Wednesday, March 04, 2015

You Must Protect This House

Under Armour, the fitness apparel marker is making a sizable financial commitment, in excess of 700M, in its effort to enter the electronic apparel and monitoring apps market. In the company's short 19 year history, it has risen to $3B annual revenue company driven largely off of it moisture-wicking fabric for workout clothes. However, in their effort to be cutting edge, Chief Executive of Under Armour, Kevin Plank sees the wave of the future as a deviation from its current operating model. UA will move beyond just apparel towards smart-clothing that will be able to track body movement and calories burned.

“If we believe that our future is going to be defined by these hard pieces of glass or plastic that sit in our back pockets, you’re crazy,” Mr. Plank recently told investors. “It is going to convert into apparel.”

Under Armour sees its acquisition of fitness apps, including two deals announced this year, as establishing a beachhead within a community of people who want to be measured—a relationship that could pay dividends if connected clothing were to become a reality.
Unfortunately for Under Armour, they have had notable flops in their efforts to be "cutting edge", including their foray into racing suits for the 2014 U.S. Olympic speed skating team that resulted in the racers blaming the suits, of which UA spent over 1M to make, for their poor performance at the Olympics. UA has also had issues in developing the technology required for the hardware for their clothes. As a result, UA has gone on an acquisition spree to acquire customers and engineers to build the technology. Another obstacles UA faces is from extremely challenging competitors including Nike and Apple, each of whom of their own niche in this space. Instead of trying to do this on their own, UA has actively sought to bring in-house this coveted skill set.

In their effort to enter the App space, UA has launched a successful partnership with Zappos to send Push Notifications when sneakers are nearing the end of their life (via mileage), which must be set up through the mapmyfitness app. As an avid runner, I think having this functionality is great and as long as the technology behind this is user friendly and seamless, I think this is a great way for UA to leverage their clothing line and take it to the next level.

Like its primary competitors Nike and Adidas AG , Under Armour distributes its products to retailers, meaning that for the most part it doesn’t have a direct relationship with its consumers. By building its fitness app community, Under Armour is trying to position itself to interact frequently with customers.

I really think that UA is really on to an interesting and innovative idea. While I am completely supportive of the fitness craze, where everyone wants to track their ever step with lines and lines of data, I'm still hesitant that the clothes themselves will be the way of the future. I think what UA has established is a great way to target an already engaged customer and plays into the overall fitness revolution, but I'm still questioning how receptive individuals will be to that in their actual clothing. As a marathon runner, I am a habit of routine and I love my Garmin watch, which is synced through my Garmin app on my iphone and I don't have any reason to change that. I think UA has the potential but I'm not going to be their first customer.

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