Lululemon Company Briefing

MGMT-382-002

Lululemon Company Briefing

Founded in Vancouver, Canada Lululemon is an athletic wear company that has been designing and selling yoga wear since 1988. Although its first store was opened in 2000, the company has sold over $350 million worth of apparel in a time span of just eight years. In 2012, the company was reported to have the third most productive retail store business model in the US, marginally behind Apple and Tiffany & Co on the list. In the age of declining brick and mortar stores, Lululemon has proven otherwise. In the last fifteen quarters the company has continually beat analysts growth estimates and continued to stay debt-free. The company mainly specializes in women’s exercise apparel but has moved into the men’s apparel sector within the past year, opening a men’s only store in SoHo in 2014. The company outsources it clothing mostly from third party vendors in Taiwan and is distributed from facilities in Canada, US and Australia. Online sales account for nearly 15% of the total revenue along with wholesale sales to select yoga studios, health clubs, and fitness centers that align with the company's brand identity.  Lululemon's target customer is a sophisticated, educated, physically-active woman, who can afford to spend upwards of $80 on a pair of yoga pants. While the company currently does not pay a dividend, earnings are growing at a rapid clip. Sales revenue spiked from a steady $711 million in 2011 to $1.8 billion in 2015.

 A big driver of growth for the company has been achieved through a loyal customer base. According to Nina Gardner, Lululemon’s community relations manager, the company has achieved their success mostly via word-of-mouth. Gardner states, “We don’t do ads. All of our marketing is done word-of-mouth and grassroots. The only place you’ll see ads is in ‘Yoga Journal’ and ‘Runner’s World,’ two national publications”.  As a loyal customer I can agree that I bought my first pair of leggings because of a convincing friend. I never saw myself as someone to spend upwards of $80 on a pair of leggings, however my friend have convinced that she has had a pair for over three years and the quality was outstanding. Once I embarked on my first shopping experience in store, it was clear to me what all the hype was about. According to retail expert Robin Lewis, the company is an expert in channeling “addictive experiences” to its customers. The business model of the brand is so compelling to the customers because it stocks very few of each item and updates selections often. As a shopper, I know that when I am in store and happen to like a specific style my only option is to buy in that moment. The store rarely has clearances and each location has different styles of clothing in-stock, so it is very unlikely that I will have another chance to purchase. This tactic is very effective because as a customer I am inclined to impulsively buy clothes out of fear they will sell out, thus helping the store sell their merchandise at full price. I also can purchase confidently knowing that there is a small chance that I will ever run into someone at the gym wearing the same exact leggings as me.