Lululemon’s Pivot to Peloton: A Deep Dive

Recently lululemon athletica and Peloton announced a new five-year strategic partnership, signifying Lululemon’s Pivot to Peloton as the exclusive digital fitness content provider starting in November 2023. However, the stunning announcement is that lululemon is discontinuing selling Mirror, a connected at-home interactive device providing access to live and on-demand classes through a $39 monthly subscription. Lululemon acquired the Mirror business in June 2020 for $500 million in cash — the company’s first acquisition and a remarkable outcome for Brynn Putnam, Mirror’s founder who started the business at the end of 2016 before launching the product in 2018.

𝐓𝐡𝐞 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐕𝐢𝐬𝐢𝐨𝐧: 𝐔𝐧𝐩𝐚𝐜𝐤𝐢𝐧𝐠 𝐋𝐮𝐥𝐮𝐥𝐞𝐦𝐨𝐧’𝐬 𝐑𝐚𝐭𝐢𝐨𝐧𝐚𝐥𝐞 𝐟𝐨𝐫 𝐀𝐜𝐪𝐮𝐢𝐫𝐢𝐧𝐠 𝐌𝐢𝐫𝐫𝐨𝐫

Calvin McDonald, CEO explained the rationale: “In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweat life through sweat, grow and connect. The acquisition of Mirror is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweat life.”

The 2020 acquisition was built on a mid-2019 partnership when lululemon bought a minority stake in Mirror. Therefore, sufficient business and competitor due diligence seems not to be the core issue.

𝐅𝐫𝐨𝐦 𝐀𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 𝐭𝐨 𝐀𝐮𝐜𝐭𝐢𝐨𝐧: 𝐓𝐡𝐞 90% 𝐖𝐫𝐢𝐭𝐞-𝐃𝐨𝐰𝐧 𝐨𝐟 𝐌𝐢𝐫𝐫𝐨𝐫 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐄𝐥𝐮𝐬𝐢𝐯𝐞 𝐒𝐞𝐚𝐫𝐜𝐡 𝐟𝐨𝐫 𝐚 𝐁𝐮𝐲𝐞𝐫

By March 2023, the Mirror business was written down by 90% with reports that the fitness subsidiary was up for sale, but with no takers.

𝐓𝐡𝐞 𝐅𝐢𝐭𝐧𝐞𝐬𝐬 𝐏𝐫𝐨𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧 𝐏𝐮𝐳𝐳𝐥𝐞: 𝐥𝐮𝐥𝐮𝐥𝐞𝐦𝐨𝐧, 𝐌𝐢𝐫𝐫𝐨𝐫, 𝐚𝐧𝐝 𝐭𝐡𝐞 𝐐𝐮𝐞𝐬𝐭 𝐟𝐨𝐫 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐅𝐢𝐭

It seems that lululemon had convinced themselves that through Mirror they could reproduce a compelling studio experience for the home, formulating what they saw as the essential ingredients of:

1 Content variety
2 Personalisation and
3 Community.

The CEO doubled down on this rationale in 2021 as US gyms reopened following the Covid-19 pandemic.

I always want to know where a fitness proposition fits into the lives of exercising consumers. Is Mirror a gym subscription substitute or a gym complement?

𝐖𝐡𝐞𝐧 𝐭𝐨 𝐏𝐢𝐯𝐨𝐭, 𝐖𝐡𝐞𝐧 𝐭𝐨 𝐏𝐞𝐫𝐬𝐞𝐯𝐞𝐫𝐞

I admire leaders with the capacity and conviction to know when a strategic pivot is needed. How easy it would be to persevere to validate the acquisition — give it more time, refine the product, add new content, enter new markets, and so it goes — the sunk cost fallacy is a persuasive cognitive bias. Perhaps the art of leadership couples a compelling vision with strategic agility.

Key observations

• The Art of Strategic Agility: I can’t help but admire lululemon’s willingness to pivot away from Mirror to embrace Peloton. It reveals the essence of strategic agility—knowing when to cut losses and sidestep the perilous sunk cost fallacy. It’s a textbook case for the industry, highlighting that clinging to previous investments without assessing current utility can be a costly error.
• Ongoing Due Diligence—More than a Mere Formality: What strikes me is that lululemon’s pivot serves as a potent reminder that due diligence isn’t a box-ticking exercise at the point of acquisition. It requires a relentless appraisal of how well the asset is performing against set objectives, market trends, and above all, consumer sentiment. A static viewpoint in a dynamic market is a recipe for failure.
• Where Does the Puzzle Piece Fit?: The downfall of Mirror versus the success of Peloton articulates an undeniable truth—technological novelty can’t outshine consumer fit. As someone constantly dissecting the fitness proposition landscape, it leaves me pondering: how does a product or service fit into the exercising habits of consumers? Is it a gym substitute or a complement? The answer may just tip the scales of success and failure.
• The Rise of Multi-Partner Ecosystems: Another observation is lululemon’s multi-faceted approach to consumer engagement. This shift from a standalone interactive device to a partnership with a content provider like Peloton could signal a new era. Might we see an industry trend where companies build ecosystems through diverse partnerships rather than putting all their eggs in one basket?
• Leadership in Fluid Times: Finally, what captivates me the most is the style of leadership displayed here. It’s no longer sufficient to be merely a visionary. The ability to reassess, recalibrate, and realign strategy swiftly has never been more vital. As we navigate an industry constantly in flux, the art of leadership now marries a compelling vision with unerring strategic agility.

Join the discussion

What are your thoughts on this pivot to Peloton and unplugging the magical interactive mirror? Please join the conversation on our LinkedIn post.