Lululemon’s yoga pants include a lifestyle. Betcha can’t duplicate that
Ever since Vancouver-based hipster entrepreneur Dennis (Chip) Wilson founded Lululemon Athletica in 1998, the yoga-wear retailer has done things differently from other chains. The hook? Never mind “Just do it”—you could distill this into something more Zen, like “Just let it happen.” Create a fashionable, high-quality product in a niche market, skip the advertising, rely on word-of-mouth from avid followers and stick to core values that emphasize health over wealth.
Today, Lululemon boasts more than 150 stores worldwide and over $1 billion in annual revenue. Between 2001 and 2007, its annualized growth rate was 48%—four times greater than the retail sector average. With numbers like that, you’d expect serious competition, and that has now arrived. Gap Inc., the San Francisco-based behemoth, bought Athleta, a small online womenswear retailer, in 2008, and it plans to have 50 stores open across North America by the end of 2013—many of them located within a short walk of Lululemon outlets.
What Lululemon’s financial results don’t reveal, however, is how it has built up its brand value by focusing on intangibles. Sure, the product is good, but the chain has also sold customers on the idea that Lululemon is a community that is intrinsically connected to a healthy, happy and virtuous lifestyle. “There is a huge emotional component,” says Laura Klauberg, senior vice-president of global brand and community. “[Lululemon] really inspires people to make a change physically in their life. ...It’s way bigger than black stretch pants.”
Athleta’s strategy so far seems to be more down to earth: Go for the same look and locations, but sell for less. Find a pair of women’s yoga pants at Lululemon that sell for $90 to $100, then buy a similar pair for about $15 less at Athleta. The chain is also attempting to tap in to Lululemon’s grassroots connections by offering discounts to instructors at yoga and fitness studios. And the stores near Lululemon’s? The official line is that it’s just a coincidence.
Outwardly, at least, Lululemon seems untroubled by Athleta and smaller competitors such as prAna and Beyond Yoga. “Anyone can copy our products and if you want to try to copy some of the other tactics, you can do that as well,” says Klauberg. “One of the things that differentiates us and is very difficult to copy is our culture. What distinguishes us is that from the beginning, we’ve had very strong and authentic relationships with our community.”
Jim Cramer, the over-the-top host of CNBC’s Mad Money, is blunter about Lululemon’s philosophy. “It’s a mass cult,” he said in 2007. Indeed, if you want a glimpse into the heart of Lululemon, look at the language it uses. It calls its head office the “store support centre” (SSC for short), sales staff are “educators,” customers are “guests” and yoga instructors associated with the brand are “ambassadors.” They’re there not to push product, but to answer questions.
Credit much of the chain’s focus and discipline to CEO Christine Day, who assumed the top job in 2008, and who’s a devotee of über-individualist novelist Ayn Rand. Day spends several hours each week in stores.
The karmic approach pays off. In November, consumer consultants Retail Sails reported that Lululemon stores had the third highest sales per square foot of any U.S. retailer ($1,936), behind only Tiffany’s and Apple. “Culture is not a sprint,” says Klauberg. “It’s a marathon.”
BRANDS THAT HAVE INCREASED IN BRAND VALUE OVER THE PAST YEAR
The discounter has found a market sweet spot by operating stores that are smaller than Walmart’s. And it still has room to grow.
Continues to increase same-store and online sales, which pleases investors. But will its brand value plateau with more competition and flat growth in the sector?
Swallowing ING will help Scotiabank grow, but its real strength lies in leveraging its safe and reliable Canadian brand abroad—it does that better than other big banks.
BRANDS THAT HAVE DECREASED IN BRAND VALUE OVER THE PAST YEAR
Where are the apps? Large corporate and government clients are also bailing because of concerns over two former strengths: security and reliability.
Beset by tentative leadership after environmental snafus. Would other big energy companies have the same problems negotiating with the Canadian and U.S. governments? Just asking.
Canada’s biggest bank is still a profit behemoth, but it drops to second place because TD’s brand value increased more.
OTHER BRAND VALUES
New York Yankees
Toronto Maple Leafs
Top 50 Canadian Brands
% chg in
Source: Level5 Strategy Group
|BPO-T Brookfield Office Properties||20.35||
|Add to watchlist|
|TD-T TD Bank||98.18||
|Add to watchlist|
|LLL-T lululemon athletica||63.77||
|Add to watchlist|