With the pandemic upending the fitness industry, Lululemon bought Mirror, a home workout startup, at just the right time. But even after the public health concerns go away, Lululemon’s purchase of Mirror in late June will remain key to attracting more customers.
As gyms and yoga studios became the last place many people felt comfortable, if they were open at all, the use of interactive fitness services like Mirror and Peloton has exploded. According to a nationwide poll by the Washington Post and the University of Maryland from April 28 to May 3, 78% of the 1,005 respondents said gyms should be closed during the pandemic. Covid-19 outbreaks have been traced to fitness centers such as a Hamilton SpinCo fitness studio in Toronto, Canada and a Planet Fitness in West Virginia.
Because the home fitness business has rapidly grown during the pandemic, when Lululemon announced its plan to buy Mirror, it predicted that Mirror would not only produce more profits but also accelerate Lululemon’s sales. Not only has Lululemon gained an additional digital platform for the increasing demand for workout-at-home, but it will also lead a vastly different post-pandemic fitness industry.
Lululemon plans to l use its digital ecosystem, such as Lululemon ambassadors working as fitness models on its social-media content and in Mirror classes, to interact with customers,
Mirror users use an interactive fitness device, which costs nearly $1,500 but does not take up much space like its rival Peloton Bike, to access live or filmed fitness classes. Mirror device, which is controlled by its app on users’ phones, looks like just a floor mirror, but it also functions like a computer screen, and users can be exposed to Lululemon’s advertisement while they use the app.
Mirror’s yoga instructors wear Lululemon clothes, and Mirror advertises Lululemon products onscreen during virtual classes. Consumers can try out and buy Mirror devices at Lululemon’s stores.
There is no guarantee, of course, that Mirror users will become Lululemon customers just because Mirror offers these shopping options.
But Lululemon already had a firm user pool for its digital workout platforms. About three-quarters of Lululemon customers said they were using digital services to exercise at home during the pandemic, and 86% said they would continue after the pandemic, according to statistics shared by Calvin McDonald, the company’s CEO, in October during the company’s conference call on its second-quarter earnings report. Fifty percent of Mirror users are Lululemon customers, he added.
Mirror was originally predicted to generate over $100 million in revenue for the full fiscal 2020, but in September, in Lululemon’s second-quarter earnings call, Meghan Frank, senior vice president of Lululemon, said Mirror would be on pace to generate more than $150 million in 2020. Frank added that Lululemon would bolster its investment in Mirror for the holiday shopping seasons.
Covid-19 smashed the fitness industry: the International Health, Racquet, and Sportsclub Association estimated that a quarter of the nation’s 40,000 to 50,000 gyms would close permanently. And customers who are getting used to digital workout platforms have started to realize the economic benefits and convenience of a home workout.
“Investing into digital fitness items costs less than paying monthly fees to gyms, I think,” said Jenny Chen, a Mirror user in Boston who started buying Lululemon products this month. “Above all things, it is so great that I can work out whenever I want, even at midnight.”
David Swartz, an equity analyst at Morningstar Research Service LLC, said Mirror users, who have already invested $1,500 in its digital fitness equipment, would not hesitate to buy Lululemon products.
“Mirror is pretty expensive,” he said. “It costs $1,500 to buy a Mirror device, and Lululemon itself, its clothing is expensive. So, Mirror and Lululemon’s customers share the same demographic, the upper-middle class.”
Many companies expand their business through their acquisitions but not everyone successfully lands on the new business and even brings up the existing business. But the changing fitness industry and Lululemon’s great records to use its digital platforms, Lululemon’s buying of Mirror will do a lot to boost the company’s growth.