Skin tight leggings, cropped tanks and trendy jackets.
This is the ultimate gym fashion statement of luxury athletic wear brand Lululemon.
With retail prices for leggings starting at $88, Lululemon took athletic wear from straightforward
function to high-end fashion.
It fully owns and operates 600 stores, 40 of which are in Europe.
"Every region we're in, we're seeing solid double digit growth."
And while such high prices for athletic clothing were uncommon before Lululemon's entrance, the
company boasts an avid fan base, often described as a "cult following."
"The core narrative of Lululemon is twofold, really.
It's great product and a great community."
From the average athleisure shopper to full-blown fitness gurus, items often sell out for some of
its most sought-after and limited releases.
But while the brand is well-loved, it has had challenges in the past with unsteady leadership,
product mishaps and supply chain delays.
The athletic wear market continued to grow even during the pandemic.
The category reached a value of $303.4 billion in 2021 and is expected to grow by 5.8%
annually from 2022 to 2028.
Lululemon posted a 29% revenue increase in Q2 2022 from Q2 2021 and
plans to double its sales in 2026 to $12.5 billion.
With competitors like Gymshark, Alo and Fabletics making waves in the market, however, it's worth
wondering if Lululemon can avoid losing its place as one of the leaders in high-end
sportswear.
Lululemon was founded in 1998 and originally began as an athletic clothing brand geared towards yoga
enthusiasts. "It is the only sports brand that was established for
catering directly to women's needs.
That is a unique position in the market."
The company went public in 2007 and raised $327.6 million, above expectations.
Between an expansive list of proprietary fabrics, in-store services and its well-loved, reusable
shopping bags, the brand cultivated a truly high-end product and shopping experience.
It aimed to be a lifestyle brand, rather than simply a clothing brand.
"I call it 'from cradle to grave,' basically from the point of product design, product engineering
and fabric innovation through development of product commercialization and then through
distribution and the touchpoints with consumers."
Lululemon has maintained control over the brand from start to finish, in-store and online,
allowing it to also steer development.
"It maintains the quality of the consumer service proposition, and it's those things
that create long lasting connections with consumers."
Prior to Lululemon's entrance, sports and sweat could hardly be seen as synonymous with the word
luxury. And yet, that's exactly the niche that it filled.
"So there are specialty shops across the premium landscape that existed well
before Lululemon that sort of innovated in their respective categories.
But Lulu was the first to innovate in two ways: Number one, they innovated first in yoga,
and they were one of the early ones, and they premium-ized the category.
They were innovators because they started with women, and then expanded into men's instead of
vice versa, which is the path most high-performance apparel athletic brands
take."
The recruitment of thousands of global brand ambassadors is the core of its grass roots
marketing. "And when you think about those 2,500 ambassadors around the world, they give us- they
give us the opportunity to listen and be curious and have our finger on the pulse in terms of
everything that's going on in around the world."
"The things you'll notice about Lululemon is it very rarely discounts because most of its
customers are willing to pay full price.
That's pretty unusual in the retail market, and it speaks to the strength of the products, but
also the customers that Lululemon has managed to pull in to its ecosystem."
The emphasis around community has afforded the brand a particularly loyal fan base, built around
professionals and enthusiasts well-entrenched in the fitness world at mostly local levels.
Though its rise has been meteoric, the list of competitors continues to pile
on.
The athletic wear sector is particularly ripe with competitors ranging across many shopper types and
fitness disciplines.
Nike and Adidas are the largest players in the sportswear space, each commanding a combined
68.4% of total market share.
The brands make gear for all athletic ages, ability levels and types.
Beyond those behemoth brands, there are also startups and wholly e-commerce brands like
Fabletics and Gymshark, who have optimized retail convenience.
Their shoppers never have to leave their front doors.
Gymshark reported a 68% increase in revenue from July 2020 to July 2021.
"So there are competitive threats, and Lululemon has to work increasingly hard to stay one step
ahead. The evidence is it's doing that, but it has to keep doing that, and that is quite
difficult." Even more so, smaller retailers for specific disciplines such as weightlifting,
running and hiking are rising.
Take Alphalete, for example, a brand targeted at younger athletes and avid gym goers.
Its rapid growth can be credited to its widespread use of Instagram influencers.
The fitness industry's presence on Instagram is exponential.
The hashtag #fitness lands at number 30 on Instagram's most popular hashtags list.
That means being trendy — looking good in a mirror selfie — is everything.
