“We have to make our revenues stop shrinking and start growing again,” McCarthy said in the memo provided to Bloomberg, adding that the changes are essential to making Peloton cash-flow positive again. “Cash is oxygen. Oxygen is life.”
Read the full memo here.
In its third known set of layoffs this year, the company will fire 784 employees across its distribution and customer service teams. Peloton will stop using in-house employees and vans to deliver equipment and shutter 16 warehouses across North America. Instead, it will rely on providers of third-party logistics, or 3PL, to set up bikes and treadmills at customer homes.
Peloton already uses third-party shipping companies JB Hunt Transport Services Inc. and XPO Logistics Inc. for some deliveries and will offload its remaining in-house distribution to those firms. The company acknowledged that such a change might not be loved by all buyers, as some have complained that the third-party delivery services aren’t on par with Peloton’s own efforts.
“This has been a challenge,” McCarthy told staff. “We won’t fix it overnight, but we have no choice but to make it work, so we’re leaning into it and proactively managing our 3PL relationships. We are confident in the plan we’ve put in place and we’re encouraged by the progress we’re making.”
Peloton is also cutting about half of its customer support team, which is mainly located in Tempe, Arizona, and Plano, Texas. The company will use third-party firms to handle support requests as needed to augment the staff it is keeping. “These expanded partnerships mean we can ensure we have the ability to scale up and down as volume fluctuates while still continuing to provide the level of service our members have come to expect,” McCarthy wrote.
The winding down of in-house deliveries, distribution and warehouses will eliminate 532 jobs, while another 252 will be culled from support teams. Peloton said last month it would cut about 570 employees in Taiwan as part of a move away from in-house equipment manufacturing. In February, it fired nearly 3,000 employees across the company.
Still, McCarthy said the company will continue to hire in key areas, including its software engineering group. “I share this so you won’t think we’re driving with our foot on the gas and the brake at the same time,” he said.