Lululemon's "Manifesto" Explained - Business Models of an Innovative Marketing Company

                          

Who is lululemon?

Founded in 1998 with ideas from surfer/snowboarder, Dennis "Chip" Wilson, lululemon has established themselves as the top yoga athletic apparel with an average growth rate of 31.6% in the last 5 years (Phalguni).  Their focus on building a successful business model has contributed greatly to their success. lululemon has established a merchant model to base their company on. More specifically, lululemon seems to have implemented the 'brick-and-mortar' model, a subset of the merchant model, by providing goods and superior services to their customers through corporate-owned retail stores and online shopping. According to Bloomberg, as of February 2015 lululemon operates 302 corporate owned stores in the US, Canada, Australia, New Zealand, the UK, and Singapore. To better understand how lululemon started with one location in Vancouver, Canada successfully launched 300+ stores, this post will dive into the values and business model that launched lululemon into the sphere of Nike and Under Armour.

What are the elements of a business model?

According to our book, "Internet Marketing Integrating Online and Offline Strategies" by Roberts and Zahay, there are six main functions of a business model:

• To establish a value proposition
• Identify a market segment
• Define the structure of the value chain
• Estimate the cost structure and profit potential
• Describe the position of the firm within its industry
• Formulate the competitive strategy that will allow the company to hold competitive advantages against rivals

How lululemon's model aligns with these elements: 

lululemon's value proposition has take on a new form with this company's revolutionary marketing. Instead of having a set statement, lululemon has a list of 31 phrases, or "ideas", that the company holds their educators to. lulu has translated this into a new 'manifesto' that they carry throughout their brand. Examples of this can be seen in their bags and clothing. This manifesto is implemented in order "to guide the company in creating a unique niche and future retailing success" (Beaumont). 

                                 

lululemon's ideal market segment are active, stylish, and middle to upperclass women whom value an active and healthy lifestyle. As consumers, we buy products that reflect who we are and help to create an image of ourselves that we are happy with. lululemon appeals to those hoping to identify with trendy sportswear, healthy living, active lifestyles and being fashionable all along! 

                       

lululemon's value chain depends on customer satisfaction and ensuring high quality products. Their products' technology is patent protected and offer the best quality sportswear available. Fabrics like Luon, Silverscent, and UV protection fabrics help set apart their products, adding value in the customers' eyes.

                     

With such high quality products, lululemon is able to charge a high premium for their clothing. With shirts priced at $48 and leggings ranging from $50-$120, lululemon has been able to create a huge profit margin that allows them to expand rapidly, pay for premium locations, and invest in their company and international markets (Beaumont). 

Within the athletic wear industry, lululemon has gone from a small-town, local run business to a dominant, global player in the last decade. Their program is designed the "support you in c
creating a life that you love" (www.lululemon.com/education/goalsetting). Their online sales have allowed customers in countries around the world have access the their products. lulu "clearly understands that the world is shrinking" due to globalization and online consumption (Beaumont). lululemon has capitalized on this, and expanded their reach across the globe.

                 

lululemon's product design and distribution allow them to create competitive advantages against their rival companies. Their use of innovation and feed back from customers is an aspect they value highly in their strategy (Phalguni). The companies' corporate-owned retail stores generate over 77% of overall revenue, and that is with only 302 stores! If they continue to expand their stores in premium locations, lulu's continued growth is almost guaranteed. Their direct to consumer (DTC) revenue accounted for approximately 17% of the company's overall revenue as well, meaning there is definitely room for improvement and growth to be made for lululemon's online presence.

                               

Is There Another Model For lululemon? 

As successful as lululemon is, I think there are business models that could add to lulu's profit. An aggregator model is another option that I could see lululemon being successful with. In this model, companies "organize and choreograph the distribution of goods, services, and information" (Roberts & Zahay). lululemon's online presence could greatly be enhanced through this model. 

Unlike eToys, who launched in 1997 and was unable to track costs of running a retail business, lululemon is already established and know how to make profitable decisions. eToys started as a forerunner in online toy retail, just as lululemon is the first true yoga-specific athletic wear. Through the aggregator model, lululemon would have even better knowledge of their inventory and customer satisfaction. The aggregator model would also allow lululemon to make better use of their excess inventory if they were to over produce an item.  

However, at the end of the day lululemon has definitely been successful in their implementation of a merchant business model. They have successfully launched over 300 physical retail stores and are well on their way to increasing the online sales, they have launched catalogues, and have seasonal products, excellent customer service, and produce very high quality products that consumers are willing to pay premium prices for. I think that if lululemon keeps purchasing premium store front locations and continue to build their online presence, they will continue to see large growth. 

Update on How My Blog is Going! 

As stated on my homepage and prior post, I have created this blog as an assignment for a Digital Media Marketing course. Since I have started my blog, my page has received 133 page views! All of my views are from the United States viewers using Google Chrome (71%) on the Mac computers (57%). I think that most of these views are from people in my class, and from a lot of my friends and family. I want to increase the viewers of my blog, especially internationally. It would be cool to see areas on the map light up from places other than the United States. In order to do this, I plan to increase my tag usage and try to make my posts relatable to all. Even though Nike and Under Armour are American-based companies, I h0pe to be able to reach buyers outside of America, and hope to give them some insight into these companies!  

I chose to comment on fellow classmates' blogs. I chose to follow Bri because we had the same difficulty keeping the tone personal but also making sure we cover all the areas our professor is asking us to cover. Basically we're both trying to figure out how to make our blog sound like a blog, not like a paper, so I wanted to see how she was doing! 
I followed Taylor because I like the companies she decided to follow, Chipotle, Uber, and Snapchat, and I use all of those. I also really like how Taylor uses images and videos in her blog. 


I hope to learn from both of them to make my blog better, and hope they get something useful out of mine as well.

Here are links to both of their pages:
Bri: http://tellyhoopla.blogspot.com/
Taylor: http://valentitaylor.blogspot.com/

Beaumont, D. (2013, December 3). Eight Secrets to Success from Lululemon. Retrieved September 26, 2015.

LULULEMON ATHLETICA INC (LULU:Consolidated Issue Listed on NASDAQ Global Select ): Stock Quote & Company Profile. (n.d.). Retrieved               September 26, 2015

http://www.bloomberg.com/research/stocks/snapshot/snapshot.asp?ticker=LULU

Phalguni, S. (2014, December 15). Welcome to Market Realist. Retrieved September 26, 2015.

Roberts, M., & Zahay, D. (2013). Business Models and Strategies. In Internet marketing: Integrating online and offline strategies (3rd ed., pp. 60-            79). Mason, Ohio: South-Western Cengage Learning.