Under Armour: The Business of Sweat Goes Digital

Under Armour is evolving from a shirts-and-shoes company to a pure tech company, making all athletes better performers one connected app at a time.

Today’s user has evolved: we toggle between physical and virtual worlds effortlessly, made possible by the ubiquity of handheld and accessible technology. Adapting to the user’s connected world is now the industry toll to compete.[1] This have never been more salient than for the fitness industry, with athletes craving more ways to be better, faster, stronger. With this changing tide, Under Armour (UA) is embracing digital transformation to create, capture, and deliver more meaningful value for the connected athlete.[2]

UA’s Business Model Evolves to “Make Athletes Even Better”

For over 20 years, UA created value for their customers and captured that value by being a shirts-and-shoes company that simply wanted to “make athletes better.” UA saw 23 consecutive quarters of growth under this business model [3], but UA’s CEO Kevin Plank recognizes that the shirts-and-shoes company will not suffice in a world where making athletes better has evolved beyond apparel sales. UA is now focused on a digital innovation strategy that optimizes for the athletes of tomorrow, as showcased by UA’s CES 2016 presentation of Future Girl (Exhibit 1). We see from the video that UA’s digital innovation strategy is predicated on connecting athletes’ devices and daily apparel, deciphering that dataset, and providing actionable insights to produce better and healthier performers.[4]

Exhibit 1: Future Girl Ad [5]

Creating Value with Integrated Applications: Gone are the days of an Under Armour that makes only shirts and shoes, selling product through brick and mortar and a standalone website. Over the last several years, UA has invested $710M acquiring and developing three mobile applications to build their connected fitness platform: MapMyFitness, Endomondo, and MyFitnessPal.[6] Fully integrated into UA’s proprietary UA Record application, this collection of personal data tracking apps enables users to optimize activity levels, sync wearables, and analyze aggregated personal metrics. Altogether, these applications create value in excess of UA’s historical business model, giving users access to an action-oriented, comprehensive dashboard of their biometric statistics. As such, users are now armed with personalized tools needed to become better athletes.[7]

Capturing Value from a Connected User Base: With UA’s latest app acquisitions, the company’s digital community tops 120M unique members worldwide.[8] This user base provides UA two value capture opportunities in excess of their historical business model: 1) accessing new markets, and 2) leveraging their existing customer base. Prior to UA’s connected fitness platform, women accounted for 30% of company sales. UA now sees 60% female users across its apps. This connected fitness platform provides UA with a new captive female audience from which to access previously unrealized dollars. Additionally, the average underarmour.com order that comes in through the connected fitness community is 26% higher than orders from external referral sources.[9] Here, UA’s vast user base enables the company to optimize value capture by leveraging existing customers’ self-reported data to send targeted customer offers.

Operationally, UA Hits a Home Run

UA’s digital transformation has evolved how the company delivers on its promise to “make all athletes better.” Previously a standalone website with brick-and-mortars, UA did not deliver customer value in a meaningfully differentiated way from competitors. Digital tech has made UA’s value delivery smarter and user-focused. User-reported data within UA apps is spurring product innovation tailored to athlete needs. For example, UA learned from MapMyFitness data that the average run is 3.1 miles. When designing the 2016 Speedform Gemini running shoe — one of UA’s most popular running products — the company added Charged Foam padding to optimize for short-distance runs.[10] From their database of user activity habits, UA can see fitness trends emerge in real-time. This competitive advantage equips UA to design for, and proactively identify, customer needs.

At Bat: UA’s Next Steps

UA has bigger ambitions than simply selling more workout shirts than Nike, they aspire to be the go-to fitness brand. To be this, UA has room to meaningfully own the market by:

  • Disrupting Apparel Wearables: UA introduced HealthBox at CES this year — this kit includes a collection of wearables that sync with UA Record.[11] To prevent a replay of the Nike FuelBand flop of 2014, UA must supplement its hardware offering with connected clothing. These apparel wearables should have biometric tracking capabilities and seamlessly connect with UA apps.[12] As first-mover in connected clothing, UA will move closer to its vision of a Future Girl world.
  • Leveraging Apple’s Fitness Focus: UA is digitally competing with Nike and their Nike+ apps, and also faces the formidable Nike-Apple partnership.[13] But, Nike does not completely own Apple’s fitness mindshare. UA will be the first-mover in connected clothing, and the rapid adoption of Apple’s HealthKit developer platform provides an opportunity for a UA-Apple collaboration. This could materialize as UA developing clothing wearables that connect to Apple devices.[14] A partnership with Apple would expose UA to a new population of users.

Word Count: 798 (excluding citations)

[1] Marco Iansiti and Karim R. Lakhani, “Digital Ubiquity: How Connections, Sensors, and Data are Revolutionizing Business,” Harvard Business Review (November 2014 Issue), pg. 3-5.

