October 3, 2023
Photo: iStock
Is the Lululemon/Peloton Partnership a Win-Win Situation?
Lululemon and Peloton announced a five-year partnership through which Peloton becomes the exclusive digital fitness content provider for Lululemon and Lululemon becomes the primary athletic apparel partner for Peloton.
For Lululemon, benefits include moving past its failed experiment with Mirror, acquired for $500 million in July 2020 at the peak of home-fitness demand. The device offers on-demand workouts and virtual personal training streamed through a video-enabled mirror screen.
Lululemon was rumored to be hunting for a buyer earlier this year after Mirror’s hardware sales never took off. A recent filing showed Lululemon had written down Mirror’s value to just $58 million.
The company will discontinue selling the Lululemon Studio Mirror device by the end of this year but plans to keep providing service and support for current owners.
Starting Nov. 1, “thousands of Peloton classes” will become available for Lululemon Studio Members on the Studio device and companion app. In addition, exclusive Peloton content will be available through the app to the more than 13 million members of Lululemon’s free Essential membership loyalty program.
Co-branded apparel will start arriving at Peloton retail stores and online starting on Oct. 11 to offer an opportunity for Lululemon to convert Peloton’s 6.5 million connected fitness subscribers into Lululemon buyers. Some Peloton instructors will also become Lululemon ambassadors to potentially raise brand awareness. Lululemon said last fall that unaided brand awareness in the U.S. was 25%, including 38% among women and 11% among men.
For Peloton, the partnership enables the connected fitness leader to outsource apparel, which is beneficial since the company was likely losing money on its apparel business, according to Axios. Providing content as part of the deal also gives Peloton a chance to convert Lululemon’s biggest fans into buyers of its connected bikes and treadmills.
“LULU will earn some revenue share from its co-branded apparel sold by Peloton, while PTON will earn some revenue share from each Studio member that uses its workouts, but neither revenue stream is material,” Bernstein analyst Aneesha Sherman wrote in a note. “The bigger benefit to both brands is around [long-term] brand equity and customer acquisition. PTON expects an uptick in traffic to its stores and website as a result of LULU members using its workout app, including 13m free members being offered free PTON workouts.”
Still, some analysts were skeptical of the marketing benefits, believing many Peloton users already wear Lululemon. Jefferies analysts wrote, “We view this announcement as a non-event, particularly given PTON customers likely already shop with the brand.”
UBS analyst Arpine Kocharyan, who covers Peloton, likewise said that while the partnership enhances Peloton’s digital app strategy, “the question of successful conversion still remains: would co-branding and exposure to Peloton digital content drive meaningful conversion to connected fitness subs?”
BrainTrust
Liza Amlani
Principal and Founder, Retail Strategy Group
Mark Price
Adjunct Professor of AI and Analytics, University of St. Thomas
Brandon Rael
Strategy & Operations Transformation Leader
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Discussion Questions
Does the partnership between Lululemon and Peloton hold equal benefits for both companies? Are you likewise skeptical about the customer acquisition capacity of the partnership to convert Peloton subscribers into Lululemon consumers and vice versa?
Poll
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Lululemon and Peloton have both realized that dabbling in areas outside of their core competencies was not yielding results. As such, they are now leading on their complementary strengths in a new partnership.
Peloton’s push into apparel was a failure as the selection was weak and looked incredibly lackluster in stores. The company was not doing sufficient volume to justify the operation. Partnering with Lululemon to provide co-branded apparel will elevate the assortment and make production far more efficient.
Lululemon’s Mirror device was a flop because it was too expensive and too complex. Lululemon has pivoted and now wants to offer classes via its Studio platform. Peloton is a master at content so will be able to help Lululemon create a better experience.
The partnership is beneficial for both firms, but Peloton arguably needs it more as it is still on very shaky ground financially.
There is benefit to both brands, but more benefit to Peloton. Peloton has struggled through the tumult it experienced from of waning demand, bad product decisions and leadership changes. Lululemon has been and continues to be a brand juggernaut. On the surface, the arrangement makes sense, but how much it will move the sales needle for both brands is hard to say. The important question is how much overlap is there between these brands already? However it turns out, this announcement is a major partnership of two significant brands and the outcomes will be interesting to watch.
