lululemon athletica case 1
DESCRIPTION
East Carolina University strategy presentation. Lululemon. Problem Identification.TRANSCRIPT
S T E V E N B A Y L E Y E M I L Y B E A L E
Y A N A D U B I N S K Y E L I Z A B E T H P E E D I N
lululemon athletica, Inc.
MGMT 6722 Dr. Karriker
About lululemon….
� Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia
About lululemon….
� Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia
� Began when Chip Wilson opened a design/yoga studio in 1998 in Vancouver, British Columbia
About lululemon….
� Designer, retailer of high-end yoga inspired athletic wear with locations in Canada, US, New Zealand, and Australia
� Began when Chip Wilson opened a design/yoga studio in 1998 in Vancouver, British Columbia
� Community hub where people learn and discuss physical aspects of healthy living
What does the Lululemon customer look like?
“Other than their poise and perfect coifs, you can identify members of this gym robot army by their brand of clothing. You’ve seen them at your gym, at the Whole Foods and in line for green juices;
What does the lululemon customer look like?
“Other than their poise and perfect coifs, you can identify members of this gym robot army by their brand of clothing. You’ve seen them at your gym, at the Whole Foods and in line for green juices;
they’re the lululemon ladies!” Read more: http://www.blisstree.com/2013/08/14/fitness/optical-illusion-look-like-a-lululemon-lady-even-though-youre-poor/#ixzz2gOfyUCB7
What does the lululemon customer look like?
What does the lululemon customer look like?
� Woman � Fit � Healthy � Active � Athletic � Yoga
What does the lululemon customer look like?
� Woman � Fit � Healthy � Active � Athletic � Yoga � Wealthy
What does the lululemon customer look like?
� Woman � Fit � Healthy � Active � Athletic � Yoga � Wealthy � Educated � Sophisticated
Lucky LuLu
Lindsey Cooper • 32 • Marketing Executive • University of Richmond alum • Married, No Kids (froze eggs at
29, just in case) • Orders groceries from Whole
Foods online and has them delivered
• 2400 Sq. Ft. Condo in Chevy Chase, MD with her husband Reed, a senior analyst for The Brookings Institution
• Just bought a 2014 Toyota Seqouia
• HHI: 230K
Lululemon Manifesto
It is a lifestyle!!! � The pursuit of happiness
is the source of unhappiness
� Dance, sing, floss, and travel
� Practice yoga so you can remain active in physical sports as you age.
The Insight
Lucky LuLu’s are addicted to Inconspicuous Consumption
Athletic Apparel Positioning
Under Armour
Athleta
Adidas
New Balance
Lulu-lemon
Pric
e/Pe
rcei
ved
Qua
lity
and
Imag
e
Broad v. Niche Market Niche Broad
Low
H
igh
Nike
Reebok
Old Navy
Prana
Competitive Forces
� Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
Competitive Forces
� Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
� Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap
Competitive Forces
� Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
� Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap
� Competition from producers of substitute products – shorts, pants, or other clothing not intended for athletic use
Competitive Forces
� Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
� Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap
� Competition from producers of substitute products – shorts, pants, or other
clothing not intended for athletic use
� Supplier bargaining power – in introductory phase, high bargaining power due to increased investment and desire to work with leading fabric suppliers; 90% of apparel production in Asia but will use US/Canada production facilities as needed
Competitive Forces
� Competition from rival sellers – vigorous competition from multiple large companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple smaller ones such as Lorna Jane, Lole, and Gap Athleta
� Competition from potential new entrants to industry – Vary: low from new players due to time and funds, high from current apparel designers and retailers like Gap
� Competition from producers of substitute products – shorts, pants, or other clothing not intended for athletic use
� Supplier bargaining power – in introductory phase, high bargaining power due to increased investment and desire to work with leading fabric suppliers; 90% of apparel production in Asia but will use US/Canada production facilities as needed
� Customer bargaining power – high due to: low cost of switching, buyers ability to delay purchases, multiple other brands from which to choose
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
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 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
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 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
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 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
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 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
Value Chain
Supply Chain Management: received real
time input from customers, short time to receive
and approve samples
Operations: streamlined design and
development processes.
Production is the only
activity that is outsourced to
low cost countries
Distribution: facilities in
Vancouver-BC, Sumner,
Washington, and
Melbourne, Australia;
online retail store
Sales and marketing: community based, yoga instructors
ambassadors, community
coordinators
Service: “educators”,
“guests”, lululemon manifesto
Profit Margin:
Net PM 17.1%
about 15% above
industry average
Value Chain
Supply Chain Management: received real
time input from customers, short time to receive
and approve samples
Operations: streamlined design and
development processes.
