Few companies have experienced a greater surge of customer interest this spring than Peloton Interactive, the Manhattan-based maker of Internet-linked exercise bikes and treadmills. With gyms closed in most states to curb the spread of coronavirus, options for staying in shape quickly narrowed.
Revenues for Peloton’s most recent quarter rose 66 percent, and subscribers paying for access to Peloton’s classes doubled, to 886,000. The company’s 2019 revenue was $915 million; it forecasts that 2020 revenue will surpass $1.7 billion.
“We’re doing everything we can to fulfill all the orders coming in, and to provide all the customer support we can as quickly as we can,” Paster says. “We do have people continuing to work on long-term product innovation initiatives — we just can’t compromise on that — but we have re-balanced our innovation priorities to be more short-term product-, experience-, and service-focused.”
An edited transcript of our conversation is below.
InnoLead: Home fitness solutions are in particularly high demand right now. When did Peloton start to see market conditions change?
Rick Paster: Before the crisis, we had an analysis in place describing what we believed our total addressable, available, and obtainable markets to be. Then, in early March, the number of orders for our bikes went crazy and the downloads of our digital app spiked through the roof. A small part of that demand likely came from prospective customers who were already considering buying our solutions, and the crisis accelerated their purchase decisions.
Most of that demand, though, came from people who never considered buying home fitness solutions before — and so we never included them in our analysis. It’s exciting that we’re now considering how to support the health and fitness of a much, much larger market. We know how lucky we are to be able to say in the current environment that we can’t keep up with demand.
InnoLead: Has the sudden growth in demand for Peloton’s existing solutions changed how the company thinks about driving new growth through innovation?
Paster: Yes. We’ve always been focused on growing our community, and we’ve been excited as our investments have paid off. Now, suddenly, we’re working through explosive growth which is obviously a phenomenal problem to have. … We do have people continuing to work on long-term product innovation initiatives — we just can’t compromise on that — but we have re-balanced our innovation priorities to be more short-term product-, experience-, and service-focused.
For example, while we were able to start shipping bikes very quickly to meet that early-March surge in orders, suddenly our delivery teams couldn’t go into houses to set up those bikes. We’ve tried hard to become known for our “white glove” service, and suddenly we couldn’t deliver on it. So the challenge was to figure out how to create the best customer experience we could given this new constraint. And so we’ve started by doing threshold delivery.
Our teams will assemble the bike and leave it on your doorstep for you to roll inside. Our new customers can then have a team return in the future to move the bike to their desired location. We’ve got other things we’re planning to roll out to make that onboarding experience as seamless as possible.
Some other examples: We’ve had to shift our classes from in-studio to our instructors riding at home. There were some initial technical challenges to make that happen, but for the most part, the transition has been pretty smooth. And that’s a game-changer for us, because we now have a robust capability to broadcast live from anywhere. We’re also paying very close attention to how our members, who used to ride at set times during the day like early morning, are now exercising whenever they can, while being surrounded by other competing priorities like kids and videoconferences.
Leaders should make sure not to just think about right this second, but about what their companies should look like in six months or in a year. They should ask themselves, “How do we come out of this stronger than we went in?”
InnoLead: What has life been like at Peloton over the last few weeks?
Paster: We’re all wearing whatever hats we need to wear to help the company be successful. For example, I’m helping to place customer orders and also supporting some of our customer service folks with email communication. It’s an amazing sort of juxtaposition to want to grow fast and be as successful as possible, but also not to grow too fast. This is where our senior leadership team really shines. They’ve put very capable, humble people around them who are just willing to roll up their sleeves and jump in to help wherever they are needed, regardless of their titles or roles. They make sure we’re focused on the right priorities and they minimize the unnecessary internal conflict that normally slows companies down.
InnoLead: What advice would you share with other corporate leaders considering how best to guide their organizations through this period of uncertainty?
Paster: Everyone is in agreement that we’re in the middle of a very challenging time, but also that we’re going to come out of it at some point, and that we need to be ready for what might be a quick turnaround. It might be “all hands on deck right now,” but leaders should make sure not to just think about right this second, but about what their companies should look like in six months or in a year. They should ask themselves, “How do we come out of this stronger than we went in? Stronger than our competitors?” We’re very sensitive to all the challenges people are facing these days, and we want to do everything we can to care for our members and our community. I believe that everything we can do — and that companies in general can do — to strengthen their relationships with customers and partners will pay off significantly in the months and years ahead.