Brands can learn valuable lessons from Lululemon’s failed Mirror acquisition, which resulted in a $443 million loss. The experience highlights the importance of understanding market dynamics, focusing on core competencies, and executing effective marketing strategies.
In June 2020, Lululemon acquired Mirror, an at-home fitness startup, for $500 million. Mirror, which competes with Peloton, offers a wall-mounted fitness device priced at $1,495, allowing users to stream live or on-demand workout classes for a monthly fee of $39.
The acquisition took place during the COVID-19 pandemic when people were confined to their homes and increasingly turning to home workouts. Lululemon’s CEO, Calvin McDonald, emphasized that the acquisition was about strengthening the company’s community relationship with its guests, driving loyalty, and increasing customer engagement.
Mirror’s growth potential, however, has been a subject of concern among analysts. In December 2021, Lululemon slashed its outlook for Mirror sales to between $125 million and $130 million, down from the initial projection of $250 million to $275 million.
Lululemon started showcasing Mirror devices in select stores with plans to feature them in 200 more locations across North America. The company also launched Lululemon Studio Membership, a new membership service that requires a Mirror device and offers additional benefits to members.
The Mirror device, now rebranded as Lululemon Studio, had seen some success, with sales exceeding initial expectations in 2020. However, less than three years later, Mirror represents less than #5% of Lululemon’s total revenue. As Lululemon continues to integrate Mirror into its business strategy, it’s clear that the acquisition has proven to not be a successful venture.
Here are six learning lessons from Lululemon’s acquisition of Mirror, from retail expert, Jeanel Alvarado.
1. Assess market demand and trends
Before venturing into new markets or acquiring businesses, it is crucial to thoroughly assess market demand and trends. Lululemon’s acquisition of Mirror occurred during the peak of the pandemic when at-home fitness was booming.
However, as the pandemic subsided, the demand for home workouts decreased, impacting Mirror’s growth potential. Brands should consider long-term market trends and not just short-term spikes in demand.
2. Focus on core competencies
Lululemon’s primary strength lies in its apparel business. The acquisition of Mirror, a connected fitness company, diverted resources and attention away from their core competency. Brands should be cautious about expanding into areas outside their expertise, as it may dilute their focus and negatively impact their primary business.
3. Effective marketing and brand awareness
Lululemon faced challenges in creating brand awareness for Mirror and integrating it with their existing offerings. Brands should invest in extensive marketing efforts and leverage partnerships with influencers and ambassadors to promote their products and services effectively. Additionally, integrating new acquisitions with existing offerings can help create a seamless customer experience and enhance brand value.
4. Monitor competition and adapt
View this post on Instagram
Peloton, a major competitor in the connected fitness market, had a significant lead over Mirror. Brands should closely monitor their competition and adapt their strategies accordingly to remain competitive. This may include offering unique features, competitive pricing, or superior customer experiences.
5. Financial prudence
Lululemon’s $500 million acquisition of Mirror raised eyebrows due to the high price tag. Brands should exercise financial prudence when making acquisitions or investments, ensuring that they align with long-term growth strategies and offer a reasonable return on investment.
6. Flexibility and adaptability
The ability to pivot and adapt to changing market conditions is crucial for success. Lululemon could have explored alternative strategies, such as offering a digital-only Mirror experience or focusing on integrating Mirror’s offerings into their main site. Brands should be prepared to change course when necessary and explore innovative solutions to overcome challenges.
By carefully assessing market demand, focusing on core competencies, executing effective marketing strategies, monitoring competition, exercising financial prudence, and remaining flexible and adaptable, brands can avoid similar pitfalls and achieve long-term success.
RETAILBOSS provides well-curated, research-driven news and insights into the trends and business aspects of the rapidly evolving retail industry.