What Lululemon is prioritizing in the years ahead - The Entrepreneurial Way with A.I.


Thursday, April 21, 2022

What Lululemon is prioritizing in the years ahead


Lululemon revealed on Wednesday its goals for the next five years, which include doubling the brand's revenue to $12.5 billion by 2026. In the growth plan, dubbed Power of Three x2, Lululemon plans to double its men's business and digital revenue, as well as quadruple its international business. At the same time, the company's women's business, stores and North America operations are all expected to grow by double digits.

The details of the plan are very similar to the company's original Power of Three growth strategy, which included goals like doubling its men's business, doubling its digital revenue and quadrupling its international business. Lululemon is also continuing to focus its strategy on the three core pillars it identified last time around: product innovation, guest experience and market expansion.

However, Lululemon's business has changed since its previous growth strategy. For one thing, Lululemon is bigger: The retailer now makes more annually than Under Armour. In just the past few weeks, Lululemon launched its first footwear product and debuted sport-specific collections in tennis and golf. And its offerings now expand beyond just apparel. The question mark in Lululemon's strategy for the past two years has been home fitness company Mirror, which the company acquired in 2020.

As the company looks toward another five years of growth, here are some additional highlights from Lululemon's analyst day.

Lululemon Studio is the future of Mirror

The future of Lululemon's Mirror acquisition is much more clear now. The home fitness company's membership program will be replaced by what Lululemon is calling Lululemon Studio. The replacement program is $39 a month, and includes all of Mirror's workout content as well as classes from Lululemon partners like Pure Barre and Dogpound. 

Lululemon Studio also takes away the need to actually own a Mirror device: Members of the Lululemon Studio program will be able to use an app to workout if they want, which can connect to a SmartTV, an iPad, a phone or another device. All current Mirror members will be transitioned over to the new Lululemon Studio program when it launches. 

"The Mirror brand continues, but it's the hardware. It's the Mirror," CEO Calvin McDonald said. "It's a device you can purchase to interact with and experience your Lululemon Studio membership."

McDonald hinted that some of the content will be available for its free "essential" membership program to both drive engagement and convince shoppers to eventually pay for the $39 monthly membership. Lululemon Studio members will also be able to attend physical classes at a discounted rate from its fitness partners.

"It's going to generate revenue, it's going to generate its own profitability, and it's going to have the retention and spend benefits that you have within the loyalty program and something that's truly unique within the marketplace," McDonald said of Lululemon Studio.

Celeste Burgoyne, president of the Americas and global guest innovation, said the company expects 80% of its customers to participate in one of its membership programs over the next five years. Outside of getting members to pay for its premium program, high participation in its free program will also give Lululemon access to more data on its customer base.

Lululemon previously tested a membership program that was initially priced at $128, but combining Mirror and Lululemon Studio allows the company to focus its marketing efforts on just one membership program, according to Chief Brand Officer Nikki Neuburger.

"Putting our efforts together I think just makes one strong, connected community that also provides us with some leverage to invest into other areas of the marketing strategy," Neuburger said.

Lululemon's international expansion includes Spain, Italy and Thailand

With Lululemon aiming to quadruple its international business once again, expansion into new markets was another hot topic at analyst day. The company is opening its first stores in Spain (including in Barcelona and Madrid), Italy and Thailand in the next 12 months and also has big plans for geographic areas where it has a relatively low presence.

André Maestrini, executive vice president of international, said the company is planning to double down on some of its more mature international markets, which include Germany, South Korea, the U.K. and Australia. Out of those, Australia is the most mature, but "we see still the possibility to double the business," Maestrini said.

Other notable openings include a store on the Champs-Élysées in France, and a focus on Tokyo in Japan. China, however, is the company's "biggest opportunity," Maestrini said. Lululemon plans to expand from 70 stores in the country to 220 by 2026.

As it moves into new markets, tackling low brand awareness is top of mind. Neuburger noted that Lululemon is building out a roster of diverse brand ambassadors to appeal to a range of consumers, which so far includes U.K. fitness coach and YouTuber Joe Wicks, Utah Jazz NBA player Jordan Clarkson, and former NCAA football player and Bachelor star Matt James.

The company is doubling down on the versatility of its products

Lululemon is still widely known for yoga — and executives know that. 

"Yoga is where the brand began so we're, not surprisingly, most known within the yoga activity … But if we use that as sort of the most established within Lululemon, we see a huge opportunity in run and train to continue to drive the awareness consideration for those activities," McDonald said. "And we've proven through the growth in the last few years that the brand is more than just yoga. It's rooted in yoga, but the versatility of the product and the ability to achieve those unmet needs across — guests are engaging in and we're seeing new guests come in through new activities."

The company plans to capitalize on the versatility of its products as it expands into new spaces. For example, with the tennis and golf launches, only about 20% of that product is designed specifically for those sports. Otherwise, Lululemon used its existing products and just showed consumers how they could be used for those sports. As a result, many of its core products saw sales rise when the collections came out. The company wants to continue building on some of those core franchises, which can drive serious sales — for example, its Align collection of products is almost a billion-dollar franchise.

Next up is a hiking collection launching over the summer, which will feature "adaptable, convertible and packable items that consider storage solutions and thermal comfort," Chief Product Officer Sun Choe said. As part of the effort, Lululemon will launch a hiking bag that factors in weight distribution.

"Through COVID-19 we noticed our guests are spending more and more time outdoors, and there was an unmet need to offer technical solutions for hikers that still focused on premium feel, fit and design aesthetic," Choe said. "We're bringing a fresh design perspective to the outdoors — one that marries versatility and adaptability with a stylish aesthetic that is unique to the category."

More pop-ups and experiential stores ahead

When it comes to store strategy, Lululemon will expand its square footage by 5% annually, which includes new store openings and optimizations. Burgoyne said the company will continue to pursue new concepts like college campus stores, in addition to its established experiential megastores and short-term pop-ups.

The third large format experiential Lululemon store will open this fall in Houston. In the past, Burgoyne told Retail Dive the concept could eventually account for 10% of Lululemon's total footprint. Lululemon currently has 60 pop-ups in North America and that will continue to be "a big part of our future," Burgoyne said.

"This strategy not only allows us to capture seasonal demand, acquire new guests, and also gives us an opportunity to test and learn in new markets to help inform our permanent openings," Burgoyne said. "We will continue to lean into exploring and testing new markets through this approach."

Lululemon's strategy is much the same as it has been for the past several years, and since it emphasizes selling directly to its consumers, it's also become a similar strategy to many other retailers of the day. But McDonald sought to make a distinction between how other companies think about DTC and how Lululemon thinks about it. To Lululemon, it's about building relationships with customers, not just about higher margins — though those are useful. By knowing consumers, Lululemon is able to get feedback and continue building products that meet its customers' needs. And at the end of the day — as evidenced by its growth — Lululemon doesn't need to change much.

"We do not need to create something that's not proven in order to double this business," McDonald said. "We don't need to extend into high-risk areas."

via https://www.aiupnow.com

Cara Salpini, Khareem Sudlow