Dennis (Chip) Wilson founded Lululemon Athletica Inc. in 1998. For the fiscal year ending January 2016, the company reported $2.016 billion in revenue. This represents an increase just shy of 15% over the previous year. The company’s logo is the letter “A” in a stylized manner. The “A” was supposed to stand for the term “athletically hip,” but that failed in focus groups. They retained the logo, even though it does not have much to do with its current name. It is unclear what the name does mean, and there is plenty of speculation online.
How the Company Started
There is one word that can sum up how the company started: health. The company started as a design studio for people who love yoga. They operated the studio for design by day and opened it up as a yoga studio in the evenings. This concept still resonates with its stores to this day.
The company went public in 2007. There is no indication of funding rounds before that time. It is likely that Wilson used the proceeds from his studio to continue operations before going public. The company remains a publicly-traded company.
In 2010, the company recalled some handbags made in China. They had contained lead in them and the company was concerned about possible lead poisoning that could result from the handbags.
The company also received heat as its founder, Chip Wilson, made offsetting comments. He stated that the company does not provide clothing for plus-sized people due to the prohibitive cost.
Lululemon had to recall a product line for being too sheer which led to it being easily ripped, as well as causing women to feel uncomfortable wearing the clothes.
Another factor that is going to be difficult to overcome is competition from large players such as Nike and Under Armour. Analysts are worried that the Lululemon’s staple product will be victim to a fad and does not have enough in its pipeline to compete with these giant retailers.
As the competition grows and the line popularity fades, it may be difficult for the company to continue. In a 2016 interview, Chip Wilson stated much of what is mentioned here. He is no longer involved in the managerial aspects of the company and has divested much of his holdings.
Why it Works
The company adopted the idea of brand ambassadors. Their community-based initiatives have garnered support from its customers. Once this happens, it can take a company into the stratosphere.
The company values health and caters to people who are interested in living healthier lives. Lululemon started out as a design shop-by-day and a yoga studio at night. They can be classified into the category of functional design. They not only help their customers look good but the clothes function to absorb sweat better, etc.
The current initiative is to go after men as a demographic. The company started out catering to women and girls. However, men are a market that the company feels has been underserved. Too many companies mistakenly believe men don’t care about what they wear. The company’s market research suggests otherwise and that is the motivation for the drive towards this demographic.
Lululemon has a large social media presence and actively engages with it. This helps with community and company announcements. On Twitter, they have close to 1 million followers and growing. If nothing else, its constant social media activity will remind people of what it does and why it exists.
Community is the key to the company’s success. It doesn’t use celebrity endorsements (which carry with it high costs) and relies on helping small business owners in the health-related fields.
The company is constantly sponsoring community events. They have free classes that they hold in their stores. This is a great way to bring people unfamiliar with their brand into the mix.
Lululemon offers yoga and dance classes in its stores. These are free events and they help engage the community surrounding the stores. It doesn’t hurt that many participants will buy products before or after the classes.
The company has coined the phrase “technical leisure” as a means to describe that people can wear the clothes outside of the studio or gym. The design is for everyday wear but can also be used when exercising.
It’s admirable that the company lists reviews on its website as people have posted negative reviews about their products. One review stated the product (Hot Like Agni Pant: $118), the mesh roped up as soon as she bought it. The person stated that it was terrible quality and was upset because of the high cost.
On Reddit.com, one user stated that the company switched manufacturers a few years back and felt the switch was the cause for the quality of the products to take a hit.
On the other hand, you’ll find several listings on Amazon that show 4 and 5 star ratings. The caveat is many of them only have one or two reviews. People tend to rely on several stars before making a decision about purchases. It’s not clear whether the reason is that these products are new listings on Amazon or are simply not purchased as readily from their stores.
Lessons Learned By The Business
- The company strives to establish relationships with its customers. It tries to develop a community of like-minded, health-conscious people. As these relationships develop, they branch out to more like-minded people.
- Many sports apparel companies use their corporate logos as part of the design. The type of customer Lululemon targets is one who is not interested in that type of practice. They still put their logo on their line of athletic wear but it is placed in subtle places and does not stand out.
- Unlike its competitors, you won’t find many sports celebrity endorsements. Instead, they focus on members of communities such as yoga instructors and health-related practitioners. They give them gear with the idea that these people will help to promote on the company’s behalf.
- The company trains employees to connect with customers and find out what they are looking for with athletic apparel.
- Before founding Lululemon, Wilson owned a surfing apparel company, called Westbeach. He did not do well with this company and felt the mistakes could be used as a springboard. He used these mistakes as a means of what not to do with Lululemon.
- The company boasts an extremely low employee turnover rate, which likely means the employees are on board with the direction the company is going. This is extremely helpful when trying to adopt a community-based atmosphere. Employees who are committed will connect with the community and that familiarity will continue indefinitely.
How Other Businesses Can Learn From This
Find a market segment that you can define as your own. Try to make customers a part of your success rather than just trying to sell products. Take a higher view of what your products mean to a customer and why it can help them in achieving success or living a better life.
The company tries to instill in its managers to stay true to beliefs of its yoga foundations. They consider this the core element and is responsible for a good portion of their customer base. This is something all companies should try to seek out. Find a core belief or tenet that you can carry throughout the life of the company. This will become apparent to your customers and potential customers.