Peloton to charge sizable 'activation fee' for used equipment purchases

Consumers in the United States and Canada who buy used Peloton exercise machines will face a "used equipment activation fee."

The fitness company, which reported its fourth-quarter earnings Thursday, revealed it will begin collecting the new one-time fee from people who acquire their Peloton equipment from former owners through secondary sales not conducted by "Peloton-owned channels or any of our third-party distribution partners."

The "used equipment activation fee" will cost $95 in the U.S. In Canada, it will be $125 CAD.

Peloton said secondary market buyers subject to the activation fee will get deals on Peloton accessories.

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Those charged the fee for a Bike or Bike+ will also get a "virtual custom fitting" so they "can get the most out of their first ride" and their machine’s history summary, according to the fitness company.

"Although these secondary market sales are not from Peloton-owned channels or any of our third-party distribution partners, we want to ensure these new members receive the same high-quality onboarding experience Peloton is known for," Peloton said. 

The company also identified the secondary market as an "important channel" for the company.

"The secondary market is an important source of subscribers for us and continues to deliver a steady stream of paid connected fitness subscribers, which were up 16% year over year in Q4," Interim Co-CEO Chris Bruzzo said.

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Peloton reported subscribers that buy pre-owned equipment "exhibit lower net churn rates" compared to those who rent machines.

"We’ll continue to lean into this important channel and find additional ways to improve the new member experience," Bruzzo said. "It’s also worth highlighting that this activation fee will be a source of incremental revenue and gross profit for us, helping to support our investments in improving the fitness experience for our members."

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The company reported 2.997 million paid connected fitness subscriptions and 828,000 paid app subscriptions at the end of the fourth quarter. Overall, members to its platform totaled 6.5 million, it said.

Peloton’s lineup of exercise machines includes bikes, treadmills and rowing machines.