Image source @ Visual China
Wen | Xinyan, author | Ye Jing, editor | Sang Mingqiang
Less than 10 years after its establishment, the market value soared from $1.6 billion to more than $40 billion after listing.
With an astonishing rate of growth, Lululemon has been at the center of research into consumption cases. Not long ago, at the Winter Olympics, the Winter Olympic series down jacket created for the Canadian team made Lululemon quickly out of the circle, according to the WeChat index, people's attention to Lululemon also peaked on the opening day.
Compared with established sports companies such as Nike and Adidas, Lululemon's origins from selling yoga pants are niche. Peter Drucker believes that if the growth layout is the purpose or result of the enterprise, the key to the variable driving the growth performance is the user, and when people summarize the company's successful experience, they often attribute the secret of its growth to brainwashing marketing: the brand becomes a belief, and the consumer becomes an irrational loyal believer.
New Eyes has also been featured in LV in Yoga, How Does Lululemon Do It? Lululemon's marketing rules have been explained in detail: on the one hand, to build a KOL team and enhance brand trust with the help of professional word of mouth; on the other hand, to embody the community effect by experiencing the display store, Lululemon follows the typical circle of friends communication rules.
When we focus on the marketing dimension, it is easy to ignore the other fundamentals of a brand, after all, the healthiest growth is not only the customer, because there has never been a great consumer brand in history, just by telling stories to attract users can achieve lasting growth, how companies to improve their share position in the customer's wallet is the ultimate goal of their competition.
Positioning and pricing
The same yoga pants, the price of 300 yuan and 1000 yuan, how will you choose?
Lululemon's yoga pants retail for more than 750 yuan in China, and the price of Nike's leggings next door is still hovering in the range of 300-700 yuan, even so, yoga enthusiasts are still keen to pay for the former.
In fact, the brand starts from the positioning construction, in order to achieve the premium effect. Tracing the reason for Lululemon's high pricing depends first of all on its portrait of its target users: women between the ages of 24 and 36, earning $80,000 or more a year, highly educated, have their own house, have an hour and a half of exercise every day, and have a positive attitude towards life.
The "yoga fever" that swept the United States between 2000 and 2008 made the female group that was ignored by sports brands emerge.
In Lululemon's eyes, girls under the age of 24 are in their youth and don't need to spend too much extra money to manage their bodies. In contrast, women aged 24 to 36 are more eager to maintain their physical appearance, among which people with high education and economic independence are not only willing to pay a high premium for the United States, but also need the innate social currency effect of high-end products to meet their strong identity information needs.
We found through the survey of the official website data of various brands, domestic brands such as Li Ning, Peak and Anta, etc., most of the sportswear is generally around 200 yuan, often through the way of 4-6 discount promotion, with the strategy of low-price penetration to promote new products, in order to occupy the market, as for Nike, Adi, these early brands stationed in the Chinese market, most of them will be between the price of 200-800 yuan between the difference in supply, during the event 7-8 discount, while relying on agents and dealers to achieve sinking, out of the national route.
In contrast, Lululemon's product pricing strategy, different from the skimming pricing and differentiated pricing commonly adopted by Chinese and foreign sports brands, its large single yoga pants at the beginning of the sale, it hit a price 2-3 times higher than the market, and there are few discount promotions and other activities in the sales process, nor the launch of low-cost similar products.
Up to now, although Lululemon has opened 92 directly operated stores in China, focusing on high-end shopping malls in second-tier cities and above, the number of stores in Beijing, Shanghai, Hong Kong, Shenzhen four major cities has exceeded half of the total, at the beginning, Lululemon focused on the middle-class female customers who can afford and are willing to buy, and the well-designed stores and user image fits, are also written on the label as a premium.
Branding is the sum of the consumer's perceptions generated by each touchpoint in their work life, which can always make people eccentric. In this way, Lululemon maintains user concentration on the one hand and avoids the psychological gap caused by price cuts; flaunting its own strategic determination and high standardization of products, which is actually the reason why fans insist on buying back.
"Wearing it is the same as not wearing it" is the most unified feeling of users who wear Lululemon Align series yoga pants. In its inception, Lululemon targeted the yoga clothing segment, a client group that focused more on the fabric quality, elasticity, and fit of the clothing with the body. At that time, there was no professional yoga clothing and equipment on the market, and a women's breathable yoga workout pants became just needed.
In terms of product design, Lululemon referred to various body features for improvement, such as elongating the tight vest to cover part of the hips, plus fashion elements such as "dark pocket", "double-sided wear" and "night flash". Interestingly, Lululemon positioned itself as a technology company, and by the beginning of 2020, Lululemon had a total of 9 fabric technologies, resulting in 22 different textures, of which nude leggings made of patented materials were the most popular.
Although competitors such as Nike and Adi have targeted women's yoga pants, sports bras and other products and begun to touch the field of leisure sports, it also happened after 2014, and the lag in decision-making made them unable to fully explore the women's market. However, to this day, Lululemon can still outperform the industry position in the pricing power derived from the brand and product innovation, especially in its star product yoga pants category, which is highly similar to the situation of Moutai in the liquor industry.
Excellent transcripts
Positioning + marketing + innovation, once Lululemon occupied the market three axes.
With the normalization of Athleisure (casual sports style), consumers' acceptance of products is getting higher and higher, and the positioning of the brand seems to be no longer as important as it was in the beginning. As of now, Lululemon's dynamic P/E ratio is still as high as 46 times, and it is true that the market's enthusiasm stems from its excellent performance, and we look at some data.
