Barry McCarthy, Peloton's CEO, tests new pricing model and hires supply chain chief.

• Barry McCarthy, Peloton's new CEO, has been in charge for just a month but is already exploring methods to increase the company's profitability.
• The company will introduce a new pricing system on Friday, which includes a monthly fee for both workout equipment and on-demand fitness classes.
• The test will be conducted in Texas, Florida, Minnesota, and Denver for a set period, with monthly fees ranging from $60 to $100.
• Grove Collaborative's former chief operating officer, Andrew Rendich, has been appointed as Peloton's chief supply chain officer.

Barry McCarthy, Peloton's new CEO, has only been in charge for a month, but he's already testing ways to attract new customers and increase profits. He's also refreshing the circle of executives closest to him.

Peloton has confirmed that it will implement a new pricing system on Friday, where customers pay a monthly fee for both their workout equipment and access to on-demand fitness classes. If a user cancels, Peloton will take back the Bike.

The test will be conducted in Texas, Florida, Minnesota, and Denver for a monthly fee ranging from $60 to $100. Customers can only select this option through Peloton's physical stores or fitness studios, not online.

Peloton has appointed Andrew Rendich, former COO of Grove Collaborative, as its new chief supply chain officer, effective next week. Additionally, Shari Eaton, the company's current global head of people, has been promoted to chief people officer, reporting directly to McCarthy.

Peloton is attempting to convince skeptical investors with its new pricing plan, but at least one Wall Street analyst has raised concerns about its potential impact on the company's brand and finances. Over the past 12 months, Peloton's shares have fallen 80%, and in recent weeks, the stock has been trading below its IPO price of $29, closing at $22.61 on Thursday.

In select markets in the US, Peloton launched a limited-time pilot to investigate different pricing models and membership options.

According to Lane's emailed statement, this aligns with Peloton's belief that intuition guides testing and data informs decision-making as the company prepares for its next phase of evolution and growth.

Members who own Peloton equipment pay $39 monthly for access to workout classes, while digital-only members pay $12.99.

The larger initial cost is associated with Peloton's equipment. The original Bike costs $1,745, including delivery and setup fees, while the Bike+ is priced at $2,495. In August, the company reduced the price of its Bike by 20% to $1,495, excluding delivery, in an attempt to attract more customers with a more affordable option. Additionally, Peloton provides financing options through.

McCarthy has stated that prices may decrease in order to expand Peloton's user base beyond the Covid pandemic.

The new CEO, who replaced John Foley as CEO of Peloton, has been assigned the responsibility of restoring profitability to the company, which is currently facing declining demand for at-home fitness products and increasing supply chain costs.

Rendich, Peloton's incoming supply chain chief, has over 12 years of experience at Netflix, holding various roles such as chief service and operations officer.

McCarthy stated in an interview with CNBC's Jim Cramer last month that there is a significant opportunity to modify our business model and increase the total addressable market for new members by reducing the cost of entry and experimenting with the correlation between monthly recurring revenue and upfront revenue.

Simeon Siegel, a BMO Capital Markets analyst, raised concerns about the potential harm that Peloton's bundled pricing strategy could have on its financials and brand image, even though it is only a temporary test.

Siegel stated that the company, which has faced logistic challenges, is now enabling customers to return their equipment promptly. Instead of abandoning the delivery and logistics sector, they are investing more resources into it.

Peloton's low churn rates can be attributed to the fact that people are reluctant to quit the service after investing in one of its bikes or treadmills. The company's average net monthly connected fitness churn rate was 0.79% in the most recent period.

If it becomes easy to cancel and return, what impact will it have on churn? Siegel questioned. Will Peloton become a seasonal experience for customers who rent the bike for four months and then return it when the weather gets nice, resulting in an expensive customer?

Would Peloton adjust the membership fee for individuals who already own their equipment as a result of the pricing test?

Peloton has more than 6.6 million total members, including those who only pay for its workout classes, as of Dec. 31, with 2.77 million connected fitness subscribers.

To attract more customers, Peloton recently increased the length of its free trial for its Bike, Bike+, and Tread machines from 30 days to 100 days.

Peloton is introducing new cardio products, including a strength training device called Peloton Guide and a rowing machine, to compete with rivals such as Hydrow, Tonal, and Mirror. By offering a suite of connected fitness options, Peloton aims to be a stronger competitor and encourage its existing customers to purchase more products within its ecosystem, including its own apparel.

McCarthy, upon becoming CEO, wrote a memo to employees stating that Peloton needed to focus on growth and that this would necessitate taking risks, being willing to fail quickly, learning quickly, adapting and evolving quickly, and repeating the process.

The Wall Street Journal first reported on the pricing tests.