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The fact is. Not every company can be a $12B company. Peloton might be a super successful $1B company, who slowly tries to creep into new areas for growth. And

by shmatt 5y ago

The fact is. Not every company can be a $12B company. Peloton might be a super successful $1B company, who slowly tries to creep into new areas for growth. And it sounds like Blackwell understand this, and instead of pushing for Peloton to focus internally on its product and get rid of the extra fat, they want a fast sale to a not-really-smart company. So they can at least get some ROI People talk about monthly fees being high or fair, thats not it at all, Pelotons prices for hardware and membership or completely fine. What they did do is * Pouring money into building their own factories (even Apple doesn't do this at their scale, they pay Foxconn) * Building a full fledged apparel brand * Hiring way too many engineers, FAANG level org size * Having their own warehouses and delivery full time employees No other company does this. I'm not sure what the long term plan was, maybe they become a white label manufacturer for other start ups? It failed, badly You do not need 14,000, or 11,000, or 3,000 employees to do what Peloton currently does (again, maybe they had grandiose plans in the pipeline). If we want to compare proprietary hardware + Android + online streaming service. When MIRROR was bought out by Lululemon for $500M, they had 200 employees I have a feeling no one has offered Foley more than $3B for the company, and i'm being generous

ranrotx 5y ago
Their apparel brand is a joke. It’s run by Foley’s wife. Unless I messed something, what experience or qualification does she have in apparel? Never mind the fact that I’ve maybe seen only 3 people in the real world wearing anything that is Peloton branded (no, the free Century t-shirt doesn’t count). Personally, I find their apparel to be a little loud and obnoxious, but that’s just me. As a consumer, I don’t see what value they bring to the apparel market. Nothing new, just branding.
- sharkweek 5y ago
  Just for a counterpoint, as commented in a previous thread, my partner and her friends are obsessed with the culture of peloton and they all wear a considerable amount of peloton clothing. It’s been a predictable gift given among her friends over the last 2-3 years.
- mvkel 5y ago
  Any clothing with a logo on it is nothing new, just branding. Nike does pretty well.
- tqi 5y ago
  The HN crowd is always quick to point out that Peloton has no moat - its just a screen on a bike. Creating a lifestyle brand (ala in person fitness brands like Soulcycle or Barrys) is a way to address that moat, and apparel is a core part of that. Whether or not they were successful is an execution issue.
  - ss108 5y ago
    How would having a lifestyle brand create a moat? How would you define "moat"? (Genuine questions, I have no position on the issue and no real knowledge in the area)
    - danzig13 5y ago
      Branding is a bit of a moat that puts you ahead of other competitors. Literal true story but perhaps a counter example: my wife is considering buying an exercise bike and is trying to choose between Peloton and Beachbody. Everyone online seems to be suggesting she buy the Peloton. She is a little torn, because she already has done non-bike exercises on Beachbody for several years. Peloton has the leg up for the bike, because it has the best branding in that area; however, my wife was at least willing to consider Beachbody, because of her previous experience with their brand.
    - tqi 5y ago
      I use moat here in the sense that it creates some level of defense against competitors. Nike's shoes obviously contain a lot of advanced technology in it, but the strength of their brand what shields them against a newcomers and generics selling similar items.
  - PaulDavisThe1st 5y ago
    IIUC, the classes/instructors are the moat.
    - tqi 5y ago
      Instructors definitely are, but I think they recognize that it would be very easy to poach an instructor to jumpstart a competitor.
- mdoms 5y ago
  I just took a look at Peloton apparel and I don't see how you could class it as "loud and obnoxious". Most of it looks like pretty generic branded fitness gear. If anything it's especially understated compared to the competition. Considering how strong the brand is I think apparel is a genius idea for growth. It has just been mismanaged due to nepotism.
- 908B64B197 5y ago
  Apparel makes sense. It’s very high margin and the company is in a great position to market to fitness conscious people. But I don’t see it ever being more than a side business.
missedthecue 5y ago
Why would Blackwell buy into a $12B company in order to make it a $1B company? It might make peleton live longer but it would lose a lot of money for their LPs
- toomuchtodo 5y ago
  From Matt Levine’s Money Stuff piece on this: > In a sense, the pitch here is straightforward. Blackwells does not think that Foley is very good at running Peloton. The stock market does not think that Foley is very good at running Peloton, in that the stock is down 80% from its highs last year and spent last week below its 2019 initial public offering price of $29. (It’s up today.) And Foley does not think he’s particularly good at running Peloton, at least if you believe the quotes that Blackwells selected here. If someone else takes over the day-to-day running of Peloton, or the process of selling it to a better owner (and Blackwells is also pushing for a sale), then Foley will have more money (because he owns a lot of Peloton stock) and also more free time (because he’s not running Peloton). It is no fun to do a job that you’re not good at, particularly when doing that job costs you money. If you can get in a room with Foley, or just lob a PowerPoint deck at him, and explain “hey, everyone is mad at you, you’re not having fun and it’s making you poorer,” that’s fairly persuasive and maybe he’ll listen. He did! Sidenote: I suggest subscribing to Money Stuff. It’s a free email newsletter, and Matt’s writing is stellar.
- shmatt 5y ago
  Why did any shareholder buy into the hype? When Peloton decided building their own personal factory in Ohio was a great use of money, their shareholders and fans cheered about how great idea it was. We're getting healthy and helping unemployment in the rust belt! Same for having a full time Peloton employee drive the bike to your home Those decisions made absolutely no sense financially, and were immediately shut down once the CEO changed. But when they were decided Wall Street was cheering them on
  - dlp211 5y ago
    The factory part aside, white glove delivery is not unheard of in premium offerings of various items. It makes perfect sense to have white glove treatment for the delivery of Peloton devices, and you can almost always guarantee the customer interaction is better when your employees are in-house instead of contracted.
ninjaz 5y ago
They have virtually no experience on their C-suite in managing complex logistics problems. The people they hire from FAANG are mediocre middle managers who then get titles like VP or SVP. They are trying to scale too fast to keep up with their valuation, without a clear vision.
parasense 5y ago
> Hiring way too many engineers, FAANG level org size Ahem... that's now FAAAN (facebook, apple, alphabet, amazon, netflix) I'm sorry, I hated to write this, and for what it's worth I didn't know what you meant by FAANG... had to look it up only to find the term has fallen from use.
- Avery3R 5y ago
  Don't you mean MAAAN?
  - dixie_land 5y ago
    or MAANA
    - thehappypm 5y ago
      I think Netflix should be removed, MAGA.
    - dr_zoidberg 5y ago
      You're missing Microsoft: MANAMA
Animats 5y ago
Pouring money into building their own factories (even Apple doesn't do this at their scale, they pay Foxconn) Is it possible to run a manufacturing business in the US without slave labor somewhere?
pedalpete 5y ago
I don't think the "building their own factories" is as cut and dry. Here in Australia, many of these small to medium sized businesses do their own manufacturing in house. I believe it depends on margin and volume. The examples I'm referring to are Rode Microphones, Cochlear hearing aids, and ResMed CPAP machines, are all manufactured in Australia (though I'm not sure all of their world-wide manufacturing happens here, they could have other factories). Would love to get the feedback from people who may have any idea in where and why it sometimes make sense to do your own manufacturing. My issue with Peleton has always been that the cost for a stationary bike is more than the cost of my road bike, and about the same prices as my mountain bike. From my user name, you may be able to tell... I ride, but how many people want to spend the kind of money Peleton is charging to ride indoors? They got the early adopters who were willing to pay the price, but they may have run out of consumers. I know of a few people who LOVE their Peleton, I don't know of anybody who doesn't have one that wants one.
- PaulDavisThe1st 5y ago
  > I know of a few people who LOVE their Peleton, I don't know of anybody who doesn't have one that wants one. Bingo. The growth opportunities at this price point seem to be close to zero. Move the price point by a factor of 5, and maybe (maybe) that changes. Meanwhile, you can pry my Racermate Computrainer from my cold, dead hands :)

