get too confident and overextend themselves. It sounds like you are stereotyping Peloton purchasers into one group, then assuming that the majority of them can't afford nice things. What if you look at it from the flip side and say "people buying $2.4k in-house bikes have a lot of money and all is well in the world"?
- Traster 7y ago
  People with lots of money don't buy on credit because the credit is expensive. So it really comes down to whether most purchases are on credit or not. US consumer debt peaked in 2008/9, dropped until 2014 and started rising again - it's now higher than 2008/9. https://www.marketwatch.com/story/us-consumer-debt-is-now-breaching-levels-last-reached-during-the-2008-financial-crisis-2019-06-19 https://www.marketwatch.com/story/us-consumer-debt-is-now-br...
  - wastedhours 7y ago
    > People with lots of money don't buy on credit Interesting, but lots of wealthy people do finance their purchases, especially if they are active investors. Someone elsewhere in the thread mentioned that the Affirm rate is de-facto 0% if you factor in the subscription for the full-term. Taking that as fact (apparently it's changed now, so can't 100% confirm), you'd have to be pretty anti-debt (or lacking in cashflow) to pay in full on that rather than earn interest on the balance for 3 years if you intended to book the subscription anyway.

pbreit 7y ago

Do folks who profess not understanding why something is successful ever use such data to improve their outlook?

S3an12 7y ago

The company is selling the bikes and treadmills at a 43% gross margin. This company somehow sells its bicycles at a higher gross margin than Apple(38%). How!