Early signs are that Amazon’s customers are hopping on; Amazon called out the Peloton Bike as one of the bestselling products in its Prime Early Access Sale event that took place in mid-October. And on Peloton’s earnings call earlier this month, Chief Executive Officer

Barry McCarthy

said the relationship “has outperformed our expectations for sure.”

That is a good sign for Peloton’s holiday season, which will be the company’s first using outside retail partners. The connected fitness pioneer has typically sold and distributed its products directly, either online or through dedicated showrooms. That was sufficient when Peloton was riding the pandemic wave of home-based workouts and able to sell every pricey stationary bike and treadmill it could make.

But sales cooled quickly as the world began to recover, and missteps by prior management exacerbated the problem of unsold gear taking a long breather on the company’s books. Peloton ended the calendar year of 2021 with inventory of a little over $1.5 billion—three times the level from the same point the prior year. 

Even fitness pros need help slimming down sometimes, but Amazon’s help won’t come cheap. The deal is a wholesale relationship, which means Amazon buys the bikes from Peloton then sells them at a markup. Analysts estimate that Peloton’s average selling price hit $1,780 in the September quarter, down 16% year-over-year and the lowest for the company in at least three years, according to data from Visible Alpha. And that was before holiday promotions; as of the day before Thanksgiving, Amazon was offering the Peloton Bike for 21% off the regular price as part of its Black Friday sale. 

Peloton’s hardware revenue of $204 million for the quarter fell 8% shy of analysts’ projections, indicating that Wall Street hadn’t fully baked in the Amazon discount. In Peloton’s most recent earnings call earlier this month, Mr. McCarthy admitted that using outside retail partners like Amazon “comes at the cost of some margin.”

It might still be worth it, if it helps Peloton bring inventory under control and expand its subscriber base—a key goal of Mr. McCarthy’s. “What this deal shows is Peloton is looking to move units, and Amazon is the best mover of units,” said Simeon Siegel of BMO Capital Markets in an interview.

But the pandemic made Peloton almost as famous as Zoom, so many of Amazon’s customers—especially the more well-heeled ones already paying for a Prime membership—are likely already aware of the service and have so far chosen not to hop on.

“The days of posting your Peloton proudly on social media are behind us,” Mr. Siegel said. “At the end of day, I don’t know that selling on Amazon creates demand.” 

It had better create some. Peloton has been burning cash for the last two years. It has also watched its subscriber growth slow to a trickle. The company added just 13,000 connected fitness subscribers in the last two quarters combined, about 6% of its average additions per quarter over the previous four periods.

Mr. McCarthy said in the most recent report that he expects free cash flow to reach “near break-even” in the second half of the fiscal year that ends in June 2023. He also expects Amazon to play a key role in the evolution of the company’s business model “from mostly fixed to mostly variable costs.” 

That will take more than a boost from Amazon. Peloton says it is working to slim down its own retail footprint; it had 135 such “showrooms” as of June 30. Wall Street doesn’t expect Peloton’s annual adjusted earnings before interest, tax, depreciation and amortization to be positive until fiscal 2024. Amazon can help work off some holiday weight, but Peloton’s health still lies in its own hands. 

Write to Dan Gallagher at dan.gallagher@wsj.com