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Under Armour Looking To Tech To Take Nike’s Crown

Doubling down on tech vs maintaining diversity

14Sep

The rise of wearables and technology in sports has brought traditional sports companies closer than ever to booming tech giants. With companies like Apple releasing wearables with similar fitness functionality to the likes of Fitbit, the crossover between sports and high end tech has never been greater. In fact, Apple has been collaborating with sports giant Nike for years, and the release of its new Apple Watch Nike+ signals the latter’s move away from creating their own wearable devices.

It’s no surprise that so many companies want a piece of the wearables market, though, given that it’s set to be worth $25 billion by just 2019, and new applications for wearable technology are being found all the time. From sport to healthcare to the warehouse, the use of wearable tech can streamline processes and provide otherwise difficult-to-garner information about patients, athletes, or employees. Not to mention the personal fitness tracker market, which is set to be worth $5 billion by the same year.

Despite being a relatively new market, dominant companies are threatening to emerge in each area of wearable application. And Fitbit’s current stranglehold on the fitness wearables sector is something Under Armour are looking to counter. According to Digiday, Under Armour is currently the world’s second-biggest sportswear manufacturer - thanks to exhibiting growth superior to both Nike and Adidas of late - and the Baltimore-based company is targeting Nike’s long-held crown.

The number one company has, in many ways, stopped trying to compete with UA in terms of tech acquisition. Rather than entering a potentially expensive tech arms race, Nike has stepped down its digital efforts since its FuelBand was discontinued in 2014. According to Fast Company, ‘it claims only about one-fifth as many fitness-app users as UA,’ and seems happy to focus on its strengths elsewhere. The Apple Watch Nike+ is probably the clearest indication that Nike is distancing itself from the wearables niche, happy to offer software to consumer electronics companies but reluctant to continue producing and investing in hardware.

Under Armour, on the other hand, is doubling down on its commitment to data collection and use. If Nike’s business model focuses on diversity of product, UA is turning itself into a ‘math house’ - so put by CEO Kevin Plank. According to Fast Company, the company ‘spent $710 million to acquire three quantifiable-self fitness apps and then developed its own wearable band, heart-rate monitor, and digital scale. It is committed to learning from the activity of more than 160 million users.’ The investment is something of a gamble given that connected sport and wearable technology accounted for just 1.3% of overall revenue in 2015. Nike’s revenue for the same year dwarfs that of UA - $30 million to UA’s $4 million - and the giant’s commitment to diversity may well keep it that way.

UA’s investment is a gamble. The company has positioned itself as the future of fitness and lifestyle wearables, adding millions of users with expensive acquisitions of the likes of MapMyFitness and MyFitnessPal. It will be years until UA is in a position to truly challenge Nike in terms of revenue and user numbers, and the growth of the company now depends precariously on the continued growth of wearable fitness tech. Nike, at this point, will not be terribly concerned with missing out on a piece of the relatively small wearables pie. Indeed, it’ll be interesting to see quite how Nike’s partnership with Apple affects Under Armour’s strive for market share - if it doesn’t, though, Nike may be looking over its shoulder soon. 

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