Merchandising Analysis Lulu Lemon

Paola Cabrera Cruz

Marketing 3 Fall ‘17

Prof. Richard Bianchi

September 16, 2017

CASE STUDY: LULULEMON

1. SUMMARY

Lululemon was created in 1998 by Dennis J. “Chip” Wilson, a brand for yoga clothing and everyday casual wear. Chip Wilson previously started in 1979 with his brand Westbeach Snowboard Ltd., a brand for surf, skate and snowboarding clothing. He sold the company in 1997 but he had initiated already in the development of innovative fabrics.

Wilson started Lululemon after he took a Yoga class and vision this as a future trend in the market. He saw an opportunity in the market for yoga clothing that would could more flattering than the ones available: made of cotton and with unflattering fit or design. His first product were yoga pants that featured good lifting and fitting.

The target customer were women between 18 and 34 years old, who were fit, health-conscious, fashion-forward, and with high disposable-income +$100K/year. Also they were sophisticated, highly educated who pursued a healthy lifestyle and peaceful balance in their lives.

The brand was also known for their innovative fabrics and design. For example, the signature groove pants were made of Luon, a fabric developed only in Taiwan. Wilson really understood what customers were looking for: women wanted to look good and attractive with activewear, so he designed highly innovative fabrics and designs that were patented. Some famous sues were with Calvin Klein and Haneswear.

Later on, problems with consumer claims regarding their yoga pants quality. Women were complaining pants were too sheer and also “pilling”. After this complaints, Chip Wilson started to be known for his controversial public statements regarding women customers and his negative relationships with the company’s board

Lululemon opened its stores in 2000, first in Canada. The company saw a rapid growth:

• By 2006, $84 million revenues
• By 2007, 59 stores around the world: US, CAN, AUS, JAPAN
• By 2015, $1.8 billion revenues

The product lines rapidly expanded from only yoga apparel, to jackets, hoodies, shorts and underwear.

However, Wilson left his CEO position before 2007, but remained in management: first in 2007 as Chief innovation and branding officer and Chairman of the board by 2013. Not long after, Lululemon’s business slowed down and so its growth rate fearing founder Wilson. Competitors had a huge effect on Lululemon’s sales decrease and he sold 50% of his shares to Advent International in 2015.

Lululemon built over time a really strong brand message and positioning. All promotion and distribution was inspired by a healthy life style. Product, free shopping re-usable bags with brand inspirational messages, in-store yoga classes, discounts for all fitness instructors, blog tips, and even employee’s career development included benefits and embodied the healthy lifestyle promise.

Their marketing strategy was not in traditional channels, it involved some social media and partnerships with yoga instructors, who got free clothes in return of free classes to customer. They turned into their wellness ambassadors.

Distribution channels were company-owned stores and direct-to-consumer. They had a high average sale per square foot because of their high prices: $1,675.16 in 2014, as big as Apple or Tiffany.

1. Recap of their competitors

• Under Amour

Initiated with men’s athletic wear

In 2010, they turned focus to the women market and by 2015 they grew 28% over the previous year.

• Athleta

Founded in 1998 as an online and catalog only for women’s activewear

Acquired by Gap in 2008 and opened its first store in SF in 2011

2015, more than a 100 stores

Empowering messages

Same community-base marketing strategy: discounts to fitness professionals, in-store classes and emphasis in design and fabric features (“unstinkable” and its natural silver salts)

They expanded product lines around casual wear and running and water sports, also adding tennis and golf.

Offered a broader range of sizes

1. MAIN PROBLEM

Lululemon’s growth slow downed and its revenues per share declined in 2015, after almost 10 years of operations. The market for women’s activewear category was growing but also well-founded competitors started growing stronger, like Under Armour and Gap’s Athleta.

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