Maggie Lu uses a Peloton Tread treadmill during CES 2018 at the Las Vegas Convention Center on January 11, 2018 in Las Vegas, Nevada.
Ethan Miller | Getty Images
A public dispute with a federal security agency and a creepy video of a child dragged under a treadmill threaten the community that Peloton has built.
Parents and training addicts who own Peloton products take their heads off and take to social media platforms and community chat rooms to discuss the fitness equipment maker’s response to the US Consumer Product Safety Commission. The agency is studying the safety of Peloton’s high-end duct tape, which has now been linked to numerous injuries and the death of a child.
Peloton has said he has no intention of recalling the $ 4,300 Tread +, despite calls from regulators and politicians to do so.
The round trip jeopardizes the launch of the Peloton treadmill in the US later this year. Brand experts and lawyers warn that the longer it lasts, the greater the risk Peloton faces of a growing consumer reaction, which requires higher damage control and costs more money.
“There is a general rule that goes back to the Tylenol case, where people were poisoned,” said Luc Wathieu, a professor of marketing at Georgetown University’s McDonough School of Business.
Tylenol became a textbook crisis management case in the 1980s, when someone manipulated Tylenol Extra Fort capsules, adding lethal potassium cyanide and killing several people. Johnson & Johnson acted quickly to develop a strategy to regain trust with Americans.
“When there is a threat to the customer (which is made public that way), it needs to be overcompensated,” Wathieu said in a telephone interview. “But for some reason, companies tend not to do that, although it has been shown time and time again that we need to act quickly.”
Over the weekend, the CPSC issued a statement saying consumers should stop using the Peloton’s Tread + machine when there are young children or pets. The move came after the organization’s investigation into the death of a child related to one of the Tread + machines, as well as dozens of other reports of injuries.
The commission simultaneously released a graphic video, captured by a home security camera, of a young boy being thrown under one of the Tread + machines and struggling to break free.
The CPSC has also said Peloton’s treadmills are designed differently than those of its peers, with “an unusual belt design that uses individualized rigid slats or treads that interlock and circulate on a rail.” This is instead of a thinner continuous belt. There’s also a big gap between the floor and the Tread + belt, which leaves room for things to move.
Peloton said its design is designed to make running on the knees and legs easier.
For now, the company is declining to withdraw the product from the market or make design changes. Peloton said he was “shocked and devastated” to meet the deadly victim last month. However, he also issued a statement this past weekend calling the CPSC’s press release “inaccurate and misleading.”
Peloton CEO and co-founder John Foley wrote in a separate letter to tape tape owners that the company is working on a new software-enabled backup code that will provide an additional layer of protection against unwanted use of Tread + “.
“Tread + is safe when our warnings and safety instructions are followed,” Foley said in the letter.
A Peloton spokesman declined to comment further.
“I’ve never seen a fight like that”
The business is best known for its stationary bikes and did not release a treadmill until 2018. First it was called Tread, now known as Tread +, because the company is preparing to start selling a less expensive version in the United States. later course. The smallest and cheapest model is already on sale in the UK and does not include the same rigid slats as the Tread +.
The clash with the CPSC has not been good for Peloton’s actions. Shares fell 7% on Monday. Shares closed at $ 106.50 on Tuesday afternoon, up 1.2%. Over the past three months, Peloton shares have fallen more than 32%, to an intraday figure of $ 171.09 on January 14th. There is a huge readiness in 2020, when investors saw Peloton as a permanent home gambling and pandemic beneficiary, which exceeds 400% of the shares. But as fitness centers begin to open, some of those gains have been left behind.
According to BMO analyst Simeon Siegel, the price of Peloton shares has recently been “detached” from the underlying fundamentals and published results.
Actions seem “governed by perception and hope,” he said. Siegel has a lower rating on Platoon shares with a target price of $ 45.
“Most of Peloton’s market cap has been created by its marketing department rather than its teams, engineers or instructors,” Siegel said. “They’ve been telling a story … And that Peloton story is much bigger than the membership base that Peloton pays for.”
Over the past six months, Siegel said, Peloton’s messages have begun to stumble as the business grows exponentially during the pandemic.
“Whether it’s Tread +, or responding to customers on the supply chain, … at the end of the day, as companies grow, they face obstacles and can’t face them all hard” , said Siegel.
Although Peloton does not produce sales of its treadmills compared to cycles, Cowen & Co. has estimated that the Tread + will account for approximately 2.2% of unit sales by 2021. That was about 1,633 million stationary bikes and treadmills combined, he said.
In 2020, Peloton had revenue of $ 1.8 billion, up from $ 915 million the previous year.
Cowen analyst John Blackledge said he predicts that most of Peloton’s treadmill opportunity will come from its upcoming Tread model, which is priced more affordable than the $ 4,300 Tread +. Hopefully, he said, the new model will avoid similar problems with the CPSC, as the belt does not wrap under the machine.
Peloton has said it is open to working with the CPSC to further ensure its customers are safe. He said his classes include safety messages from instructors to remind users to keep their children, pets and other objects off the tread + during workouts and to remove a safety key after workouts so children don’t can activate the machines.
Disagreements with the federal agency in charge of protecting American consumers from dangerous products, however, are rare. The CPSC cannot force a withdrawal, but in the past it has sued companies to get them to comply.
Peloton has also complied with the agency. Last fall it issued a recall of a version of its fixable bike pedals due to the risk of axle breakage and user injuries, affecting some 27,000 motorcycles.
“To be honest with you, I haven’t seen a fight like this here,” said Anthony Gair, a partner at Gair, Gair, Conason, Rubinowitz, Bloom, Hershenhorn, Steigman and Mackauf, who specializes in personal testing. cases of injuries related to defective products.
“The CPSC must have reason to believe that it has not been properly designed,” he said. “Warnings are the last resort. So the question becomes, ‘Have they done a proper risk analysis, yes or no?’ “And if they did a proper risk analysis, ‘did you identify that danger?’