"And that produces very must-have products, things that people go out, they will buy every season.,
they will look to Lululemon to refresh their closets."
Lululemon's challenge is finding a way to justify the higher price tag for similar quality clothing.
"They also compete at a premium level, so they can put a lot more into the product, because they can
sell it at a higher price.
So you've got to give consumers a really strong price-value relationship.
And Lulu does that by investing a lot in the product.
And that I think does support the premium pricing for the brand."
"They spend a lot of money talking to consumers about how they feel about the products and the
problems they have with other products, so that they can infuse into their own lines solutions for
those things."
And despite supply chain issues and the rippling effects of inflation, Lululemon has been hesitant
to touch its pricing.
"We're more aggressive. They're now course correcting a lot of that activity through
promotional. And I just think we took a different approach.
Our brand positioning is different, and we drive through innovation."
Lululemon's "cult following" is largely responsible for its continued supremacy in trendy
gym wear.
Its consumer base of mostly women helps push it along.
The brand's presence among fitness influencers and yogis with blogs is permeative.
Its popular roots in brick-and-mortar has translated well into e-commerce as well, which is
42% of its business.
"This is a product that lends itself to online shopping.
The fit generally is much more consistent than you would see from other brands.
And so once you know what size you wear in Lululemon, you can assume that that's the size
you'll wear across other product categories.
And so I think they've done a good job of maintaining quality, consistency, and those are
some of the factors that ensure better success online and certainly greater profitability
online."
With such accelerated growth in the last two years, Lululemon is curating an ambitious
future.
Lulu is enjoying a moment in the sun right now in 2022, riding the rising wave of athletic wear and
athleisure and posting increases in revenue quarter after quarter.
And while the brand originated as a women's yoga wear brand, it keeps diversifying.
It launched its menswear line in 2014, but in 2021, it is leaning even further into the men's
category, which has been widely popular in the pandemic era of work from home attire or simply
just more comfortable daily workwear.
Men's revenue grew 30% over a three year period, a stark contrast from its 90% women's sales base
in 2007.
"They became very famous for the ABC pant.
That ABC pant is now an office staple.
The expectation among consumers is that work clothing needs to provide the same benefits and
the same comfort and fit that some of the athletic performance apparel does.
Lulu's the one that probably crosses over and checks both boxes the
best."
In 2019, Lululemon invested $1 million in at-home workout tech, Mirror, before acquiring the company
for $500 million just a year later.
In 2022, the brand is aiming to reach further into the at-home gym membership space.
"The reason why I was and remain excited about the acquisition, and it's about growing our
relationship, community with our guests and doing it in both a digital and physical arena.
We are going to rebrand it Lululemon Studio.
We will have more content than any other fitness platform out there, and we're going to launch a
digital app that allows our members to engage in it."
The brand released an ambitious five-year plan in April 2022.
Long standing strategy pillars — innovation, community and international expansion — continue
to be at the core.
Among the most notable of its efforts are its March 2022 launch of its own women's footwear
line, dubbed 'Blissfeel.' While the move is a new category for Lululemon and the consumer response
has been positive thus far, with comparable sales increasing 26% from 2021, some analysts view
it as a risky move.
"If you take Nike really on fire, combined with a lot more competition for Lulu, combined with what
you just talked about, Mirror integration of- the acquisition of Mirror, integrating that, as well
as the recent launch of the footwear line, we think that Lululemon has a lot on their plate
going into 2022, and we think that that lack of focus or that added- added items on their plate
could di-dilute their focus and create some issues of execution as we go into the back part of
2022."
Lululemon is aggressively pursuing its international expansion as well, hoping to
quadruple its international business by 2026.
It entered Spain this year and has plans to expand into Italy and China.
For now, Lululemon continues to ride a successful wave.
But as inflation and supply chain issues continue to challenge the economy, Lululemon's growth can
be at risk.
"Things are becoming tighter.
The consumer is becoming much more cautious about spending.
And whilst I think Lululemon's customer loyalty will hold it in good stead, a consumer downturn is
bad news for any brand, and it might take some of the heat out of Lululemon's growth."
"What happens to so many brands over time is that they stick with what made them great to begin
with. And then over time, the competitive moat around the business erodes,
and then they're surprised when someone else catches up and actually threatens the business.
So if you have a business and a brand that is constantly innovating to find new ways to push the
boundaries of the brand, that's really tough to compete with over time."