Sweat – and Record
Under Armour is innovating the t-shirt and elevating work outs through data analytics
Under Armour’s CEO and founder, Kevin Plank, kicked off his most recent earnings call by declaring that “brands that five years ago were viewed as leaders in our field are in danger of being commoditized, disrupted, or worse, becoming extinct as technology and the way we live changes the way consumers need and value them”[1].
Plank refuses to let Under Armour become a retail dinosaur. In order to remain competitive and to fulfill the brand mission “to make all athletes better through passion, design and the relentless pursuit of innovation”, Plank is adapting the Company’s business and operating model by focusing on forming the “world’s largest digital health and community”[2]. Thus, as many traditional retailers’ view the threat of online cannibalization as a core challenge, as online growth continues to outpace overall retail growth, Under Armour is poised to benefit from digital transformation[3].
The emergence of e-commerce companies has transformed how consumers connect with brands and purchase goods. In addition, due to the transparency and convenience of purchasing online, consumers’ expectations are elevated and attention spans are reduced[4]. Brands need to capture the attention of the consumer and find a way to develop loyalty by directly improving the lives of the consumers. Under Armour’s solution is the Connected Fitness Platform.
The platform will collect data on athletes through tracking and measurement devices, providing Under Armour insights into habits and needs of athletes. In order to form a robust platform, Under Armour has acquired or created a number of different apps and products that will provide data and feed into the platform. A few key launches and initiatives include:
MyFitnessPal and Endomondo Apps (February 2015)[5]
Under Armour expanded beyond their retail scope and acquired two apps, MyFitnessPal and Endomondo, focused on fitness and nutritional tracking for a combined $560mm.
HealthBox (January 2016)[6]
Collaborating with HTC, Under Armour debuted the HealthBox which is a Connected Fitness system consisting of a band, heartrate strap and scale in one package. The HealthBox records key health and fitness data.
Gemini 2RE (January 2016)[7]
Under Armour launched the Gemini 2RE shoe, which captures and uploads data on duration, speed and distance to the Connected Fitness platform. It also tracks the total usage of the shoe and informs the athlete when a replacement is needed. This allows athletes to run without any wearables or hardware.
UA Record (January 2016)[8]
In a partnership with IBM, the UA Record app uses IBM Watson’s cognitive computing technology to offer users real-time, personalized, evidence-based insights around fitness, nutrition and sleep.
Under Armour’s Digital Team (Ongoing)[9]
The Company has invested heavily in the human capital element as well. Under Armour’s digital team has expanded from 60 people in 2013 to over 500 in 2016.
With over 190mm users currently registered, the Company has formed the world’s largest digital health and fitness community, providing them with granular data about how consumers behave[10][11]. This should help to make the shopping experience more targeted for consumers and should lead to increased sales. For example, the data collected will be used to create personalized e-commerce homepages with customers’ fitness routines, sleep habits, geographic locations, sports preferences and demographics dictating what products are emphasized[12]. In addition, Under Armour will be able to provide more specific advertising. As shown below, the Company believes that a “virtuous cycle” will be formed with the data insights from the connected fitness platform generating additional product and equipment sales[13].
Going forward, the Company has stated their commitment to continue to innovate and introduce new products. They intend to launch hardware partnerships in 2017 and smartwear in 2020.
However, more can be done to increase the impact of the platform.
Under Armour should accelerate the launch of smartwear (clothing with sensors that records data). The platform’s current success is contingent on athletes using the wearables. Often, athletes remove their wearable for work and may forget to put it back on. When the sensors are directly embedded into clothing, users do not need to remember to wear the additional device and any annoyance factor is eliminated.
The Company also needs to increase engagement on the apps. The average order on Under Armour’s e-commerce site is 26% higher than orders derived from other sources[14]. The Company can increase user engagement by continuing to roll out innovative products as well as simplify the user experience. For example, entering the exact type of food and size of the portions into a phone can be time-consuming, so Under Armour may want to consider developing technology that can determine the specifics of a meal from a picture.
In addition, the apps should allow for direct purchasing, as consumers have shown a high propensity to buy. As the Company increases both features offered and convenience, engagement will increase, generating more data – and sales – for the company.
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Sources:
[1] Kevin Plank, Chief Executive Officer, remarks at Q3 2016 earnings call, 25-Oct-2016. From transcript provided at http://files.shareholder.com/downloads/UARM/3251633237x0x914565/B54C5072-DE2C-409D-9FC6-BB784247C2FA/UA_3Q16_Transcript.pdf, accessed 17-Nov-2016.
[2] Kevin Plank, Chief Executive Officer, remarks at 2015 Investor Day, 16-Sept -2015. From transcript provided at http://files.shareholder.com/downloads/UARM/3251633237x0x851285/EEA170BC-04C1-4288-94D8-8EEA79970590/UA-Transcript-2015-09-16T14_00.pdf
[3] National Retail Federation, “Holiday Headquarters:2016 Forecast”, accessed 18-Nov-2016, https://nrf.com/resources/consumer-data/holiday-headquarters
[4] Goldman Sachs, “The Connected Consumer: The Internet of Things Meets Retail”, May 2016. Accessed on 15-Nov-2016, http://www.goldmansachs.com/our-thinking/pages/iot-meets-retail.html
[5] Sara Germano, “Under Armour Acquires MyFitnessPal for $475 Million”, Wall Street Journal, 4-Feb-2015, accessed on 16-Nov-2016, http://www.wsj.com/articles/under-armour-to-acquire-myfitnesspal-for-475-million-1423086478
[6] Kevin Plank, Chief Executive Officer, remarks at Q1 2016 earnings call, 21-Apr-2016. From transcript provided at http://files.shareholder.com/downloads/UARM/3230954760x0x896741/1500AF76-04B8-4B51-9A2B-9079B8E32316/1Q16_Transcript.pdf, accessed 17-Nov-2016.
