Peloton, one of the most famous companies in the fitness market, is making some changes, including switching to new suppliers to cut costs.
On Tuesday, July 13, the company announced that it would use Apple's suppliers and no longer rely on its own factories.
This is after the company had faced several fumbles in 2021, from several reported accidents to declining demand for its products post-pandemic. Peloton is looking for ways to keep the costs down, according to 9to5Mac.
Peloton to Use Apple's Suppliers
Peloton is currently in talks of a potential buy-out or investment from Apple, but it is also keeping its doors open for Amazon.
In its latest bid to reduce spending, the company is turning to tech giants to work with them to assemble their products.
Instead of splitting the manufacturing of its products between its own facilities and partners, the company will stop the production of the treadmills and bikes at its facilities in favor of relying solely on third parties, according to Bloomberg.
Also Read: Peloton Under Investigation Due to Several Injuries Involving its Equipment
The work done by facilities that are operated by Peloton's subsidiary Tonic Fitness Technology will instead be done by Rexon, the company's partner.
Andrew Rendich, Peloton's chief supply chain officer, said that they are "going back to nothing but partnered manufacturing" and that it allows them to "ramp up and ramp down based on capacity and demand.
Rendich believes that having dual supply chains need more resources, and so making an external-only approach could help cut costs and improve the quality of their products.
Aside from using Apple's manufacturers, Peloton is also planning to work with firms in Apple's supply chain.
It already works with Quanta Computer on touch screens for its treadmills and bikes, but it is also thinking of working with Pegatron Corp for its rowing machines.
The shift in manufacturing strategy is the latest move by Peloton to improve its financial standing. After its cost problems made it an acquisition target, the company moved to fix its issues.
One of the cost-cutting moves that Peloton did was laying off 2,800 employees in February after it got a new CEO. In April, the company increased its subscription fees and cut the prices on hardware.
What Went Wrong?
According to CNBC, consumers have now become more comfortable with going back to the gym and their fitness classes as the COVID-19 restrictions have eased up. Now, the demand for their products has declined.
In January, Peloton cited inflation and supply chain issues as reasons for raising its prices. The company added $250 per bike and $350 per treadmill.
The company also hired McKinsey, a management consulting firm, to help them with cost structure, but it resulted in thousands of layoffs.
In February, Peloton halted the production of its Bike for two months and its treadmills for six weeks. The debut of the company's Peloton Guide, a $495 strength training product that connects to the customer's TV, was also placed on hold due to the decreasing demand.
In the midst of it all, Peloton's CEO John Foley remains optimistic as its subscriber base approaches 3 million users.
Related Article: Peloton Adds New Feature, Lanebreak, Turns Bike Rides Into a Game
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Written by Sophie Webster