by shmatt 5y ago

ranrotx 5y ago

Their apparel brand is a joke. It’s run by Foley’s wife. Unless I messed something, what experience or qualification does she have in apparel? Never mind the fact that I’ve maybe seen only 3 people in the real world wearing anything that is Peloton branded (no, the free Century t-shirt doesn’t count). Personally, I find their apparel to be a little loud and obnoxious, but that’s just me. As a consumer, I don’t see what value they bring to the apparel market. Nothing new, just branding.

sharkweek 5y ago
Just for a counterpoint, as commented in a previous thread, my partner and her friends are obsessed with the culture of peloton and they all wear a considerable amount of peloton clothing. It’s been a predictable gift given among her friends over the last 2-3 years.
mvkel 5y ago
Any clothing with a logo on it is nothing new, just branding. Nike does pretty well.
tqi 5y ago
The HN crowd is always quick to point out that Peloton has no moat - its just a screen on a bike. Creating a lifestyle brand (ala in person fitness brands like Soulcycle or Barrys) is a way to address that moat, and apparel is a core part of that. Whether or not they were successful is an execution issue.
- ss108 5y ago
  How would having a lifestyle brand create a moat? How would you define "moat"? (Genuine questions, I have no position on the issue and no real knowledge in the area)
  - danzig13 5y ago
    Branding is a bit of a moat that puts you ahead of other competitors. Literal true story but perhaps a counter example: my wife is considering buying an exercise bike and is trying to choose between Peloton and Beachbody. Everyone online seems to be suggesting she buy the Peloton. She is a little torn, because she already has done non-bike exercises on Beachbody for several years. Peloton has the leg up for the bike, because it has the best branding in that area; however, my wife was at least willing to consider Beachbody, because of her previous experience with their brand.
  - tqi 5y ago
    I use moat here in the sense that it creates some level of defense against competitors. Nike's shoes obviously contain a lot of advanced technology in it, but the strength of their brand what shields them against a newcomers and generics selling similar items.
- PaulDavisThe1st 5y ago
  IIUC, the classes/instructors are the moat.
  - tqi 5y ago
    Instructors definitely are, but I think they recognize that it would be very easy to poach an instructor to jumpstart a competitor.
mdoms 5y ago
I just took a look at Peloton apparel and I don't see how you could class it as "loud and obnoxious". Most of it looks like pretty generic branded fitness gear. If anything it's especially understated compared to the competition. Considering how strong the brand is I think apparel is a genius idea for growth. It has just been mismanaged due to nepotism.
908B64B197 5y ago
Apparel makes sense. It’s very high margin and the company is in a great position to market to fitness conscious people. But I don’t see it ever being more than a side business.

