Peloton is spending millions to tackle its massive problem with delivery delays
What Peloton's spending to try to alleviate its delivery backlog.
CEO John Foley
Peloton CEO John Foley recently penned an open letter to customers about the delivery delays affecting the company. Foley says deliveries of its connected exercise bikes and treadmills have been held at ports in Los Angeles and Long Beach, taking "upwards of five times longer than usual" due to a massive increase in sea freight during the pandemic. To try and shorten wait times, the company is spending $100 million to literally fly in its hardware from its manufacturing facilities.
A nice problem if you can get it — The heightened demand for Peloton products has also, of course, put a strain on the company. That increase comes from people being stuck at home thanks to the pandemic. And while it's good news for Peloton that it can't keep up with orders... it's also bad news if frustrated would-be customers decide to go elsewhere. Hence the $100 million outlay, most of which will go to flying in equipment from manufacturers, increasing the usual transportation costs 10 fold in the process. Ouch.
"Our team has been hard at work increasing the capacity of our supply chain. I am happy to report that we have ramped our manufacturing capacity by more than 6x in the last 12 months," Foley wrote. "Unfortunately, dramatically scaling our manufacturing capacity alone has not gotten us out of the woods. We obviously need to get the Bikes and Treads from our overseas production facilities into your homes, and that has also proved challenging in this environment."
Hence the planes. Of course, that's not the most carbon-friendly way to move Peloton gear around the world, and Foley touches on this briefly, without offering any substantive solutions like, say, spending on offsetting the increased carbon footprint.
"These unprecedented measures are for these unprecedented times. We will not always fly bikes in airplanes over the ocean. In addition to caring about our Members, we care about the environment and are committed to continuing to create more local jobs."
Ongoing challenges — The COVID-19 pandemic has, nonetheless, overall been very good for Peloton's business. As gyms shut down and people began socially distancing, Peloton's bikes and treadmills suddenly seemed very appealing. However, waiting six weeks or more for a product to arrive isn't the sort of thing consumers in the U.S., UK, or Germany are used to... and that's more than enough time to either defect to other services like Zwift, or simply give up on one's get-fit plan entirely.
For the first year of COVID-19, Peloton managed to handle the sudden influx of new subscribers and customers. It offered free 90-day trials for the curious, and its app is packed with non-bike workout programs, many of which don't require anything more than one's own body weight. But with plenty of rival fitness apps out there, it's Peloton's connected hardware that's its real differentiator and selling point.
Here's hoping both that this increased spending will cut wait times, and that backlogs will be shortlived, so Peloton can get back to using boats, not planes, to move its gear around the globe.