[7] Kevin Plank, Chief Executive Officer, remarks at Q1 2016 earnings call, 21-Apr-2016. From transcript provided at http://files.shareholder.com/downloads/UARM/3230954760x0x896741/1500AF76-04B8-4B51-9A2B-9079B8E32316/1Q16_Transcript.pdf, accessed 17-Nov-2016.
[8] “Under Armour And IBM To Transform Personal Health And Fitness, Powered By IBM Watson”, IBM Press Release (Las Vegas, Nevada, 6-Jan-2016)
[9] Kevin Plank, Chief Executive Officer, Connected Fitness Presentation, http://files.shareholder.com/downloads/UARM/3251633237x0x808497/47858994-ADBA-46D1-A4AA-07D6D32406F8/NASDAQ_Version.pdf, accessed 17-Nov-2016.
[10] Kevin Plank, Chief Executive Officer, remarks at Q3 2016 earnings call, 25-Oct-2016. From transcript provided at http://files.shareholder.com/downloads/UARM/3251633237x0x914565/B54C5072-DE2C-409D-9FC6-BB784247C2FA/UA_3Q16_Transcript.pdf, accessed 17-Nov-2016.
[11] Tom Foster, “Kevin Plank is Betting Almost $1 Billion Dollars that Under Armour Can Beat Nike”, Inc. February- 2016. http://www.inc.com/magazine/201602/tom-foster/kevin-plank-under-armour-spending-1-billion-to-beat-nike.html , accessed 18-Nov-2016.
[12] Kevin Plank, Chief Executive Officer, remarks at Q3 2016 earnings call, 25-Oct-2016. From transcript provided at http://files.shareholder.com/downloads/UARM/3251633237x0x914565/B54C5072-DE2C-409D-9FC6-BB784247C2FA/UA_3Q16_Transcript.pdf, accessed 17-Nov-2016.
[13]Kevin Plank, Chief Executive Officer, remarks at 2015 Investor Day, 16-Sept -2015. From transcript provided at http://files.shareholder.com/downloads/UARM/3251633237x0x851285/EEA170BC-04C1-4288-94D8-8EEA79970590/UA-Transcript-2015-09-16T14_00.pdf
[14] Tom Foster, “Kevin Plank is Betting Almost $1 Billion Dollars that Under Armour Can Beat Nike”, Inc. February- 2016. http://www.inc.com/magazine/201602/tom-foster/kevin-plank-under-armour-spending-1-billion-to-beat-nike.html , accessed 18-Nov-2016.
The technology behind Under Armour’s new innovations and products is incredible; wearable tech has so much potential, particularly in the field of health and wellness. However, as a consumer, I would have concerns about what Under Armour does with all the data collected. Insurance companies are beginning to enter the wearable tech industry (for example, Aetna and John Hancock are partnering with Apple Watch [1]) and using the information to offer promotions or new products. These programs are currently aimed at encouraging people to be active, but it could also be used to penalize people for health issues detected by wearable tech. In addition, there is a risk that the Under Armour app’s insights and recommendations lead to adverse health problems. For example, an individual follows an exercise plan but doesn’t follow it correctly and gets injured or leads to chronic health issues.
Paul Virilio, a philosopher, said: “The invention of the ship was also the invention of the shipwreck.” It seems applicable here and it will be interesting to see what new challenges and opportunities arise from the wearable tech movement.
[1] https://techcrunch.com/2016/11/15/watch-insurance/
I think wearable technology has the ability to transform not only the way we exercise, but also the health care and insurance industries. It will be interesting to see how Under Armour uses the collected data but I imagine that ultimately insurance providers will be able to access this data. Currently, Fitbit and other wearable device companies are working on how to work with insurance companies. Health care consultant Kelly Barnes argues that with wearable technology, insurance providers can “set rates on a daily basis as opposed to just once a year.” It will be interesting to see how Under Armour fits into the space and if it is able to capitalize on its data.
http://www.forbes.com/sites/parmyolson/2014/06/19/wearable-tech-health-insurance/#6aefff795ba1
One of the largest challenges in wearable tech has been the battery life of products. As consumers we have become increasingly accustomed to superior battery life in our products– each subsequent iPhone release has made significant strides in battery life and set the bar for what we expect from our most portable and essential technology. As one industry analyst noted “anything short of all-day battery life for wearables… is unacceptable” (http://www.businessinsider.com/biggest-problems-with-wearable-tech-2015-2). How has UnderArmour gotten around the issue of battery life or how does it plan to?
100% agree that battery life is key. I would actually take this further and say that most consumers will find it annoying to charge their T-shirts. My phone provides a lot of value, so I’ve built a habit of charging it every night. When I have multiple T-shirts, it would be easy to get them mixed up and charge the wrong one, or just to give up entirely.
One solution to this could be generating small amounts of electricity from kinetic energy. There are some watches that use this technology so that users never have to bother replacing the battery.
Source:
http://www.seikowatches.com/world/technology/kinetic/
Thanks MW – this was a fascinating read. I did not know about the Gemini 2RE shoe – that is an amazing product. I agree with your advice for UnderArmour that their strongest path forward is to push ahead on smartwear. I think this will drive customer loyalty and really strenghten the brand for UnderArmours core demographics. The other element of this that should be important is the marketing around this. Anecdotally, I have never seen advertisements for the Gemini 2RE shoe, but I have seen multitudes of ads for less technologically advanced Nike shoes. I wonder why UnderArmour isn’t investing as aggressively in marketing campaigns or if I have just not seen them.