As everyone has probably heard, Lululemon bought the fitness-startup, Mirror, for $500 mil. In probably one of the biggest M&A deals this year, people started to think that Lululemon may be getting into the home fitness market. This bears the question, who will win this fight, Lululemon or Peloton? And better yet, who will Gen Z choose?
Let’s check out this matchup, starting with Lululemon. This $38 billion dollar behemoth already has a pretty big reach into the fitness market. Lululemon is well known throughout generations, including Gen Z, that “Lulu” stands for high-quality athletic and casual apparel. With this reach, it makes sense for Lululemon to break into the home-fitness market. With Covid-19, we saw Peloton have a massive jump in sales and online users. During the same time, we saw the possibility of people joining a gym after Covid shoot dramatically lower. Lululmeon may have seen this as an opportunity to expand their business from apparel and go into the technology sector.
As for Peloton, we have all heard about them. A few years ago they launched their at-home bike and it exploded. People loved, and I mean loved the bike. Anyone who got the bike would always tell all of their friends how awesome it was. Now, they have expanded. By adding a treadmill and digital gym program, they now have the ability to increase their revenue streams. Since Covid, they have seen a massive increase in their online gym, which costs only $40/month. I’ve talked to a few users… It’s the same situation as the bike, everyone I’ve talked to loves them and will never use a gym again. Let face the fact, Covid may have delivered a big blow to the gym industry. Peloton is positioned in a great place to expand their reach and have many products in the pipeline they will be launching soon, according to a recent earnings call.
So who’s going to win? Well first, here’s how I think the companies will operate. In terms of Lululemon, I think they will pursue an acquisition strategy and buy another 1 or 2 fitness startups. In terms of Peloton, I believe they will keep launching new amazing products and continue to diversify their revenue stream.
From the Gen Z view, I believe that people will be mixed. Those people who have been wearing Lululemon since high school will most likely go with Lululemon, this is all due to brand loyalty. Those whose parents have a Peloton will likely go with Peloton. Here is the trick to grabbing the Gen Z audience, make the products more accessible. Lululemon has the lead in this arena, some of their products are affordable for kids and when we wear them we love them. Peloton on the other hand, does not have a big reach into college students, no kid can afford a $2000 bike. They have taken steps by adding Peloton digital, but $40/month is still too much money. I recommend partnering with universities in some matter, maybe sending bikes for gyms, or giving a student pass, this will expand their reach into the Gen Z market and help them win the battle.
In this fight, I think the markets are up grabs. So… Round 1, Fight! (*bell rings*).
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