Company Avoids Crises by Responding Honestly and Effectively to Challenges
11/6/2020 – – Peloton Interactive, the company that revolutionized in-home fitness with its very cool exercise bikes and internet subscription programming, yesterday reported a sales increase of 232 percent in the quarter ended September 30. Among large-cap stocks, only Zoom Video Communications has performed better for investors than Peloton during this COVID-challenged year.
But the news was not all good. Peloton CEO/Founder John Foley, leveling with investors, warned that explosive demand has created “a substantial backlog of deliveries” that the company does not expect to catch up with until “at least June 2021.” Prospective customers hoping to place a Peloton bike under their Christmas tree may be out of luck, creating an opportunity for lower-priced competitors.
Being unable to keep up with demand is a common growing pain for category leaders experiencing explosive growth. Peloton was doing well even before the coronavirus pandemic locked us in our homes and shuttered popular gyms and storefront spinning facilities. With no end to COVID risk in sight, there now are 3.6 million subscribers to Peloton’s membership programs, up from 563,000 at this time last year.
Last month the Peloton leadership team faced another growth-related challenge when it announced a voluntary recall of pedals that have been breaking on bikes sold between July 2013 and May 2016. According to a joint news release issued by Peloton and the U.S. Consumer Product Safety Commission, there have been 120 reports of breakage, resulting in 16 injuries requiring medical attention. Stating that, “There is no greater priority than the safety and well-being of Peloton members,” the company offered customers owning the approximately 27,000 bikes covered by the recall free replacement pedals along with plenty of instruction and support.
During my career, I’ve worked on a number of product recalls. While these can be emotionally draining and very expensive for a company, they come with one big advantage when it comes to action and communication. A company’s response priority is crystal clear: public safety.
It’s no disgrace for a company to admit a problem and fix it. Visit the website Recalls.gov at any time and you’ll see the dozens of products listed under the site’s categories of consumer products, motor vehicles, boats, food, medicine, cosmetics and environmental products. No company wants to be listed, but those that are usually find themselves in good company. The disgrace comes if you ignore a problem and leave the consumer vulnerable to harm.
It looks like Peloton, by acting quickly and offering its customers easy resolution, has passed its recall test and avoided a crisis. Given the popularity of Peloton’s products and communication platforms, my bet is that demand will stay strong despite availability backlogs. By being honest with investors, maintaining manufacturing quality as it races to fulfill orders, and placing safety first, Peloton has demonstrated that it’s operating with a long view and not just spinning its wheels.