Tracing Lululemon’s (ambitious) next steps

What the unveiling of a new concept store in Chicago reveals about the apparel company's strategy here at home.

Lululemon-Chicago

This story is from Strategy C-Suite, a weekly email briefing on how Canada’s brand leaders are responding to market challenges and acting on new opportunities. Sign-up for the newsletter here to receive the latest stories directly to your inbox every Tuesday.

A new Chicago store

With the opening of a new megastore in Chicago this month, Lululemon Athletica has offered a peek into what’s in store for its customers in the years ahead.

The new 20,000-square-foot location doubles as a traditional fitness studio, equipped with exercise rooms and a meditation area, as well as a restaurant (named Fuel) that serves smoothies, salads and beer. Visitors can attend one of 10 different fitness classes being offered, and grab an outfit off the rack should they forget something or want to trial-run a future purchase.

If successful, Lululemon is reportedly considering expanding the concept to about 10% of its stores come 2023  the end date of a five-year strategic plan unveiled in April.

In short, it seems the store is part of a larger effort by the Vancouver-based company to push further into the “experiential” space, as it also expands into new product categories  with its first line of personal care products having landed in June  and eyes major growth in menswear. Come 2023, Lululemon is aiming to double its menswear revenues, double its digital revenues and quadruple its international revenues under its new CEO, Calvin McDonald.

The last quarter saw the company’s comparable sales increase 16% year-over-year (thanks to a sales bump of 8% in-store and 35% in ecommerce), with total revenue jumping 20.4% from last year to $782.3 million.

Strategy spoke to industry experts about the apparel company’s new store, as well as the risks and opportunities that come with its ambitious growth plans.

What experts think of Lululemon’s new concept store

  • Tamara Szamesa fashion industry analyst at NPD Group: Online shopping has changed consumers’ expectations around speed, she says, so retailers must find new ways to keep customers in their stores longer. Lululemon appears to be diving into this trend. “What happens is that consumers spend more when they feel that connection, or they feel that emotional bond with that space.”
  • Patrick Rodmell, president of retail consultancy Rodmell & Company: “Lululemon’s brand DNA is centred around spiritual and physical wellness which is not a trend, but rather a growing societal norm. So from a brand perspective, going ‘experiential’ is right on point. However, the merchant in me worries about sales/square foot at retail, so there’s a limited number of locations where it will make sense.”
  • Kim Koster, brand strategist and executive director of APG Canada: “It’s a natural for Lululemon. They’ve always run yoga classes and running clubs from their stores. And beyond those activities it’s already a lifestyle brand with a loyal following. People wear yoga pants everywhere, right? When a brand creates a physical, in-person experience you can’t just find that on Amazon for cheaper.”

Lululemon-Mens

Looking for growth in new places (and going back to its grassroots) 

In February 2018, CEO Laurent Potdevin resigned unexpectedly over allegations of improper conduct.

McDonald was chosen as Potdevin’s successor in July 2018, arriving with experience as CEO of both Sephora in the Americas and Sears in Canada. McDonald was at the helm when Lululemon launched a campaign celebrating 20 years in business (with an updated manifesto and limited-edition clothing line) and has spearheaded the company’s five-year strategic plan.

That plan includes a focus on “product innovation, omni guest experiences and market expansion”  the three pillars of its strategy  and includes launching into new product categories and testing a membership program in which customers can pay for access to free shipping, free yoga classes and other perks, with the goal of becoming a “truly experiential brand.”

Lululemon went mass in 2017 when the retailer launched its first global campaign in May 2017, but it appears to be taking a stronger grassroots approach to marketing for the new experiential store.

With support from 45 brand ambassadors (who will wear Lululemon gear and act as a street marketing team), the location is being pushed much harder than other stores, which typically have between four to eight ambassadors each, according to food website Eater.

In June, the company also launched a new “dual-gender” line of self-care products that includes dry shampoo, deodorant, face moisturizer and lip balm (available in “full and gym-size” formats) that are being sold online, in 50 stores, on Sephora.com and a few other retail partners.

And finally, McDonald has set his sights on growing Lululemon’s menswear business. According to the Globe and Mail, men’s clothing currently makes up more than 20% of the company’s sales, a number the CEO would like to see balloon to 50%.

What the experts think of the overall strategy and marketing tactics

  • Szames: Lululemon dominates the women’s market, and there’s an opening for growth on the men’s side too, she says. “However, sometimes when you focus away from your strengths, it leaves room for competitors to come in and threaten your strength. So Lululemon will have to protect their core, which is their women’s business, while simultaneously growing their men’s.”
  • Rodmell: “Grassroots marketing is effective at connecting with a brand’s core consumer audience, but if you want to start attracting the fringe market – which Lululemon will need to do in order to deliver on its growth projections – traditional media would be beneficial. The timing needs to be right and the message must be provocative, but the broader market is ready to hear what Lululemon has to say.”
  • Koster: “What’s more significant than [these] initiatives are Lululemon’s broader goals, like to double their men’s business by 2023. I bet they’ll do it… The products themselves, and product innovation, is what drives the brand’s success,” she says. Koster points to the company’s Q1 2019 earnings call transcript, which stated: “The majority of our sales growth is coming from our core products…that we either continue to innovate on or introduce new colour palettes, which the guests are responding very favourably to.”

Lululemon-Chicago2