Company profile Lululemon was founded in 1998, by Chip Wilson. After attending a yoga class, Wilson noted that the existing cotton clothing which people wear in yoga class was neither fitted nor appropriate for sweaty and stretchy yoga. He then spotted a gap between the increasingly popular sport and the unmet demand of yoga clothing. With a passion of making quality athletic clothing for women using technical athletic fabrics, Wilson started the company. The name of the company was chosen in a survey of 100 people from a list of 20 brand names and 20 logos.
In November 2000, Lululemon opened its first real store in the beach area of Vancouver BC called Kitsilano. The original idea was to use the store as a community hub where customers could discuss the benefits and thoughts about yoga. However the store then became too busy so that the focus shifted to training Lululemon staff, who can thus influence their families, communities and customers. The vision of the company is “Elevating the world from mediocrity to greatness. ” And their mission statement is “Creating components for people to live longer, healthier, fun lives. Indeed the company is selling its ideology rather than its product. The brand has evolved into a type of lifestyle or a mindset. Market and target customers Chip Wilson, the founder of Lululemon, created a muse for the brand–a 32-year-old professional single woman named Ocean who makes $100,000 a year, who are also engaged, has her own condo, is traveling, fashionable, has an hour and a half to work out a day. Ocean has been an inspiration to the development and creation of Lululemon products.
When explaining why this woman becomes the representative of the brand, Wilson said: If you’re 20 years old or you’re graduating from university, you can’t wait to be that woman. If you’re 42 years old with a couple children, you wish you had that time back. Lululemon targets at middle and upper class women who are not very sensitive towards price and pursue high-quality life. The company is entering the market through this scope of customers in hope that they can become influencers and trend-setters to generate a lust among women.
Because of its chic design and fine quality, Lululemon soon becomes popular among fashion pioneers including celebrities like Megan Fox, Scarlett Johansson, etc. , which can be free advertisements for the brand. The brand maintains a premium image. It sells yoga pants for $98, about $20 more than a pair of basic yoga pants in Gap or Athleta, with similar products sold in Nike and Under Armour for $65 and $60 respectively. With this high-end image, Lululemon becomes something unique and exclusive, which arouses desire among female customers.
The marketing strategy of Lululemon relies heavily on its low inventory level and high stock turnover. Company’s international strategy When considering the company’s international strategy, Lululemon follows a transnational strategy, differentiating products across geographic markets for local differences while fostering some level of standardization across markets. In the apparel industry, the pressure for cost reduction is high therefore the company has uniform branding and standard products and pricing across different markets.
In addition, because of the divergent culture in regions, the pressure of local responsiveness is also high. Consequently, Lululemon undertakes a global vision with promoting consistent themes of healthy and positive lifestyles but with customized implements for specific geographic markets and add innovation for better diffusion and penetration. When consider its marketing aspect of entry, Lululemon applies localization with a grass-rooting and seeding strategy with no mass advertising. Before enter into a ew market, Lululemon launches showrooms which are like smaller version of stores opened for shorter time with lower inventory level. Showrooms are vital to the company’s seeding strategy for they help Lululemon to learn about local activities, preferences, customer behaviors and cultures. Showrooms allow the company to provide retail stores which are best suitable for the market. Lululemon also holds grassroots events like yoga class to tap into local communities and spread out the brand name.
The localization of Lululemon heavily relied on word-of-mouth, with rare mass advertisement and celebrity endorsement. One of the word-of-mouth strategies the company carries out is the “ambassador program”, selecting local fitness instructors to represent company’s value and promote brand visibility. These ambassadors will wear Lululemon’s products and educate people around them about the importance of fitness and health and the philosophy of the company. The program also includes elite ambassadors who are world-class athletes.
With this word-of-mouth strategy, customers don’t just watch unconvincing TV commercials. Instead they get advice from friends, their fitness tutors, or people in the same community, which undoubtedly improves the company’s trustworthiness and connection with customers. Lululemon in Hong Kong The Hong Kong fitness industry is estimated to be worth US$300 million, with the city believed to have the highest penetration rate of health clubs in the region. As a fast-paced, metropolitan city where people burden a lot of pressure, Hong Kong is a promising market for Lululemon.
