lululemon’s Strategy for Success, 5 Things to Emulate
In a turbulent retail sector, lululemon is a bright spot. It is one of the best retailers in the world with a growth trajectory that leaves many envious. In 2011 lululemon brought in $1 billion in revenue, a little more than decade later it is a nearly $10 billion company in terms of revenue. Stretchy yoga pants, is that all it takes? As with all success whether the result looks simple or complicated it is never by accident.
lululemon can credit its growth to a number of carefully crafted moves. Those stretchy leggings you see everywhere have a level of technical craftsmanship that is hard to match. The company is also visionary in terms of how to create a cult like following. Every retailer wants an army of highly engaged and loyal customers but in reality it is very hard to achieve that. lululemon also focused on yoga well before anyone cared and is known for creating the hugely popular athleisure category. None of these are easy feats which speaks to how the company went from humble beginnings in Vancouver Canada to company with a market cap of over $40 billion. In case you are curious about lululemon’s growth here are the strategies lululemon has used to differentiate itself from the competition.
1. A history of innovation. At the core of lululemon is a company obsessed with innovation. Those stretchy black leggings your best friend wears aren’t just any leggings. They are pants which have been engineered for maximum performance. They wick away sweat, dry quickly, reduce bacteria causing odors and feel great. And lululemon has done all of this without sacrificing style.
Innovation doesn’t just happen, it requires a culture and a mindset focused on constant improvement. One of the products where you can feel lululemon’s innovation is in their bras. Several years ago lululemon discovered women were looking for a bra that feels as if it is barely even there. Then lululemon dedicated several years to developing bras to meet that need. A new fabric called Light Ultralu that is proprietary to lululemon was also created in the process.
Some of lululemon’s technically innovative and trademarked materials include Luon, Nulu, Boolux, and Luxtreme. The technological advances lululemon has made in clothing makes it harder for competitors to emulate its success. It also enables lululemon to charge higher prices and have merchandise that rarely goes on sale.
lululemon’s focus on innovation not only lies within its products but within its stores. In 2019 lululemon opened a new flagship store in Lincoln Park Chicago. At 20,000 sq. ft. it was the brand’s largest at the time of opening. Over two floors the store has a yoga studio, gym, meditation area and café. Customers looking for more than yoga can take strength training or high intensity workout classes in the store. The space is also designed to hold community events.
If you are thinking about getting in on the athleisure trend and taking on lululemon it will be a bigger challenge than you realize. Even Nike with all of its design prowess hasn’t been able to successfully take on lululemon in its own backyard.
2. A community of highly engaged customers and fans. Few retailers have created a greater sense of community amongst its customers like lululemon has. As lululemon has written on its website:: “our vision for our store was to create more than a place where people could get gear to sweat in, we wanted to create a community hub where people could learn and discuss the physical aspects of healthy living, mindfulness and living a life of possibility. It was also important for us to create real relationships with our guests and understand what they were passionate about, how they liked to sweat and help them celebrate their goals. Today, we do this in our stores around the globe.”
One of the ways lululemon has fulfilled its vision is by offering yoga classes for free, holding events and sponsoring runs. These are not random events but experiences that are highly valued by its customers and foster a sense of community.
For example, lululemon has held Sweatlife festivals. Sweatlife is what lululemon calls its engaged community of customers and fans. These events can span over more than one day and offer unlimited yoga, meditation, talks, workshops and sweat classes. Classes range from: boxing and spinning to high-energy trampoline workouts. World renowned yoga teachers like Barron Baptiste and Janet Stone have taught at past Sweatlife events. Elle magazine has even called these events “a fitness experience like no other.”
It is not easy to create a cult following like lululemon has. The truth is the relationship most companies have with their customers is transactional. A great community is not the same as a great email list. Community comes from making a genuine investment in someone else consistently over time. A person is more likely to invest in you if you have already invested in them. By using this strategy from the beginning lululemon has built a community of highly committed fans some of whom have been part of the Sweatlife community for decades.
Investing in your customer taps into a universal sales principle called reciprocity. Author Robert Cialdini wrote in his best-selling book Influence, the Psychology of Persuasion that: “one of the most potent of the weapons of influence around us [is] the rule for reciprocation. The rule says that we should try to repay, in kind, what another person has provided us.” “By virtue of the reciprocity rule, then, we are obligated to the future repayment of favours, gifts, invitations and the like.” “For those who owed him a favour, it made no difference whether they liked him or not; they felt a sense of obligation to repay him, and they did.” Offering free classes that your customers desire will make them more loyal over time.
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3. A unique, community based marketing approach. lululemon also uses a community centric marketing approach. While brands like Nike and Adidas have built their brands through big name endorsements, think Serena Williams or Michael Jordan for Nike, lululemon has largely marketed its brand via word of mouth. It does this through its events but also through relationships with brand ambassadors.