Both Peloton and Lululemon will benefit from the merger, since they will now go back to their strengths. The Mirror was not in Lululemon’s strength and, apparently, apparel is not Peloton’s strengths. As I have always been an advocate of allowing the specialists or experts in a discipline to do what they do best, this move falls in line and looks positive.
I have to give credit to my RSR colleague Brian Kilcourse for this one: This is a two-drunk strategy. One drunk alone may not make it home, but two together can prop each other up and might just make it.
I love this partnership. Beyond the synergies of the two businesses, the socio-economic status of both customer bases has to be quite similar, so there is another fit there. As the article states, revenues picked up from each other may not be too material but the relationship makes a ton of sense. They are both the premier brands in their space so they fit.
This is a big break for Peloton and a big win for Lululemon. Especially it it’s the opening move for LULU to acquire Peloton.
This is what I’d call the perfect match and partnership. A win win for both lululemon and Peloton – where both parties shine in their own areas of expertise while leveraging each other to combine and grow market share…together.
It will also put Peloton back on the map with some positive press.
Sticking to their respective strengths will help Lululemon and Peloton go further faster. Hardware is very different from softlines, so this partnership will reduce complexity.
Lululemon lets go of Mirror to focus on apparel leadership and brand loyalty. Peloton regains relevance as a fitness equipment and digital content leader. Both brands broaden their access to enthusiastic fitness communities to drive engagement and sales.
Consumers win with a higher quality offering of products and services.
There is synergy between Lululemon and Peloton. Peloton has struggled over the past few years since the pandemic, and this partnership should benefit them. In short, this is a great opportunity for two good companies to support each other.
A partnership between Lululemon and Peloton is a win-win, especially as their core customers are already highly loyal to both brands. There are clear synergies and cross-promotional opportunities that will come from formalizing the partnership in terms of exclusive product offerings, extended services across brands, and the advantages that come with expanded scale and reach.
During the heart of the pandemic, both Lululemon and Pel0ton indeed experimented and went beyond their core competencies. Lululemon’s $500 million acquisition and experiment with Mirror during the peak of home-fitness demand represents the risk of extending outside your brand promise. Managing the complexities of the Mirror hardware, software, and architecture proved extremely challenging, with very high operating costs.
As Lululemon continues to invest in its Studio platform, the collaboration with Peloton will reap the most benefits. Outside of its bike sales, Peloton is a master at content creation, live streaming, and scaling out new and innovative classes. Peloton has proven that product and service diversification strategies are crucial, but they must be strategic and aligned with their core customers’ needs. Partnering with Lululemon is a step in the right direction.
This is a classic case of two companies focusing on their core competencies and combining branding efforts to drive incremental engagement across channels. Peloton has been unable to succeed with apparel, while Lululemon has been unable to succeed with devices. The critical link between them is content, which Peloton produces consistently, on-brand, and in quantity. I would rate this partnership as a win-win, with a slight edge to Peloton, since they have the “content machine” — their instructors.
Both brands are enduring a drop in interest and sales of home-based casual wear and exercise equipment post-pandemic. So this is a partnership of stagnant companies looking for a boost.
Lululemon jumped way outside of their core competency in buying Mirror, ultimately a reactive digital monitor, and ironically, of which Peloton created something similar. At the same time, Peloton was spending too much time and resources on casual wear.
Both Lululemon and Peloton have a chance to reset the deck and be true partners. They’ll need to share data openly and co-market with a zeal, focusing on customer acquisition and building back (up) marketshare, brand.
Given that many Peloton users may already be Lululemon customers, and vice versa, the doubts raised by some of the analysts do make sense. At this point, whether or not this partnership would bring any significant customer acquisition for the companies, remains to be seen. In my opinion, if they want to turn this partnership into a win-win scenario, both companies must find ways to make their products stand out and appeal to each other’s customers.
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Lululemon and Peloton have both realized that dabbling in areas outside of their core competencies was not yielding results. As such, they are now leading on their complementary strengths in a new partnership.
Peloton’s push into apparel was a failure as the selection was weak and looked incredibly lackluster in stores. The company was not doing sufficient volume to justify the operation. Partnering with Lululemon to provide co-branded apparel will elevate the assortment and make production far more efficient.
Lululemon’s Mirror device was a flop because it was too expensive and too complex. Lululemon has pivoted and now wants to offer classes via its Studio platform. Peloton is a master at content so will be able to help Lululemon create a better experience.