missedthecue 5y ago

Why would Blackwell buy into a $12B company in order to make it a $1B company? It might make peleton live longer but it would lose a lot of money for their LPs

toomuchtodo 5y ago
From Matt Levine’s Money Stuff piece on this: > In a sense, the pitch here is straightforward. Blackwells does not think that Foley is very good at running Peloton. The stock market does not think that Foley is very good at running Peloton, in that the stock is down 80% from its highs last year and spent last week below its 2019 initial public offering price of $29. (It’s up today.) And Foley does not think he’s particularly good at running Peloton, at least if you believe the quotes that Blackwells selected here. If someone else takes over the day-to-day running of Peloton, or the process of selling it to a better owner (and Blackwells is also pushing for a sale), then Foley will have more money (because he owns a lot of Peloton stock) and also more free time (because he’s not running Peloton). It is no fun to do a job that you’re not good at, particularly when doing that job costs you money. If you can get in a room with Foley, or just lob a PowerPoint deck at him, and explain “hey, everyone is mad at you, you’re not having fun and it’s making you poorer,” that’s fairly persuasive and maybe he’ll listen. He did! Sidenote: I suggest subscribing to Money Stuff. It’s a free email newsletter, and Matt’s writing is stellar.
shmatt 5y ago
Why did any shareholder buy into the hype? When Peloton decided building their own personal factory in Ohio was a great use of money, their shareholders and fans cheered about how great idea it was. We're getting healthy and helping unemployment in the rust belt! Same for having a full time Peloton employee drive the bike to your home Those decisions made absolutely no sense financially, and were immediately shut down once the CEO changed. But when they were decided Wall Street was cheering them on
- dlp211 5y ago
  The factory part aside, white glove delivery is not unheard of in premium offerings of various items. It makes perfect sense to have white glove treatment for the delivery of Peloton devices, and you can almost always guarantee the customer interaction is better when your employees are in-house instead of contracted.

ninjaz 5y ago

They have virtually no experience on their C-suite in managing complex logistics problems. The people they hire from FAANG are mediocre middle managers who then get titles like VP or SVP. They are trying to scale too fast to keep up with their valuation, without a clear vision.

parasense 5y ago

> Hiring way too many engineers, FAANG level org size Ahem... that's now FAAAN (facebook, apple, alphabet, amazon, netflix) I'm sorry, I hated to write this, and for what it's worth I didn't know what you meant by FAANG... had to look it up only to find the term has fallen from use.

Avery3R 5y ago
Don't you mean MAAAN?
- dixie_land 5y ago
  or MAANA
  - thehappypm 5y ago
    I think Netflix should be removed, MAGA.
  - dr_zoidberg 5y ago
    You're missing Microsoft: MANAMA

Animats 5y ago

Pouring money into building their own factories (even Apple doesn't do this at their scale, they pay Foxconn) Is it possible to run a manufacturing business in the US without slave labor somewhere?

pedalpete 5y ago

I don't think the "building their own factories" is as cut and dry. Here in Australia, many of these small to medium sized businesses do their own manufacturing in house. I believe it depends on margin and volume. The examples I'm referring to are Rode Microphones, Cochlear hearing aids, and ResMed CPAP machines, are all manufactured in Australia (though I'm not sure all of their world-wide manufacturing happens here, they could have other factories). Would love to get the feedback from people who may have any idea in where and why it sometimes make sense to do your own manufacturing. My issue with Peleton has always been that the cost for a stationary bike is more than the cost of my road bike, and about the same prices as my mountain bike. From my user name, you may be able to tell... I ride, but how many people want to spend the kind of money Peleton is charging to ride indoors? They got the early adopters who were willing to pay the price, but they may have run out of consumers. I know of a few people who LOVE their Peleton, I don't know of anybody who doesn't have one that wants one.

PaulDavisThe1st 5y ago
> I know of a few people who LOVE their Peleton, I don't know of anybody who doesn't have one that wants one. Bingo. The growth opportunities at this price point seem to be close to zero. Move the price point by a factor of 5, and maybe (maybe) that changes. Meanwhile, you can pry my Racermate Computrainer from my cold, dead hands :)