Blog Post

Lululemon Performance Signals

Key Factors that Impact the Business

Situation

Lululemon Athletica was founded in Vancouver BC in 1998. The first Lululemon store shared space with a yoga studio to promote initial designs for runners and yoga students. Technical athletic apparel known as “athleisure” is a clothing category that promotes healthier lifestyles. Lululemon grew globally by building over 400 corporate-owned stores that forged strong ties with customers in local communities. In 2009, Lululemon tested its business model with a new brand called Ivivva. Most ivivva stores were closed in 2017, but this brand continues with Lululemon online. Today, brick-and-mortar retailers everywhere must contend with online competition. Rivals like Under Armour and Nike have helped to grow the athleisure category, but at an unsteady rate. To compete, Nike closed hundreds of stores to focus on online sales. Other retailers like Adidas and the GAP’s Athleta also compete for athleisure customers. At some point, Amazon’s offerings in the market will be a major challenger.

Challenge

In a strategy to maintain its premier image, Lululemon Athletica does not yield to incessant discounting or price adjustments. Some critics cite a reputation for overpricing. Lululemon Athletica has an ambassador program with about ten paid ambassadors and more than 1,500 local ambassadors who get products for teaching classes at stores and wearing Lululemon attire. Despite its market-leading customer loyalty, there is no loyalty program. Lululemon’s online business is growing, but it lags behind Athleta. In recent years, Lululemon’s leadership has been shaky which created numerous missteps. Current return policies are not as generous as its competitors. Expect this category to grow as more competitors come online to offer loyal consumers more choice.

Opportunity

Male and female runners swear by Lululemon’s built to last quality and comfort. Store managers who actively engage with customers gain great feedback on product selections. Organizing and hosting community activities (some in-store) helps managers keep the pulse on local demand and interests. This forms a clear competitive advantage. The psychological aspect of feeling / looking good affects what most people wear. Clothes can influence how people think and act and athleisure consumers tend to be more active. It’s now common to see men and women in athleisure clothing on sidewalks and in grocery stores. As demand grows, shrinking margins may reduce quality but have not impacted Lululemon. Many consumers pick big brands they know while others select high-fashioned technical wear that is long lasting. Lower-cost imitations do provide buyers with alternatives. Yet in the end, quality for the right price drives loyal customer demand.

Solution

The universal desire to live the way you want to feel is inspirational. New athleisure clothing can motivate customers to live a healthy life. Lululemon created successive growth by bridging the gap between athletic and street wear. Its opportunity to expand the global athleisure market will depend on serving customers in the growing markets of Asia. Expanding its ambassador program to other local studios for activities like crossfit, spinning/cycling, dance, etc. will broaden the brand’s appeal. Serving repeat customers in-store and online is a critical part of Lululemon Athletica’s future. A customer loyalty program with rewards and exclusive offers will incentivize repeat customers. Lululemon could also recruit loyal customers to participate in new product development to boost customer retention. The chance to be the first to try out new designs early would help cement relationships with loyal customers. Launching complementary lines of products to grow sales is important. GEM Analytics would apply GeoEconoMetric data models and its A2VMx™ engine to help classify and characterize Lulumeon Athletica’s buyers and products worldwide.

Takeaway - It is difficult to maintain a commanding lead in a new category with online competition.