Image Source: Mirror
Innovators make bold moves during hard times. That’s what activewear retailer Lululemon did by acquiring fitness startup Mirror for $500 million, one of the most significant events in retail this year. New York University Marketing Professor Scott Galloway called the deal a “gangster move.”
As he discussed on his podcast, Lululemon will create a vertically integrated supply chain for its activewear directly from Lululemon to our homes through Mirror’s on-demand and livestreamed workout classes.
I believe Lululemon and Mirror together represent something bigger: the evolution of the product mindset to achieve experience-driven growth.
The Product Mindset Evolves
As I blogged in 2019, the product mindset has taken hold in recent years as a way to develop lovable products. With a product mindset, a company views everything it does as a product that requires continuous evolution. Where a project mindset’s purpose, by contrast, is to serve the needs of the business, the purpose of a product mindset is to serve the needs of customers within the constraints of the business.
Adopting a product mindset requires successful co-creation, which means involving every player in your corporate ecosystem – your customers, supply chain partners, resellers, employees, and retail partners (if you have them) – in product conception and design. As I mentioned in my post, LEGO famously relies on a co-creation platform to crowdsource ideas for its latest products.
Why Products Need Experiences (and Vice Versa)
The product mindset is here to stay. But a great product, in and of itself, is not enough to drive sustainable growth. LEGO has always understood this reality. LEGO famously reinvented itself in the 2000s by launching a set of experiences beyond the LEGO product itself, such as the release of the wildly successful The Lego Movie. As part of this strategy, LEGO made the crucial decision to create experiences that build community among its loyal fan base, including:
- Events such as BRICKWORLD, a convention (now virtual) for LEGO fans around the world to learn new construction techniques, be inspired by massive buildings, and participate in games.
- LEGO Masters, a popular television series in which LEGO enthusiasts compete head to head to build elaborate creations using LEGO bricks. It’s more than a show – it’s a way for a global community to bond over their lifelong love of LEGOs.
By unleashing the power of its community, LEGO has turned around its brand.
Why experiences? Because experiences evoke powerful emotions and create memories. Experience are an essential ingredient of building loyalty. But for product companies, experiences do not generate sustainable income. They need to be coupled with a core product.
The Rise of Lululemon
Lululemon has updated LEGO’s playbook. Its formula for growth looks something like this:
- Develop a lucrative product that people want to buy, such as its popular Align Pants leggings and Wunder Under tights, made with Lululemon’s Luxtreme fabric to make them especially comfortable and breathable.
- Build a community of brand ambassadors who not only use Lululemon products but happily talk about them (in fact, Mirror’s CEO was once a Lululemon ambassador). The brand ambassadors program has evolved into a sophisticated model. It includes global ambassadors — renowned athletes, yogis, trainers, musicians and creators “who are using their passion for sweat to change the world” (in Lululemon’s words) – and store ambassadors, who rely on Lululemon locations to help people connect with each other. All ambassadors test-drive Lululemon’s latest gear, get development tools and experiences, and connect with like-minded people.
Lululemon also builds community through online yoga classes, but in 2020, with brick-and-mortar stores being disrupted by the COVID-19 pandemic, it’s become clear that Lululemon needs to expand its community online. This is where the Mirror acquisition comes into play. In a short amount of time, Mirror has built a successful community of its own through a genius combination of product and experience. Mirror provides live workouts through wall-mounted mirror device that retail for $1,495. Subscribers pay $39 monthly to stream the classes.
Boom. A $1,495 product anchors an experience that creates long-term loyalty for $39 a month.
It should be noted that although COVID-19 probably created a sense of urgency for the acquisition, Lululemon was not exactly responding to the pandemic. Buying Mirror is a logical extension of Lululemon’s growth plan, unveiled in 2019. A year ago, Lululemon telegraphed its direction by giving investors insight into its plans to develop both innovative products and “integrated guest experience across channels which are intended to inspire, provoke and celebrate guests who live a healthy and mindful lifestyle across multiple experiences – such as events, dynamic new store formats, and its innovative membership program that fosters connections among guests.” As part of that strategy, Lululemon invested $1 million in Mirror in 2019 – a sign of bigger things to come.
Lululemon’s experience-led strategy had been paying off already, but the acquisition of Mirror made Lululemon’s stock value pop even more, which demonstrates, with hard numbers, the wisdom of the new product + experiences mindset:
To put things in perspective: on July 22, 2019, Lululemon was trading at about $188 a share. Like many retailers, its stock price took a hit when the pandemic spread in March. But by July 20, 2020, Lululemon stock was trading at about $328 a share – heady growth during a recessionary economy.
Lululemon is not the only company going in this direction. In the fitness category alone, Peloton is growing rapidly through its own successful combination of product (the Peloton bike) and experiences (the at-home workout). Nike has been going down this path for some time with its wearables and connected communities (e.g., Nike Run Club and Nike Training Club). But I think Lululemon stands out because of its ability to co-create purposeful, community-driven experiences – and now a broader ecosystem that includes Mirror.
I’m with Scott Galloway, Lululemon’s acquisition of Mirror is gangster on so many levels. What’s your strategy for experience-driven growth?