Maggie Lu uses a peloton 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 agency over safety concerns and an icy video of a child being dragged under a treadmill threaten the community that built Peloton.
Parents and addicts of training sessions that feature Peloton products scratch their heads and go to social media platforms and community chat rooms to discuss the answer from the fitness equipment manufacturer to the U.S. Consumer Products Commission. The agency is investigating the safety of Peloton’s high-treadmill, which has been linked to numerous injuries and the death of one child.
Peloton has said it does not intend to get its $ 4,300 Tread + back, despite calls from regulators and politicians to do so.
The back-and-forth danger further jeopardizes the launch of Peloton’s cheaper treadmill later this year. Brand experts and advocates warn that the longer Peloton walks to face growing consumer avenues, the more damage control is needed and the more money it costs.
“There’s a rule that goes back to the Tylenol case, where people were poisoned,” said Luc Wathieu, a professor of marketing at McDonough School of Business, Georgetown University.
Tylenol became a crisis management case in the textbook in the 80s, when someone tampered with Extra Strength capsules Tylenol by adding deadly potassium cyanide and killing several people. Johnson & Johnson acted quickly to develop a strategy to regain trust with Americans.
“If there’s a threat to the customer – one that is so public – you have to compensate too much,” Wathieu said in a telephone interview. “But for some reason, companies tend not to do that, even though it’s been shown time and time again that you need to act fast.”
The CPSC issued a statement over the weekend urging consumers to stop using Peloton’s Tread + machine if there are small children or pets. The move came after the organization investigated the death of a child involving one of the Tread + machines, as well as dozens of other reports of injuries.
At the same time, the commission released a graphic video, captured by a security camera for the home, of a young boy being pulled under one of the Tread + machines and struggling to free himself.
The CPSC further said that Peloton’s careers are designed differently from its peers, with an unusual tire design that uses individual rigid rubber slats or treads that are connected to each other and ride on a track. ‘It’s instead of a thinner, continuous band. There is also a large gap between the floor and the tire of the Tread +, which leaves room for things to wrap underneath.
Peloton said its design is meant to facilitate running on the knees and legs.
For now, the company does not want to take the product off the market or make design changes. Peloton said it was ‘shocked and devastated’ to learn of the deadly death last month. However, it also issued a statement this past weekend in which the press release of the CPSC is ‘inaccurate and misleading’.
Peloton CEO and co-founder John Foley wrote in a separate letter to treadmill owners that the company is working on a new software-reactive backup code “that provides extra protection against unwanted use of the Tread +.”
“The Tread + is safe if we follow warnings and safety instructions,” Foley said in the letter.
A Peloton spokesman declined to comment further.
“I have never seen a fight like this before”
The company is better known for its stationary bikes and first launched a treadmill until 2018. It was first called the Tread, it is now known as the Tread +, because the company is ready to launch a later in the United States. cheaper version to sell. year. The smaller, cheaper model is already on sale in the UK and does not contain the same rigid plates as the Tread +.
The clash with the CPSC was not good for Peloton’s share. Shares fell 7% on Monday. The stock closed at $ 106.50 on Tuesday afternoon, up another 1.2%. Over the past three months, Peloton shares have tumbled more than 32%, with an all-time high of $ 171.09 on January 14th. This follows a major run-up in 2020, when investors viewed Peloton as a stay-favored home game and pandemic, increasing stocks by more than 400%. But when fitness centers start reopening, some of these profits have been given up.
According to BMO analyst Simeon Siegel, Peloton’s share price was recently ‘detached’ from the underlying principles and reported results.
The stock appears to be ‘governed by perception and hope’, he said. Siegel has an underperformance rating on Peloton shares with a price target of $ 45.
“Most of Peloton’s market capitalization was created by the marketing department rather than by equipment, engineers or instructors,” Siegel said. “They told a story … And that Peloton story is so much bigger than the Peloton-paying member base.”
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 across the supply chain, … at the end of the day, as companies grow, they face obstacles and can not all be confronted with violence,” said Siegel.
While Peloton does not break out the sales of his careers towards cycles, Cowen & Co. estimates. that the treadmill in 2021 will represent about 2.2% of unit sales. That’s about 1.633 million stationary bikes and careers combined.
In 2020, Peloton reported $ 1.8 billion in revenue, up from $ 915 million a year earlier.
Cowen analyst John Blackledge said he would expect most of Peloton’s long-term career opportunity through the upcoming Tread model, which is cheaper than the $ 4,300 Tread +. Hopefully the newer model will avoid similar problems with the CPSC, as the tire does not rotate under the machine.
Peloton said it was open to working with the CPSC to further ensure its customers were safe. The classes are said to include safety messages from instructors to remind users not to keep their children, pets and other objects off the treadmill + during workouts, and to remove a safety key after the workout so children can not use the machines do not activate.
Opinions are few, however, with the federal agency responsible for protecting U.S. consumers from hazardous products. The CPSC cannot force a repeal, but has sued businesses in the past to get them complied with.
Peloton has also previously complied with the agency. Last fall, it issued a recall for a version of its built-in bicycle pedals due to the risk of the axle being broken and injured, affecting approximately 27,000 bicycles.
“To be honest with you, I have never seen such a fight take place here,” said Anthony Gair, a partner at Gair, Gair, Conason, Rubinowitz, Bloom, Hershenhorn, Steigman & Mackauf, who specializes in the attempt at personal injury cases linked to defective products.
“The CPSC must have reason to believe that it was not designed appropriately,” he said. “Warnings are the last resort. And the question becomes: ‘Did they do a proper hazard analysis, whether yes or no?’ And if they did a proper hazard analysis, “Did the hazard analysis identify this hazard?”