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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?”