4 Lessons from Lululemon’s Acquisition of Mirror
A pandemic-era acquisition that tells us a lot about modern retail.
In many ways, last week’s buzzy acquisition of at-home fitness DTC brand Mirror by the apparel and lifestyle brand Lululemon is a natural fit. As one Wedbush analyst noted, a full half of Mirror's customer base overlaps with Lululemon. And, giving the union a true aura of homecoming, Mirror CEO Brynn Putnam actually once served as an ambassador for Lululemon.
Of course, beyond these clear synergies, the $500 million news was characterized by a big (reflected) elephant in the room: At-home fitness is booming in a pandemic that has separated gyms and boutique studios from their loyal clients. But before anyone gets carried away with the idea that Mirror’s acquisition would not have made sense in more normal times, let’s dig into this acquisition.
First, the at-home fitness subscription model was already in ascension long before COVID-19 put physical gym regimens on pause. In assessing the deal, Bank of America suggested that Mirror under Lululemon’s watch “could generate $700 million in revenue and reach 600,000 subscribers by 2023,” which speaks to optimism about the long-term viability of the service.
But what truly brought this deal together was more than just good timing and a little bit of market momentum. Here are 4 takeaways from the deal:
Experimentation Is Key
It’s not just that at-home workout machines with streaming classes haven’t seen a surge in sales during the pandemic—Mirror, Peloton, Tempo, and Tonal can attest to that—it’s that major fitness brands (Lululemon included) have kicked up their streaming to keep customers engaged with the companies during quarantine. This speaks to a willingness to quickly pivot from strategies in the face of compelling new conditions.
Nike, for example, temporarily made its NTC Premium streaming workout service free in the U.S. after testing the maneuver out in China during the country’s own bout with COVID-19. In both markets, Nike has seen both steady engagement and sales on its commerce apps.
Savvy Omnipresence Creates Loyalty
Let’s parse this statement from Lululemon chief executive Calvin McDonald: “This isn’t just about getting guests to buy apparel,” he told The New York Times after the deal for Mirror was announced. “This is about strengthening our community and our loyalty and our relationship with our guests and memberships, and it’s going to be its own revenue stream model, which we’re excited about.”
There’s a difference between being omnipresent by bombarding a user with ads and by finding ways to fit effectively into a user’s life. That’s why Spotify’s aggressive foray into podcasts is such an important part of its natural expansion. But what McDonald is talking about in the aftermath of the acquisition are less tangible concepts. He begins by talking about apparel and ends by talking about revenue, but in between he references community, loyalty, and relationships. These often have a physical financial component to them, but they’re also concepts driven by goodwill, value, and outreach.
DTC and Physical Store Retail Is a Potent Combo
After hosting only two physical locations, Mirror will now have its hardware sold in a number of Lululemon stores in the future. Clearly, it’ll draw consumers closer to both brands down the line. But with many stores remaining closed, the union between the brands will make sure that, for now, hard-fought loyalties won’t be lost to the distance from traditional retail experiences.
And once things do return to normal, for Mirror, Lululemon's 500 or so stores offer high-traffic brick-and-mortar demo spaces without the heavy customer acquisition cost of establishing its own branded shops. For Lululemon, hosting Mirror systems in stores is just one new facet in a strategy to draw customers into stores. Lululemon’s recent experiments already include new and different store formats equipped with amenities like yoga studios, cafes, and restaurants.
Eight-Legged Legging Monster
While Lululemon is thought of as a brand catering mostly to women, the breakdown of Mirror’s user base is actually evenly split between men and women. What this means is that Lululemon’s recent-ish entry into men’s apparel space gives it new space to grow.
But Mirror’s content itself is also part of Lululemon’s diversification. Where shoppers’ associations with Lululemon may have once been leggings, it increasingly has the potential to be leggings, apparel, men’s wear, hardware, and remote content featuring both Mirror and Lululemon influencers.
In an omnichannel world, that’s a great place to be. Now consider that Lululemon is also pushing an Amazon Prime-style membership program and has started selling upscale beauty and self-care products online and in 50 of its stores. And soon, they’ll be getting into footwear.
I’d say the only thing left for Lululemon is avocado toast, but it’s already on the menu at their restaurants.