Production is the only
activity that is outsourced to
low cost countries
Distribution: facilities in
Vancouver-BC, Sumner,
Washington, and
Melbourne, Australia;
online retail store
Sales and marketing: community based, yoga instructors
ambassadors, community
coordinators
Service: “educators”,
“guests”, lululemon manifesto
Profit Margin:
Net PM 17.1%
about 15% above
industry average
Product R&D, Technology, and System Development • Innovation Driven, based in Canada and US – short time to market • Technology of new fabrics - so far introduced 3 new materials: luon, luxtreme, and silverescent
Value Chain
Supply Chain Management: received real
time input from customers, short time to receive
and approve samples
Operations: streamlined design and
development processes.
Production is the only
activity that is outsourced to
low cost countries
Distribution: facilities in
Vancouver-BC, Sumner,
Washington, and
Melbourne, Australia;
online retail store
Sales and marketing: community based, yoga instructors
ambassadors, community
coordinators
Service: “educators”,
“guests”, lululemon manifesto
Profit Margin:
Net PM 17.1%
about 15% above
industry average
Product R&D, Technology, and System Development • Innovation Driven, based in Canada and US – short time to market • Technology of new fabrics - so far introduced 3 new materials
Human Resources Management • Customer oriented, coaches, through Yoga instructors, • Community feeling with sales associates that share the passion
Value Chain
Supply Chain Management: received real
time input from customers, short time to receive
and approve samples
Operations: streamlined design and
development processes.
Production is the only
activity that is outsourced to
low cost countries
Distribution: facilities in
Vancouver-BC, Sumner,
Washington, and
Melbourne, Australia;
online retail store
Sales and marketing: community based, yoga instructors
ambassadors, community
coordinators
Service: “educators”,
“guests”, lululemon manifesto
Profit Margin:
Net PM 17.1%
about 15% above
industry average
Product R&D, Technology, and System Development • Innovation Driven, based in Canada and US – short time to market • Technology of new fabrics - so far introduced 3 new materials
Human Resources Management • Customer oriented, coaches, through Yoga instructors, • Community feeling with sales associates that share the passion
General Administration • Founder – Wilson was CEO 2000-2005 • Remained actively involved as head of innovation department untill2012
Key Success Factors
� Community Based Marketing
Key Success Factors
� Community Based Marketing
� Superior Customer Interaction
Key Success Factors
� Community Based Marketing
� Superior Customer Interaction
� Technological Innovation
Community Based Marketing
Strategy
� Focused differentiation • Focusing on lifestyle perception
Strategy
� Focused differentiation • Focusing on lifestyle perception • Creating superior products (features, design, performance)
Strategy
� Focused differentiation • Focusing on lifestyle perception • Creating superior products (features, design, performance) • Striving for innovation and technological advances
Strategy
� Focused differentiation • Focusing on lifestyle perception • Creating superior products (features, design, performance) • Striving for innovation and technological advances • Emphasizing marketing and brand-building activities
Strategy
� Focused differentiation • Focusing on lifestyle perception • Creating superior products (features, design, performance) • Striving for innovation and technological advances • Emphasizing marketing and brand-building activities • Pursuing continuous quality improvement
Growth
� GROWTH
Growth
� GROWTH
� Net profit increase of 24x over past five years
Growth
� GROWTH
� Net profit increase of 24x over past five years
� EPS increase of 21x over past five years
Growth
� GROWTH
� Net profit increase of 24x over past five years
� EPS increase of 21x over past five years
� Expanded # of stores by 133 in five years
Improved Operations
� Operating profit increase of 17X in five years
� Improved inventory turnover by 1.4 in five years
� Cash provided by operations increased by $178.2M over past five years
� Average sales per square foot increased by $593M in five years
Valuation Measures
� Net profit increase of 24x over past five years
� EPS increase of 21x over past five years
� Return on equity increased by 10% in five years
� Gross profit margin increase of 5.5% over past five years
Financial Highlights (Most Recent Quarter: Aug 4, 2013)
� Profit Margin: 18.12% (2012: 18.49%)
� Operating Margin: 26.50% (2012: 28.67%)
� Return on Equity: 31.72% (2012: 30.52%)
� Gross Profit: 762.83M (2012: 569.3M)
� Gross profit margin: 5.11 % (2012: 5.69%)
� Diluted EPS: 1.85 (2012: 1.27)
� Operating Cash Flow: 287.52M (2012: 203.6M)
Central Issues/Problems
� Quality control/supply chain – recent issues with recalls
Central Issues/Problems
� Quality control/supply chain – recent issues with recalls
� Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear)
Central Issues/Problems
� Quality control/supply chain – recent issues with recalls
� Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear)
� Missing out on major markets (Europe/Asia/South America)
Central Issues/Problems
� Quality control/supply chain – recent issues with recalls
� Narrow focus – primary target: sophisticated and educated women who understand importance of active, healthy lifestyle (although expanding into men’s and youth female athletic wear)
� Missing out on major markets (Europe/Asia/South America)
� Lack of brand awareness/mass marketing
References
� Gamble, J., Peteraf, M., Strickland, A., Thompson, A. Crafting and executing strategy (2014). McGraw-Hill Education.
� http://www.lululemon.com/education/
� http://finance.yahoo.com/q/ks?s=LULU+Key+Statistics