This week’s purchase of the MIRROR home fitness platform by lululemon athletica for a $500 million price tag could mark the first of many alliances between retailers and in-home service providers. Many of the participants in a recent RetailWire discussion about the acquisition called it a smart move by the two companies, but several warn that the success of these and other partnerships will depend on:
- A strategic approach to pricing, particularly in terms of recurring revenue;
- Strong alignment between the retailer’s product offerings and the service; and
- A commitment to keeping content elements fresh and relevant to consumers.
Following are excerpts from the discussion.
Mark Ryski, CEO, HeadCount Corporation
This is a brilliant move by Lululemon. It’s a perfect brand extension, and by expanding into fitness equipment and services Lululemon will generate revenue from the $1,500 technology platform, and even more importantly from the ongoing recurring revenue of classes and services delivered via MIRROR — the possibilities are endless. While other competitors may try, this will be a hard act to follow.
Ricardo Belmar, Senior Director, Retail Transformation Specialist, Infovista
Smart move by Lululemon to expand its customer relationship with their Sweatlife initiative! Acquiring MIRROR moves their physical connection with customers into the home and — better yet — it even adds a new sales and marketing channel for their products with customers while they engage in activity that uses those products! Many experts expected a Peloton/MIRROR union, as Peloton has been experiencing the most benefit from office shutdowns and government-imposed lockdowns, so this acquisition is a surprise to many people.
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Gyms are probably one of the most endangered segments in retail with options like MIRROR and Peloton in play. Consumers who used to frequent the gym migrated in droves to solutions like Peloton and MIRROR, and lululemon was wise to make a quick entry into this new world. Peloton will continue to be the main rival here and perhaps we’ll see some sort of partnering between Peloton and another athleisure brand. If Gap is paying attention, maybe they’ll think about a team-up for Athleta!
David Leibowitz, Worldwide Director, Industry Strategy, Microsoft
Maybe? But I can’t help thinking of Bowflex. Those arrived at a similar price point years ago and essentially became extra spots to hang clothes instead of pumping iron. And $1,500 is a steep hurdle, especially when the market is saturated with “certified trainers,” especially on YouTube. On top of the $40/month fee? They need to take a cue from other OEMs and drop the initial hardware cost and focus on the subscription or supplemental consumables.
There are other health and wellness partnerships I like a lot more: Under Armour’s acquisition of MapMyRun/MapMyFitness app and ASICS’ RunKeeper. Lower tech investment, no hardware required, they’re plugged into an ecosystem of IoT partners (Garmin, Fitbit, Apple, etc.) and a natural fit for their brands.
Zel Bianco, President and CEO, Interactive Edge
This definitely makes sense, as it both a practical way to get their customers in shape while also being a showroom of sorts as it is very likely that instructors will be showcasing new apparel.
Ryan Mathews, CEO, Black Monk Consulting
It is, as they say, complicated. At $1,500 down and almost $500 a year this isn’t a product for everyone. Great for lululemon’s brand, and probably well-matched for its target market. But there are three areas of vulnerability.
The first is cost. The model for new technology is that the price continues to decline the farther away you get from the introduction point, so could a MIRROR-like product be marketed at say, $500 in a couple of years?
The second is content. Assuming the hardware is affordable, the real obstacle to scaling sales would be how compelling you can make the content.
The last is experience, i.e., could you bundle up “peripherals” — maybe VR, AR, health monitoring sensors, one-on-one coaching sessions, haptics in the clothing or whatever to enhance the experience? If I were one of lululemon’s competitors I’d want to explore those areas before I jumped into head-to-head competition.
James Tenser, Principal, VSN Strategies
The MIRROR services sound very compelling, but the screen itself seems over-priced at $1,495 and redundant besides. Why not just offer it as a subscription product that folks can stream on their large-screen TVs? If a camera/motion sensor is needed, that could be offered for a couple-hundred bucks, or even thrown in with a one-year commitment.
So that leads me to the question: What is lululemon buying, exactly? It has to be the platform, not the hardware. If deftly handled, there is great potential there, as well as an opportunity to expand the target market toward the big middle.
Doug Garnett, President, Protonik
I guess I’m a grump this morning. But investors better start planning to write down that $500,000 — there’s no track record sufficient to justify the price. It might end up being worth it — but the odds are low. I’ve spent a lot of time in fitness, including leading research studies into integrating video into workouts, and I just don’t see it.
Key oddity: Founded in 2018, they [MIRROR] EXPECT to drive $100 million this year. Um. Based on what? Dollar Shave told us they “expected” to be profitable while they were being bought at an outrageous price by Unilever. Easy claims to make when it never has to be publicly proven.