The partnership is beneficial for both firms, but Peloton arguably needs it more as it is still on very shaky ground financially.
There is benefit to both brands, but more benefit to Peloton. Peloton has struggled through the tumult it experienced from of waning demand, bad product decisions and leadership changes. Lululemon has been and continues to be a brand juggernaut. On the surface, the arrangement makes sense, but how much it will move the sales needle for both brands is hard to say. The important question is how much overlap is there between these brands already? However it turns out, this announcement is a major partnership of two significant brands and the outcomes will be interesting to watch.
Both Peloton and Lululemon will benefit from the merger, since they will now go back to their strengths. The Mirror was not in Lululemon’s strength and, apparently, apparel is not Peloton’s strengths. As I have always been an advocate of allowing the specialists or experts in a discipline to do what they do best, this move falls in line and looks positive.
I have to give credit to my RSR colleague Brian Kilcourse for this one: This is a two-drunk strategy. One drunk alone may not make it home, but two together can prop each other up and might just make it.
I love this partnership. Beyond the synergies of the two businesses, the socio-economic status of both customer bases has to be quite similar, so there is another fit there. As the article states, revenues picked up from each other may not be too material but the relationship makes a ton of sense. They are both the premier brands in their space so they fit.
This is a big break for Peloton and a big win for Lululemon. Especially it it’s the opening move for LULU to acquire Peloton.
This is what I’d call the perfect match and partnership. A win win for both lululemon and Peloton – where both parties shine in their own areas of expertise while leveraging each other to combine and grow market share…together.
It will also put Peloton back on the map with some positive press.
Sticking to their respective strengths will help Lululemon and Peloton go further faster. Hardware is very different from softlines, so this partnership will reduce complexity.
Lululemon lets go of Mirror to focus on apparel leadership and brand loyalty. Peloton regains relevance as a fitness equipment and digital content leader. Both brands broaden their access to enthusiastic fitness communities to drive engagement and sales.
Consumers win with a higher quality offering of products and services.
There is synergy between Lululemon and Peloton. Peloton has struggled over the past few years since the pandemic, and this partnership should benefit them. In short, this is a great opportunity for two good companies to support each other.
A partnership between Lululemon and Peloton is a win-win, especially as their core customers are already highly loyal to both brands. There are clear synergies and cross-promotional opportunities that will come from formalizing the partnership in terms of exclusive product offerings, extended services across brands, and the advantages that come with expanded scale and reach.
During the heart of the pandemic, both Lululemon and Pel0ton indeed experimented and went beyond their core competencies. Lululemon’s $500 million acquisition and experiment with Mirror during the peak of home-fitness demand represents the risk of extending outside your brand promise. Managing the complexities of the Mirror hardware, software, and architecture proved extremely challenging, with very high operating costs.
As Lululemon continues to invest in its Studio platform, the collaboration with Peloton will reap the most benefits. Outside of its bike sales, Peloton is a master at content creation, live streaming, and scaling out new and innovative classes. Peloton has proven that product and service diversification strategies are crucial, but they must be strategic and aligned with their core customers’ needs. Partnering with Lululemon is a step in the right direction.
This is a classic case of two companies focusing on their core competencies and combining branding efforts to drive incremental engagement across channels. Peloton has been unable to succeed with apparel, while Lululemon has been unable to succeed with devices. The critical link between them is content, which Peloton produces consistently, on-brand, and in quantity. I would rate this partnership as a win-win, with a slight edge to Peloton, since they have the “content machine” — their instructors.
Both brands are enduring a drop in interest and sales of home-based casual wear and exercise equipment post-pandemic. So this is a partnership of stagnant companies looking for a boost.
Lululemon jumped way outside of their core competency in buying Mirror, ultimately a reactive digital monitor, and ironically, of which Peloton created something similar. At the same time, Peloton was spending too much time and resources on casual wear.
Both Lululemon and Peloton have a chance to reset the deck and be true partners. They’ll need to share data openly and co-market with a zeal, focusing on customer acquisition and building back (up) marketshare, brand.
Given that many Peloton users may already be Lululemon customers, and vice versa, the doubts raised by some of the analysts do make sense. At this point, whether or not this partnership would bring any significant customer acquisition for the companies, remains to be seen. In my opinion, if they want to turn this partnership into a win-win scenario, both companies must find ways to make their products stand out and appeal to each other’s customers.