Four years after the company opened its showrooms and e-commerce site, it introduced its first store at Hong Kong IFC Mall. In Sep 2015, Lululemon opened a second store on Hong Kong Island. The company is also applying its localization strategy with showrooms and ambassadors from local fitness studios, who represent the philosophy of Lululemon and the spirit of Hong Kong. By engaging with local communities and creating connections with the public through events, the company is “learning every day; from guest preferences to how people will behave, as well as sizing”.
Hong Kong is regarded as a template and springboard for the company to further expand to Asia. Quality control issues In 2013, Lululemon had to recall about 17% of its stock of stretchy black “Wunder Under” yoga bottoms because they turned out to be too sheer, which cost the company about $67 million in sales. The company acted quickly to correct this by public apology and refunds. After this Lululemon added additional product tests that slowed deliveries to stores and weighed on sales growth.
Lululemon also put the new pants through 15 tests of specific components, including colorfastness and burst strength. This wasn’t the first time Lululemon faced quality control issues. In 2007 the company’s Vitasea line of seaweed fabrics which were said to be good for health, turned out to contain no seaweed at all. In 2010 its shopping bags were found to contain lead and in 2012 its swimwear line was recalled for it become sheer when wet. Just earlier this year, around 133,000 tops in the U. S. nd 185,000 in Lululemon’s home country of Canada were pulled for the drawstrings would cause eye and face injuries.
These frequent recalls make us wonder if the brand has the ability to control the quality of its products. Lululemon may face severe consequences for this PESTEL Analysis Political Tax incentives NAFTA Economic Economic recessions Consumers being price sensitive Higher cost in overseas manufacturing countries Income level Social Increasing health diseases Increasing popularity of yoga Trend towards health consciousness and high-quality life
Technological Increase market reach due to internet penetration Technological advanced textiles Environmental Pollution Resources Legal Concern for ethical product sourcing Patents and trademarks used in fabric and apparel design Political Because of the increasing growth in health diseases such as childhood obesity and diabetes, government is deploying tax incentives for sports industry so as to encourage people to be more active in exercising, which offers Lululemon an ideal environment to enter foreign countries.
NAFTA also makes it easier for Lululemon, a Canadian company to spread out to North America. Economic Just like other apparel companies, most of Lululemon’s products are manufactured in foreign countries, which allows the company to have cost advantages. This, however, makes a company vulnerable to economic factors from abroad. For example, higher wages or R&D costs in manufacturing countries like China can easily weaken Lululemon’s cost efficiency.
Also, economic recessions, in Eurozone, for instance, can be of great impact on Lululemon since its products are relatively high in price and not so rigid in demand, customer will more likely to be more price sensitive during slow economy. Income level in countries is a factor worth considering since the price of Lululemon is positioned as premium. Social It is estimated that the US has more than 15 million people who are practicing yoga in their daily life. That is to say, yoga has evolved into a mainstream sports, which exposes an unmet demand for athletic apparels.
Also due to the growing rate of health diseases, people are realizing health consciousness and pursuing more active lifestyles. Therefore it creates a market for Lululemon with great opportunities. Technology Online shopping presents retailers with a whole new channel, with e-commerce sales in countries growing steadily over the years. Lululemon started online selling in 2009, since which the share of online sales in the company’s revenues has been rising. Now Lululemon has online platform for more than 80 countries and it is definite that Internet accessibility plays a vital role in the company’s expansion.
Moreover, the emergence of social media allows Lululemon to form blogs, Facebook groups, twitter page, and communities as ways of advertising and promoting brand awareness. The development of technology makes it possible to improve manufacturing process and increase efficiency. Environmental Lululemon has a design team to design innovative fabrics like Luon and Silverscent and is in the process of developing fabrics that include features like UV protection and inherent reflexivity so the resourcing and the environmental problems that come with the fabrics should be taken into consideration.
Legal Legal issues such as Child labor and poor working environment are more being focused on recent years. It is essential that Lululemon meets the moral and ethical standard of customers. In addition, the company has industrial design registrations and patents in Canada, US and Europe to protect its originality and uniqueness, thus enables the company to stands out among other apparel brands.