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Peloton Pedals On Even During COVID-19

Brooke Banta

ID: 49815730

Econ20A

3/10/2021

COVID-19 forced many people into stay-at-home lockdowns jeopardizing their memberships to neighborhood gyms. With energy to burn and a need for a personal outlet, people continued to desire the opportunity to workout even if it meant altering their highly social, community based routines. Turning to at-home gyms, people sought new means of engaging with others while working out.

As the pandemic progressed, gone were the days of meeting co-workers after work for a trip to the gym or gathering young mothers for spin and a latte. Peloton members were now riding with Beyonce’ and connecting via the internet with friends and acquaintances around the country to compete and encourage one another through strenuous stationed cycling.

|Supply and Demand|

With the closing of all public workout studios and gyms during the start of the pandemic in March 2020, the demand for in-home workout equipment skyrocketed. The need for Peloton bikes greatly outweighed the supply of bicycles available. 

The major seaports became stressed with a surge of imports brought on by pandemic-induced buying while the workforce was adversely affected by the coronavirus. To account for the product delay at the seaports, CEO of Peloton, John Foley, announced they “will be incurring a transportation and delivery cost that is over ten times our usual cost per Bike and Tread, including, in many cases, shipping them by air instead of by sea.” 

“CEO John Foley announced on the earnings call the company would invest $100 million to speed up delivery for its connected products, acknowledging continued problems with delivery delays that are stretching into months rather than weeks. Foley noted port congestion on the West Coast as a significant problem.”

Peloton was forced to address their diminished supply of product while meeting their increasing demand by pivoting in the area of product transportation reducing the reliance on seaport efficiency. 

Brad Olson, chief membership officer commented on the success of Peloton stating, “We do believe that the pandemic has compelled consumers to reevaluate their fitness routines and many have discovered that the best, most connected workout can actually be experienced at home.” As consumers adapt to this new style of exercise, gyms and workout facilities, such as spin cycle businesses and rock climbing businesses remain closed waiting for counties to improve their position in the tier system.

This new workout platform “sent Peloton stock soaring more than 400 percent in 2020 and helped catapult it into profitability.”

Peloton went public on the Nasdaq exchange in September of last year and managed to keep its stock price afloat through the start of the pandemic. In May, the price surged due to a blockbuster quarterly earnings report, which showed a revenue surge of 66% year over year to $526 million. Shares have more than quadrupled since the start of May when the firm said quarterly revenue growth had once again surpassed expectations climbing 172%.

As you can see, my father was very excited to receive his very own Peloton bike. The limited supply of bikes added to his enthusiasm. 

Thanks for reading!

Sources

Ponciano, Jonathon. “Peloton Has Soared 350% In 2020. Here’s Why The Stock Will Keep Rising This Year, According To Experts.” Oct 15, 2020. Forbes. https://www.forbes.com/sites/jonathanponciano/2020/10/15/peloton-stock-soared-350-in-2020/?sh=2274af491ccc

Straight, Brian. “COVID broke Peloton’s supply chain – can $100M fix it?” February 6, 2021. FREIGHTWAVES. https://www.freightwaves.com/news/covid-broke-pelotons-supply-chain-can-100m-fix-it