[2] David Trites, “How Under Armour’s Digital Transformation Will Improve Your Health,” SAP News Center, February 15, 2016, https://news.sap.com/how-under-armours-digital-transformation-will-improve-your-health/, accessed November 2016.

[3] Thomas Hobbs, “How Under Armour plans to become the world’s biggest sports brand,” Marketing Weekly, May 4, 2015, ABI/INFORM via ProQuest, accessed November 2016.

[4] David Pierce, “How Under Armour Plans to Turn Your Clothes into Gadgets,” Wired, January 5, 2016, https://www.wired.com/2016/01/under-armour-healthbox/, accessed November 2016.

[5] Under Armour MX, “Future Girl,” May 14, 2013, video file, hosted on Vimeo, https://vimeo.com/66195683, accessed November 2016.

[6] David Pierce, “How Under Armour Plans to Turn Your Clothes into Gadgets,” Wired, January 5, 2016, https://www.wired.com/2016/01/under-armour-healthbox/, accessed November 2016.

[7] “Under Armour Launches UA Record, The Latest Addition To The Definitive Digital Health And Fitness Network,” PR Newswire, January 6, 2015, ABI/INFORM via ProQuest, accessed November 2016.

[8] “Under Armour Opens First Digital Headquarters in Austin’s Revitalized Seaholm Power Plant District: Under Armour Connected Fitness Debuts in Iconic Downtown Development,” PR Newswire, March 11, 2015, ABI/INFORM via ProQuest, accessed November 2016.

[9] Tom Foster, “Kevin Plank is Betting Almost $1 Billion That Under Armour Can Beat Nike,” Inc Magazine, February 2016, http://www.inc.com/magazine/201602/tom-foster/kevin-plank-under-armour-spending-1-billion-to-beat-nike.html, accessed November 2016.

[10] Ibid.

[11] Elaine Low, “Tech Will Massive Role in Under Armour: UA’s Robin Thurston,” Investor’s Business Daily, January 26, 2016, ABI/INFORM via ProQuest, accessed November 2016.

[12] Ibid.

[13] CNBC News, “More from Apple and Nike to come: Nike CEO,” May 8, 2015, video file, http://video.cnbc.com/gallery/?video=3000378000, accessed November 2016.

[14] Thomas Hobbs, “How Under Armour plans to become the world’s biggest sports brand,” Marketing Weekly, May 4, 2015, ABI/INFORM via ProQuest, accessed November 2016.

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7 thoughts on “Under Armour: The Business of Sweat Goes Digital

  1. Interesting article on a potentially transformative technology. It would be interesting to see how Under Armor thinks about commercializing such apparel. Beyond the obvious attractiveness of the product, one could argue this provides a great way to know the customer better and suggest other products and services. Under Armor could provide these themselves or also allow other companies to access this data and sell such products. This WSJ article examines this concept both for Under Armor and other apparel companies, as well. http://www.wsj.com/articles/under-armour-looks-to-get-you-wired-with-its-apparel-1425061081

  2. First, I loved that you used Future Girl. I think this is one of the best examples of communicating a long-term vision for a company. You can really tell what they’re going for here. It actually got me THIS close to taking a job at the Connected Fitness HQ in Austin, despite the whole Harvard thing.

    I’ve been a big fan of UA’s move into digital. They are definitely leading the industry, and I think a lot of this has to do with their flexibility. You mentioned the partnership between Nike and Apple and how hard it is to break. What UA has done well is not insisted upon everything being on their platforms. While they have introduced HealthBox, they’ve realized that some people may have been using other scales, trackers, etc. Instead of forcing them to switch hardware in order to access UA’s software, they’ve made things more accommodating. I can’t speak for Nike at this time, but when I first downloaded their running app a few years ago, I immediately deleted it and moved to Map My Run after they wouldn’t let me pair it with my Jawbone tracker. By being open to competition, UA has been able to win over users.

    I also hadn’t thought about how UA can use this data to improve its products, so thanks for calling that out. It is a great use of feedback loops and good means of really getting know understand user problems.

  3. Fascinating post, Phoebe! I think what Under Armour is doing is extremely powerful, not just because of its noble goal of “making all athletes better,” but for its potential to really improve the lives of people who aren’t avid athletes by building an ecosystem of products that manage fitness, health and wellness. I think of everything Under Armour has built so far as the first step to this larger goal; In order to build an ecosystem for health and wellness management, the company first needs to work on products that allow it to measure indicators of health and wellness. “You can’t improve what you don’t measure,” says Mike Lee, SVP of Connected Fitness at Under Armour. [1]

    I also see a huge opportunity for digital marketing or coupon companies like RetailMeNot to collaborate with Under Armour’s suite of connected fitness apps. For example, after tracking a run on MapMyRun, MyFitnessPal could suggest local spots and coupons where other runners enjoy a post-workout snack. The app could also leverage crowd-sourced review sites just as Yelp to help runners find popular courses in the neighborhood, or to set up competition among local users [2].

