Peloton decided to offer its products on Amazon.1 Intriguing. Peloton sells high-end home fitness equipment and home fitness classes, often using such equipment. Recent trends in consumer products have been to sell direct to consumer (D2C), which is what the company was doing prior to the Amazon liaison. Adding a layer between the company and the customer, may increase costs, logistics and perturbs the customer relationship. I’m trying to work out the strategic logic for the shift.
There are a few reasons selling Peloton’s products on Amazon could make business sense:
1. Amazon has the attention of the target market for Peloton’s products.
2. Peloton’s products have an additional market that Amazon can introduce it to.
3. The logistics of selling and delivering Peloton’s products are more cost effective when administered by Amazon.
4. Peloton’s products are more appropriate for, or will be tailored to, a less specialized market.
The business speak for the move is ‘adding channels of distribution’. It makes sense if the new channel can make additional markets aware of the product or make the product easier for customers to purchase. It’s a bit hard to understand what this means, in the age of online retail. If Peloton sells its wares online, they are accessible to everyone. Everyone has the ability to find and get to an online store, unless Peloton’s goods do not feature prominently in the some people’s search results. Amazon’s role may be to improve this, making more potential buyers aware of Peloton. This assumes Amazon has the attention of people who are likely to purchase Peloton products.
Peloton’s fitness equipment and classes suggest luxury, quality, and personalized service. One would expect:
- Equipment designed with the latest technology and the most recent knowledge of best practices in kinematics of fitness. The machines should be aesthetically pleasing beyond function, and constructed of durable, sturdy, adaptable materials, standing the test of time for usefulness.
- Service products of similarly high quality with adaptability and responsiveness to the client from the instructors/trainers/guides.
Peloton’s products are by definition differentiated. Psychographically, the customers for Peloton products are serious about fitness, direct significant of their resources towards fitness purchases, and value health and wellbeing.
Amazon is a mass market medium for general retail/consumer products. Mass market implies selling commonly purchased items (laundry detergent, dog food, socks etc.) for a good price. This doesn’t sound like a good fit for luxury fitness equipment. Peloton’s strategy depends on Amazon’s customer targeting algorithms finding fitness enthusiasts willing to spend a month’s salary on equipment and a month’s grocery bill on a subscription to fitness classes.
People go to Amazon to find things they need for a good price, and get it delivered quickly. Customers looking for specialized items, like Peloton equipment, may not be in such a hurry – quick delivery is generally good but not necessarily a differentiating factor for everything.
Have the marketing algorithms become so strong that what people go looking for is irrelevant? Is it the other way around – the products that might appeal to a person find them, through targeted ads. If a consumer is using Google to search for exercise bikes, will Amazon immediately appear at the top of their page, with a link to a Peloton product?
Amazon was originally the ‘long tail’ business model prototype – selling a wide variety of things. Sometimes consumers go to Amazon because its the only place to find unusual, rather than specialty, things. Unusual things can be generic, where brand names don’t matter, like a pink shower curtain with puppies on it, a case of tooth picks, or birthday candles for all years from one to 100. Compare these items to designer linens, Rolex watches, or caviar. They are unusual but not hard to find from specialty vendors.
More data: many, many people go to Amazon and search for Peloton products2. This is illuminating, as it explains why the Peloton management and Amazon sales folks would come to the conclusion that there are Amazon shoppers interested in Peloton products.
Perhaps this is merely consumers seeking a less expensive, Peloton-like, product from their favourite retailer (Amazon) and has been misinterpreted by Peloton and Amazon as a group of consumers who wish to find Peloton products on Amazon.
If you were looking for a Peloton product, your Google search point you to the Peloton page3. If you didn’t know exactly what you wanted in home fitness equipment, why would Amazon be the first stop on Google, when plenty of specialized providers of workout machines should have their pages optimized to answer just such a query. Unless people use Amazon to search for all their retail needs. This is how you spell monopoly.
Something is disintegrating: The luxury goods business model. Google searches. Choices in retail channels. The concept of differentiated products. I’ll be watching Peloton’s earnings reports closely for signs of any of these, four horsemen of the retail apocalypse.
An interesting update: Peloton has sold a significant quantity of equipment to a high quality hotel chain.4 This makes perfect, differentiated business, new selling channel (B2B), new market segments (enterprises that can enhance their services by adding specialized fitness equipment), business strategy sense to me. 😁
1This story was everywhere, https://www.investopedia.com/peloton-amazon-sales-6502592 and here’s the original from the company https://investor.onepeloton.com/news-releases/news-release-details/peloton-launches-products-apparel-and-accessories-amazons-us
2This is great analysis of the situation from Jon Fortt: https://www.youtube.com/watch?v=O61J-1X2vWg
3If I understand the virtual universe properly, or how search engines work: The most literal match of the query should be the first one. So, if Peloton is the query, Peloton’s site should be the first match. It is when I google.