Brand ambassadors are essentially influencers such as local yoga instructors. These ambassadors teach yoga classes for free on lululemon’s behalf and the free classes draw in existing and new customers. In exchange for teaching classes ambassadors get perks like discounted clothing. CNBC has reported that typically lululemon does not pay endorsement fees instead it partners with athletes that are aligned with the company’s values.
One of the reasons for lululemon’s success is that has never strayed far from its original vision of leading through its community. Speaking about this: Jono Bacon, an expert on community strategy and leadership and author of People Powered: How Communities Can Supercharge Your Business, Brand, and Teams which was published in 2019 said: “Nike is edging into community-building, but its business is still anchored to a large extent on big marketing campaigns and paid celebrity endorsers.” “On the other hand, lululemon has created a much more powerful community through its 1,500 member ambassador program and its user-generated content.”
lululemon founder and former CEO Chip Wilson’s vision for lululemon from the beginning was to market the brand using word of mouth. lululemon had very little money to spend on advertising in the beginning so instead Wilson’s goal was to drive brand awareness via word of mouth with customers spreading the word about the quality of lululemon products.
4. Unwavering focus. Speaking about Apple, Steve Jobs once said: “we're always thinking about new markets we could enter, but it's only by saying no that you can concentrate on the things that are really important." Many companies start in a category but once the glow of success sets in they quickly get the itch to move on to the next hot thing. lululemon was founded over twenty five years ago in 1998. With such a loyal following it could have expanded into a multitude of categories. Instead it decided to stick to its roots, only recently venturing into new categories like footwear.
Discipline is hard. Many retailers get into trouble by having a never ending appetite for what’s hot. Take Canadian coffee retailer Tim Hortons. In 2019 Tim Horton’s sales fell by $150 million. One of the reasons for the sales decline was too many new menu additions. Speaking about the sales decline in 2019 José Cil, former CEO of Tim Horton’s parent company Restaurant Brands International said: “we tried to do too many different things.” “You end up being distracted from what’s important because you’re necessarily scattering your resources to tackle a bunch of different things.”
There was a time when Apple nearly failed due to lack of focus. When Steve Jobs returned to Apple and became CEO in 1997 there was a proliferation of Apple products including several versions of the Macintosh. Jobs commented that it was unclear which product he should tell his friends to buy since there were so many product versions. Part of Jobs’ legendary turnaround of Apple, which was “less than 90 days from being insolvent”, when he returned to the company centred on reducing the number of Apple products and models by 70%. Then Jobs decided to focus on only four segments: Consumer, Pro, Desktop and Portable. The goal of the company was then to make one product for each of those segments. By the end of Apple’s 1998 fiscal year Apple was back in the black and made a profit of $309 million.
Similar to Apple’s strategy, lululemon is not the store where you get lost in a dizzying array of skus. Instead it has a narrow product line relative to other retailers. “Shopping at lululemon is quick and easy.” says Neil Saunders, Managing Director at GlobalData Retail. “It’s not like walking into a Nike store where you’re overwhelmed by lots of different products for lots of different sports.”
In 2020 approximately 70% of lululemon’s business still came from women’s. lululemon is working on growing its men’s business and its footwear line which it launched in 2022. The expansion into more menswear isn’t a huge leap especially since lululemon has spent decades honing its craft in clothing and accessories. Now that lululemon is far down the learning curve it feels like the right time for a category like footwear. “They’ve been very careful about how they’ve expanded the definition of their brand and what it stands for,” said UBS analyst Jay Sole speaking about lululemon.
5. A trendsetter with vision. It pays to be first. Before athleisure was even a word lululemon was making high performance leggings. How can you be first to market? It’s not easy. The lesson to be learned from Wilson is to follow your instincts and focus on nascent markets.
On NPR’s How I Built This podcast Wilson talks about his philosophy for tapping into his intuition. If he sees something three times he takes that as a sign and moves on the opportunity. In 1997 well before yoga was a thing, Wilson saw an article in the newspaper about yoga, then he saw a poster about a yoga class, then he overheard a conversation about yoga at a coffee shop.
With little more than his intuition at hand Wilson took a yoga class. He noticed that the class grew very quickly. He also said that at that time the: “fashion at gyms was to wear your very worst clothing.” “Nobody thought about athletic clothing being nice.” Seeing how quickly the number of people in his yoga class grew he thought in five years there would be a substantial market. Shortly thereafter the first lululemon store opened. Growth was very slow in the early years but grew over time. The eventual trends in health and wellness as well as a shift to wearing more casual clothing in more settings (largely created by lululemon) has buoyed the success of the company.