    Thanks again for sharing this, Phoebe. I think Under Armour is really leading the innovation in digital fitness, and I think this will open the door for so much more opportunity in other industries as well.

    [1] http://fortune.com/2016/04/05/under-armour-apps-healthier/
    [2] Ibid.

  4. Thank you for a very interesting read Pperonto!

    You’re definitely touching on an area with so much potential to disrupt our day-to-day lives. The fitness fad has grown so much over the last few decades and I personally don’t see it going anywhere. Therefore, the fight to capture market share in the future of fitness gear is understandably huge. With so many big players, it is interesting to see how UA is presenting its value proposition. I am worried however, that this field is yet to be truly disrupted. At the end of the day UA is offering us a monitoring device with a heart rate monitor, such products have been on the market for a quite a while now. Furthermore, today’s running watches come with a built in HR monitor. I find it hard to believe that the need to strap one on around your chest will be sustainable for daily use. So what is UA offering us besides sleek design and a compelling vision?

    I think that one possible answer to this is data – if UA can leverage the data it collects on us and millions upon millions of users to help us become better versions of ourselves then the potential can be big. Perhaps the next big step lies not so much in digitization as it does in “biologization”. One example is a recent creation of fabric that morphs as we sweat (1). With UA’s big purchasing power, perhaps they can become a leading innovator in this field as well.

    (1) https://www.wired.com/2015/10/this-living-clothing-morphs-when-you-sweat/

  5. Great post Phoebe! It was fascinating to read how UA is differentiating itself in the very competitive athletic apparel and footwear market, especially as it tries to go head to head with Nike (who has been in the business for a longer period of time). I was impressed that UA has become a first mover in connected clothing as I believe this segment is going to be the next evolution of not only fitness but also healthcare. I can see a future where all of our clothes are ‘smart’ and thereby able to give feedback on not only fitness performance but also health concerns.
    As far as UA’s digital and app strategy, you pointed out the long-standing relationship of Nike with Apple. Do you see this as a threat and how would UA form a strong relationship with a tech company as innovative as Apple? Apple has recently launched its Nike Watch so their integration with each other is getting stronger. Also, Nike is using a similar app strategy to connect to its user base and understand their behaviour to incorporate their needs in their products but how does UA stand apart?
    All in all though, I think UA is taking the right steps into giving Nike a run for its money.

    https://9to5mac.com/2015/05/08/nike-ceo-discusses-future-of-apple-partnership-apple-watch-exiting-wearables-video/

  6. Phoebe! This is an interesting post on the application of technology to the fitness industry. Under Armour, like Nike, has done an incredible job allowing everyone to become their own athlete. You made a really interesting point about Under Armour’s ability to identify future workout trends through the data collected by their apps. While this is great when suggesting future work outs, I wonder how much it will truly impact their top line. This assumes that Under Armour already has the correct products in place. One way they may be able to adapt is by integrating sales data with the apps. If UA could say that “x” shoes are incorrect for the types of workouts they are doing and that they should really buy “y”.

    Secondly, I think UA must be the first company to successfully introduce wearable technology. Whoever figures this out first will see major gains and it makes sense for a company like UA to be on the forefront of this. Especially if they can introduce it into the shoes or clothing of its customers to get real time performance data.

  7. Thank you for the fantastic read, Phoebe! I love how you’ve integrated your own love of fitness with the subject of your post. Being an avid user of MyFitnessPal, I had no idea that UA had acquired the app nor invested a whopping $710M to develop a fitness platform. Under Armour, as you clearly delineated, has invested in teaching consumers how to become better athletes, not only by providing gear, but also by motivating them to learn through interpreting data. Under Armour is creating self-aware consumers who are seeking to improve through tracking performance.

    Given Under Armour’s position, I’m intrigued by your description of competitor initiatives. As you mentioned, despite Nike FuelBand’s flop in 2014, Nike has managed to partner with Apple Watch, incorporating Nike+ on Apple’s wearable device platform [1]. Apple and Nike just announced Apple Watch Nike+ last month (October 28) [2]. In addition, Nike is playing in the fashion space, featuring an exclusive Nike Sport Bands and watch face inspired by the brand’s iconic style and colors. Furthermore, the Apple Watch Nike + introduces a whole ecosystem of apps, including Activity Rings, Heart Rate, Stopwatch and Weather to help inform runners [2]. Even if UA partners with Apple, UA will not be the first mover. As a result, are there other existing players that UA can leverage? Perhaps UA can also play to fashion, creating one-of-a-kind Fitbits, etc. to appeal to the tech-savvy and fashion-forward consumer.

    [1] https://techcrunch.com/2016/11/18/running-with-the-apple-watch-nike/
    [2] http://www.apple.com/newsroom/2016/10/apple-watch-nike-plus-arrives-friday-october-28.html

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