Indoor Biking – Are we in the course of a recession?

Looking at some headlines over the past few months, one could excuse if one thinks that indoor cycling has weathered the storm.

Earlier this year we took a close look at what’s happening at Peloton. The brand was struggling and we wanted to know what was going on. In the end, it looked like the brand was largely to blame for its own challenges, but it didn’t happen in a vacuum. Peloton made mistakes and put the brand in a difficult position to deal with outside pressure.

While Peloton has seen a bit of bad publicity in the form of storylines from popular TV shows, the real problem has been basic supply and demand. In 2020, as the pandemic transformed the world as we know it, home fitness equipment saw a huge surge in demand. Peloton was at the forefront of an unprecedented wave of demand, and it looked like the biggest challenge was getting the gear into consumers’ hands. The company invested heavily in increasing production capacity only to see the demand wave collapse. Consumers are fickle when it comes to fitness equipment, and despite what appears to be a strong core business, Peloton oversupplied when demand waned.

Then this month’s news broke that Zwift is changing its long-term plans. There have been rumors of an upcoming Zwift hardware deal and a major expansion of what Zwift has always offered. As of late last year, Zwift had been hiring behind the scenes and taking steps to prepare. Suddenly it was implied that about 20% of the Zwift employee base had become unemployed and we saw official confirmation of a change in long-term strategy.

We wanted to know if these two messages are related and how they fit into the larger story of the world right now. Is the world economy in recession or just indoor cycling?

To kick things off, we went back to Zwift and asked their opinion. A Zwift spokesperson replied: “It is clear that we are entering a period of volatility for all sectors due to rising inflation, rising energy costs, supply chain constraints, an ongoing war in Europe, the ever-changing impact of COVID and other macroeconomic conditions the economy. It would be unreasonable to think that the indoor cycling category would be immune to this kind of broad economic trend. However, the number of people riding, training and racing in Zwift continues to grow year after year. This week’s restructuring will allow us to maintain a position of financial security at a time of uncertainty, while also focusing on improving the Zwift platform to give all types of cyclists and runners access to increasingly better ways to be with one another to connect and stay fit. “

That’s a pretty clear and succinct statement that puts the blame outside of the Zwift business. However, Zwift’s appeal is to put the blame on the outside, so we looked to see if there was a way to back up that statement. Wahoo is another leader in the indoor cycling market, but at this point they haven’t responded to our questions. The same goes for Shimano.

Zwift needs to talk because they’ve made very public changes to their long-term plan. Anyone who’s played their cards a little closer to the chest doesn’t need to talk, so it’s not surprising that they don’t.

Indoor cycling with Elite and Zwift

(Image credit: Elite)

If you’re feeling a little unsure of where this is leaving us, you’re not alone. It’s not just the bike world either. If you look beyond our little corner of the economy, there are many confusing messages and uncertainties. Planet Money on NPR recently had a show covering just that uncertainty. On May 20th, The Indicator reported on how confusing the economic outlook is at the moment. In the US at least, manufacturing has increased, house prices have stayed high and unemployment remains low, but there are significant concerns. There are also some leading indicators that are starting to blink. Planet Money specifically covers the 11% of delinquent subprime personal loan accounts.

If you’re hoping the answer to the question is just that indoor cycling experiences a little contraction, there’s a bright spot we’ve been able to find. In this author’s area of ​​the Pacific Northwest, we went to a small, local hotel to see what their numbers looked like. We wanted to see if the long, cold spring and winter and the pandemic could be helping pent-up demand outside. What we got back is that this small hotel has seen a 40% year-to-date increase in revenue year-over-year. This confirms what The New York Times predicted in its February article on spring 2022 travel trends, citing an analysis of the short-term rental market showing a 30-60% increase in bookings compared to 2019. Notably, these increases come in small towns and resorts. Just the kind of places that are perfect for cycling.

It is clear that people are travelling, and this coincides with a growing trend towards bicycle availability. The market has barely returned to normal, but time has passed and more cautious brands have either made up their minds or been able to ramp up production. Even some of the best budget road bikes are actually back in stores, the weather is looking a lot better and people are getting outside both locally and touring.

This coincides with very real market pressures. Fuel costs are rising sharply and this is affecting shipping. Smart trainers are heavy and shipping affects profitability. There are also global supply chain challenges. The components needed to build a smart trainer are scarce and prices are high. Additionally, Zwift has previously reported that demand for the sneakers they sell as retailers has waned. If the brand went ahead with new hardware, it would withstand all of these market challenges plus rising borrowing costs.

Rather than blaming Zwift for failure and the economy teetering on the brink of disaster, it might be worth striking a tone of optimism. Cyclists are coming outside and that is having an impact on indoor cycling. The Zwift and Peloton stories have a connection, but only as examples of two different ways of dealing with market pressures. Peloton wasn’t careful and it cost them. Zwift is cautious and focused on its core business. The hardest thing about the situation is that people are losing jobs and that’s always hard to see.

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