LululemonAthletica, Inc.(LULU), a yoga and exercise apparel company, is another example of a company that has found success in marketing a lifestyle rather than a product. The company’s business strategy is based around promoting its “Lululemon Athletica” and “Ivivva Athletica”-branded products as stepping stones to an active and enjoyable lifestyle. This has been a successful strategy forLululemon, as the company can price its products at a premium. People are even sporting the company’s products as fashion apparel and not just for exercise purposes.
For fiscal year 2022, the company reported net revenue growth by 30% to over $8 billion, with North America revenue growth of 29% and international revenue growth of 35%.
Although a significant number of stores were temporarily closed due to COVID-19 during the first two quarters of 2020, Lululemon continued to open new company-operated stores afterward, and only in 2022, it opened 81 stores, including 49 outside of North America. As of 2023, there is a total of 655 company-operated stores worldwide.
While Lululemon's strategies have helped establish a niche for the company in the athletic apparel industry, it hasn't always been a smooth ride for this Canadian retailer founded by Chip Wilson in 1998.Lululemonhas weathered its fair share of controversy along the way, including when it had to recall its flimsyLuonyoga pants in early 2013.
Key Takeaways
- Lululemon is a yoga and exercise apparel company, whose business strategy is based on marketing a lifestyle rather than a product.
- For fiscal year 2022, the company reported net revenue growth by 30% to over $8 billion.
- The company operates 655 stores worldwide, but products are also sold via e-commerce and digital sales, as well as in health clubs, fitness centers, and yoga studios.
- Lululemon doesn't own or operate any manufacturing facilities. The company relies on a limited number of suppliers to provide fabrics or produce its merchandise.
What Products Does Lululemon Make?
The company’s offerings include articles of clothing such as pants, tops, shorts, and jackets that people can wear as they engage in fitness activities such as running and yoga. In addition to clothing, the company also sells accessories such as bags, socks, and yoga mats.
While the company’s products are mostly targeted at women who aim for a healthy lifestyle while balancing a busy life, the company has expanded its reach by also bringing men and youth into its fold. In fact, in 2014, the company opened its first store geared towards men in New York. A second men's-only store opened in Toronto in December 2016. However, the Toronto and New York stores were closed in 2017 and 2019 respectively. Although the men's business has been experiencing growth, Lululemon intends to market itself as a dual-gender brand.
Lululemon's offering goes beyond its athletic apparel: in an effort to build a stronger base of loyal customers, the company launched in 2022 a membership program with two tiers of memberships (one free and one paid) that provide exclusive access to items, events, and fitness classes.
Also in 2022, Lululemon brought technical innovations into its merchandise assortment, launching SenseKnit, a fabric technology offering zoned compression. The company also entered new categories with capsule collections for golf, tennis, and hiking. It also launched a new footwear collection for women.
How Does Lululemon Make Money?
Lululemonsells its products through a network of stores it owns and operates, as well as directly to customers through online sales. As of January 2023, the company operates 655 stores worldwide, with 350 locations in the United States, followed by China (117), Canada (69), Australia (32), and the United Kingdom (20).
Lululemonbelieves that its stores help the company connect with customers and solicit feedback on products, while also reinforcing its brand. However, customers can purchase products on www.lululemon.com or other country and region-specific websites, and use mobile apps, including mobile apps on in-store devices.
In addition to e-commerce and digital sales, the company sells its products to wholesale customers such as health clubs, fitness centers, and yoga studios as a way to enhance its brand image.Other sales avenues include warehouse sales and sales through showrooms and temporary locations.
Where Do Lululemon's Products Come From?
Lululemon doesn't own or operate any manufacturing facilities. The company relies on a limited number of suppliers to provide fabrics or produce its merchandise.
As of 2023, a group of approximately 45 vendors manufactures the products, five of which produced 56% of them, with the largest manufacturer producing 15%. During 2022, 39% of Lululemon's products were manufactured in Vietnam, 14% in Cambodia, 12% in Sri Lanka, 8% in Bangladesh, and 7% in Indonesia, and the remainder in other regions.
Who Are Lululemon's Main Competitors?
Lululemonhas been successful with its business model. Still, investors should be aware that the company faces a variety of risks, such as fickleconsumer tastes and a business model that is heavily dependent on suppliers. What's more, Lululemon faces growing competition in the athletic apparel industry from retail giants Nike(NKE), Adidas (ADDYY), and Under Armour(UA).
Why Is Lululemon So Expensive?
Lululemon uses high-quality materials and premium fabrics designed to be durable, resistant, and comfortable. The company also invests heavily in research and development, as well as in marketing, in order to build a strong brand image. All of the above contribute to a higher price point for its products.
Why Is Lululemon So Popular?
Demand for athletic wear has grown exponentially in the last decades, and Lululemon strived to be among the first ones to penetrate the yoga market. Through diversification and innovation efforts, the company has gradually penetrated into a wider range of categories, focusing always on high-quality products and its customer insights. Over the years, it has achieved to built a cult-like following.
Why Did Lululemon Closed Its Men's-Only Stores?
After testing out the menswear stores in New York and Toronto, the company found that customers responded better to the company as a dual-gender brand and decided to focus on its more productive stores. However, Lululemon plans to continue to grow into different categories, including menswear.
The Bottom Line
Lululemon’s business model has allowed the company to carve a niche for itself in a crowded market. Despite impressive quarterly earnings, the company does not pay a dividend to shareholders and retains its earnings to fund growth overseas. As Lululemon continues to expand, however,investors should be mindful of the risks the company faces from strong competition, fickle consumers, and potential supplierissues.
