Lululemon Athletica, Inc.

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Lululemon Athletica, Inc.

MKT 624

Professor Ivan Abel

Lululemon Athletica Case Study

Jie Gao, Robert Orlando, Praisjah Woodkins

March 26, 2018

Table of Contents

Introduction .......................................................................................................... 3 Major Issue ............................................................................................................ 3

SWOT Analysis ....................................................................................................... 4

Key Success Factors ............................................................................................... 5

Strategy ................................................................................................................. 6

Questions .............................................................................................................. 7

Conclusion ............................................................................................................. 9 References ............................................................................................................ 10

Introduction

Lululemon Athletica was founded in 1998 by Chip Wilson in Canada, which designed, manufactured and sold women’s athletic apparel that was yoga inspired with over 350 stores around the world. The company has become a leader in comfortable and high-end yoga apparel for many years. It makes a variety of types of athletic wear, including performance shirts, shorts, and pants, as well as lifestyle apparel and yoga accessories. The company was originally based in Canada but has expanded to selling its products internationally in both store fronts and via their online platform, lululemon.com. Lululemon developed the “Ocean” persona to inspire the line of clothing. When the company expanded into menswear, it added the “Duke” persona. Its manifesto reflects the company’s vision of “Elevating the world from mediocrity to greatness,” and demonstrates a view that to its customers, the brand represents more than just athletic apparel, it represents a way of life.

Major Issue

Demographic aspect: Lululemon's product is suitable for active women pursuing a healthy lifestyle. This target group means limitations because it has a gender identity and requires higher incomes. As the global population continues to grow, there is a shift towards both sexes. They should also look for places where markets are large and growing fast, such as China. They can strategically plan their growth in this area, as these regions attract more sales due to population density.

Inventory aspect: Lululemon is not good at inventory management. In the beginning under a rapid expansion plan, hot products from the company would vanish from stores in a matter of three days separately revealing a huge gap in production and demand. However, recent store checks done by retail analysts uncovered a “wearhouse sale,” “we made too much” or “spring cleaning” events across many U.S. stores and regions. They found out the excess inventory issues are more widespread and not just weather related.

Competitive aspect: Yoga clothing brands like Sweaty Betty and Lorna Jane also pose a potential threat, but the biggest competitors are expected to come from Athleta and Under Armour, who have a more comprehensive series of sportswear and with much cheaper price. In addition, Athelta offers maternity wear, plus sizes, comfort and at-leisure styles, and a much more expansive selection of style options and varieties.

Quality aspect: Quality control issues impacting brand image. March 18th, 2013 – Lululemon recalled yoga pants that were stretching too thin and becoming see-through. lululemon CEO of 5.5 years stepped down 3 months later. Estimate cost of recall - $67M in Revenue. November 11th, 2013– A second quality issue surfaced with yoga pants. Chip Wilson blames wearer’s “thick thighs” for stretching the limits of Lulu pants.

SWOT Analysis

Strength:

• Trademarked fabrics
• Community involvement – offered free yoga class on monthly basis
• Employee training
• Innovation
• Style/comfort
• Multiple green initiatives
• Quality – products designed to sustain 5 years of intended use while maintaining functional
• Brand identity

Weakness:

• Identified limited consumer base and narrow product line
• High retail price
• Quality control/supply chain
• Marketing targeted to mostly yoga instructors/studios
• Loss of customer service with increased scale
• Weak brand recognition

Opportunity:

• Expand product line
• Serve additional market segments
• Expand into additional geographic markets
• Increased demand in athletic apparel
• Fitness craze

Threats:

• Increased competition from current large players in the market
• Copy cats
• Economy
• New entrants
• Risk of banking on niche markets

Key Success Factors

1. Community Based Marketing
2. Superior Customer Interaction
3. Technological Innovation

Lululemon labs are a hub of creativity for functional and experimental design that taps into the culture, trends, and technology of the people and places it celebrates. While turning to digital culture, they are building an ecosystem that will create unique experiences to their guests. As they expand their digital business model with the introduction of innovative digital experiences, leveraging CRM capabilities and the expansion of more sophisticated digital marketing strategies, the ecommerce revenue will only continue to increase. The successful launch of Engineered Sensation with new technical fabrics and innovative construction techniques drove the business, led by the new Align Pants, designed to minimize distraction and maximize comfort, which increased sales a lot.