According to the latest financial report, Lululemon's full-year revenue increased by 42% to $6.257 billion and net profit was $975 million, up 65.53% from $589 million in the same period last year. In the conference call, CEO Calvin Mc Donald said that it will plan to selectively increase the price of the product by 10%, and it is expected that Lululemon's sales will reach $7.5 billion in 2022, which is not difficult to increase the price because Lululemon has a high-priced and high-quality product.
By comparing with the industry leader Nike and Under Armour, which is out of the circle by the tights segment, the higher pricing allows Lululemon to obtain higher gross profits, which is one of the reasons why although old brands such as Puma, VF, and Skechers surpass Lululemon in terms of revenue, the market value is far lower than it. Lululemon's current assets are stable and strong, accounts receivable turnover days of about 4 days, far lower than Under Armour's 34 days and Nike's 29 days, in addition, in the total asset profitability level, Lululemon has also achieved higher than similar results.
Chart: Nike, Under Armour, Lululemon net profit margin, gross margin comparison
On the sales side, unlike Nike, Adi and other brands in the past through dealers to sell model, Lululemon has always adopted a vertical DTC model, through the community direct stores and direct e-commerce directly to consumers, the advantage of this approach is that it not only establishes customer loyalty to the brand, but also strengthens pricing rights and profit margins.
In 2019, more than 70% of Lululemon's revenue came from self-operated channels, although the epidemic has impacted the income of directly operated stores, but with the rise of the concept of home fitness and the continuous development of e-commerce business, Lululemon's e-commerce business has achieved a contrarian growth, and the proportion of revenue has risen from 29% to nearly 60%, driving a substantial increase in overall revenue.
Chart: Lululemon revenue from 2014 to 2022
There is no doubt that in the post-epidemic era, the growth and recovery of the global sportswear market, such a report card in the secondary market, quite popular with capital. However, as Lululemon faces an increase in product range, problems such as the expansion of the internationalization process, the intensification of competition, and channel management have also surfaced, which is very similar to Under Armour's experience, but the latter has no longer grown at a loss, and in recent years, Lululemon is not completely out of the risk zone.
Risks, opportunities, transformations
Under Armour's net loss of $48 million in 2017, then-CEO Kevin Planck admitted that the pursuit of rapid large-scale in the past caused the cost structure to be unreasonable, and the operation did not keep up.
How to solve it? In terms of product categories, Under Armour adjusted its focus on men's training, running and women's training products, and cleaned up inventory by increasing low-cost channel sales, which became Under Armour's way of responding to the crisis. As the scope of distribution expanded to some low-priced discount stores, it affected the brand image and credibility, and eventually led to Under Armour losing its market positioning higher than Nike and transforming into a second-tier international brand.
Has Lululemon ever taken a price reduction?
The official website shows that according to the style, series, color division, Lululemon has a small number of products to reduce the price of 300-500 yuan range of treatment, most of which have been shown to be sold out, compared to other sports brands in the special festival in the promotion of the practice, Lululemon price reduction is very restrained, although in the price adjustment of a lot of discounts, but the number of tightening, but played a role in hunger marketing.
In this way, since it is necessary to be a full-category consumer brand, Lululemon's game of not reducing prices but increasing prices seems to deviate from the public route. But in fact, in the process of diversified product expansion, Lululemon has pulled down the overall price bottom line.
From the existing product matrix of the official website, Lululemon on the basis of "yoga", there are 6 major categories such as tops, bottoms, shoes, accessories, etc., extending from a single field to running, cycling, training, swimming, boxing and other sports forms, expanding the office, travel, commuting, personal care categories, of which men's and women's products are more than 20 subdivisions.
In addition to the price of yoga clothes is still higher than similar brands, Lululemon accessories, shoes and clothing and other categories of prices benchmark Nike, Feile and other high-end, there are as low as 80 yuan socks, there are more than two or three hundred T-shirts, which means that Lululemon gradually pay attention to the long-tail market, this part of the consumer may not be the target audience, but will be "follow the trend" purchase. Often they start with products the unit price is not necessarily very expensive, the frequency of repurchase is not high, but the overall scale should not be underestimated.
At the beginning of the category expansion, Lululemon's women's business grew by 13% in 2019, and the revenue of the men's business increased by 35% to $220 million, which already accounted for nearly 25% of the total business. In the Chinese market, Lululemon's sales increased by nearly 70% year-on-year. E-commerce channel sales surged nearly 30% to $217 million, accounting for 24.6% of total revenue, and men's wear, the Chinese market, and e-commerce became Lululemon's new growth engines.
However, although Lululemon, which is dominated by yoga clothes, has a fast growth rate, there is still a very large gap between the current revenue scale and Nike and Adidas. The latter nearly a hundred years of corporate history, whether it is a mature and comprehensive product category, or the number of SKUs, has an overwhelming advantage over Lululemon, according to SWS research, in 2021, Nike, Adidas revenue scale reached 46.3 billion US dollars and 21.33 billion euros respectively, only from the volume point of view, Lululemon is several places behind the first two.
Compared with Nike and Adidas, as a new brand, whether from the perspective of personality, scene or user relationship thickness, although Lululemon has always been functional and professional self-proclaimed, it is still difficult to feel its product spirit and characteristics in the cognition of most people, with the expansion of the audience and potential consumer groups of Lululemon products, a more efficient brand exposure is also imminent.