Peloton outsources production of fitness equipment to Taiwan
The Corona pandemic has had many losers. These include not only all those who fell victim to the virus or are still suffering today from the long-term consequences known as Long Covid. Many companies also suffered heavy economic losses, which sometimes led to company closures. But where there are losers, there are always shining winners. In particular, it was the blanket lockdowns and travel bans that some companies were able to take advantage of. These include not only global giants like Netflix and Amazon. Peloton was also able to take the world by storm with the idea of its interactive fitness devices. Who’s surprised? After all, many people didn’t want to give up their sport despite closed gyms. Now that business is not as excellent as it was a few weeks ago, Peloton wants to change a crucial point in its production. The treadmill and ergometer will now no longer be built in-house. Instead, the company wants to hand over manufacturing to Rexon.
Cost savings through outsourcing
Peloton’s management is hoping for several advantages from the complete outsourcing of production. For one, the New York-based company wants to avoid the problems of broken supply chains. One can certainly understand this. After all, Rexon, the manufacturing company, is located in Taiwan. This would eliminate the need to ship important goods required for manufacturing. But beyond that, the paradigm shift naturally also focuses on another point. Peloton wants to save costs. The move seems surprisingly sensible. After all, the company hasn’t really distinguished itself with smart decisions in recent months.
For example, when fitness equipment sales skyrocketed at the start of the Corona pandemic, the company completely misinterpreted the numbers. Instead of assuming a temporary boom related to closed gyms and people’s general wariness, they believed that sales would increase permanently. So the company even built itself a large factory in the U.S. to keep up with demand. When this dropped again with the relaxation of protective measures, Peloton probably quickly faced costs that were too high and had not been anticipated. The result was full warehouses and a pause in production.
Sad losses in the last quarter
Of course, the poorer sales figures were also reflected in the balance sheet. For example, while Peloton now had plenty of bikes and treadmills in its warehouses due to the increased production volume, the company was not able to find the right buyers for the smart fitness bikes. However, there were no suitable buyers for the smart fitness equipment. So it came as it had to and the company was in the red. A loss of 757 million US dollars had to be accepted. Now things are slowly but surely looking up again. Peloton CEO Barry McCarthy can certainly be trusted in view of his professional past in outsourcing production. After all, he has already worked successfully as chief financial officer at Spotify and Netflix in the past. We’re curious to see if the plan works out and Peloton can save itself. Did you know that during the Corona pandemic, pretty much every Internet company succeeded? This can be seen in the sharp increase in traffic that experts were able to track in 2021.
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