Investment Opportunities Of China'S High-End Sports And Casual Wear Market Viewed From Lululemon

Core view

The overseas sportswear industry has a long history and has produced famous brands such as Adidas and Nike.

Among them, Lululemon, a young company founded only 20 years ago, is on the rise, especially in the US stock market.

We believe that the success of Lululemon is of great significance to the domestic high-end brand clothing enterprises.

Looking back on its development process, we believe that quality products and marketing capabilities are the key to success: with the continuous technological innovation of design and fabric, and the highly sticky community operation based on opinion leaders, the company can stand out in the competitive market.

Domestic positioning is differentiated, brand, channel, technology to enhance the quality of brand sports and leisure apparel enterprises deserve attention.

Investment points

Mid and high-end sports and leisure apparel leader, the performance continues to grow in recent years.

Lululemon started with explosive yoga pants and positioned high-end sports and leisure. Since its establishment, it has come to the forefront of sports and leisure industry through its excellent product innovation, unique community operation, and industry-leading store efficiency.

The company's share price continued to grow. As of November 28, 2018, the company's total market capitalization amounted to US $16 billion 251 million, ranking third in the US textile, clothing and luxury goods sector.

The main factor driving the stock price is the continuous growth of the company's performance in recent years: the average annual compound growth of operating income and net profit in 2006-2017 years is 30% and 38% respectively.

In 2017, the company adjusted strategy aiming at "men's clothing + electricity supplier + market internationalization", further promoting the performance recovery.

In the first half of 2018, business income reached 1 billion 373 million US dollars, an increase of 24.68% over the same period last year, and net profit reached 171 million US dollars, an increase of 113.76% over the same period last year.

Technological innovation to create product differentiation, community operation to achieve direct store stores beyond Gaoping efficiency

To analyze the development process of Lululemon, we should learn from the following points: (1) continuous technological innovation in design and fabric, providing high-quality clothing with high quality, high comfort, high technology and high performance; (2) building a community operation mode with "opinion leaders" as the core.

Through progressive brand promotion, the brand culture and ideas are imperceptibly pmitted to consumers, and emotional connections are established to enhance customer stickiness. (3) lean management of direct channels and continuous upgrading of customers' shopping experience at retail terminals. In 2017, the direct store stores had a plateau effect of up to 120 thousand yuan / square meter; (4) supply chain diversification, and enhanced the right to speak to the supply department.

Investment advice: focus on positioning, differentiation and value chain upgrading of high-quality enterprises.

Compared with overseas counterparts, the accumulation of local brand culture in China is slightly weak. Based on the successful experience of Lululemon, we believe that quality products and excellent marketing are the key to their success: with the continuous technological innovation of design and fabric, and the highly sticky community operation based on the opinion leaders, the company can support the premium of high brand and lead the competitive sports and leisure clothing market.

It is suggested that attention should be paid to positioning differentiation, brand, channel and technological upgrading of quality enterprises.

With the continuous expansion of the middle class and above strata in China, the consumption demand of high-end clothing will continue to be released. At the same time, the younger generation with higher personality and health appeal will become the main consumption of the society. The high-end sports and leisure clothing market will continue to be born with new opportunities.

Investment outline

China's sportswear industry was born in the last 80 and 90s of the last century, such as Lining, Anta, PEAK and other well-known sports brands, but there are no obvious domestic advantages in the high-end market, and this part of the market is still occupied by overseas famous brands such as Nike and Adidas.

By analyzing the products, channels, marketing and supply chain management of us brand Lululemon, we can help us to understand the current development of the industry and to think about the future direction of China's garment enterprises.

1. why do we choose Lululemon as the research object?

China's sportswear brand is still insufficient compared with the Centennial brand NIKE and Adidas accumulation. It has reference value to study the successful experience of young brands.

As China's middle class and above are expanding, the demand for high-end clothing will continue to be released.

In recent years, China's high-end consumption has markedly recovered. In the past 2015-17 years, the income of high-end clothing brands has continued to rise, and the demand for residents continues to escalate.

According to McKinsey, sales of China's light luxury products can reach 11%-13% in 2018-2022 years, and sales in 2025 will reach 620 billion yuan.

Therefore, we choose the positioning of high-end brand Lululemon as the research object.

2. what can we learn from the successful experience of Lululemon?

"Technological innovation + brand marketing" is the foundation for the rise of its brand.

Lululemon relies on its high-quality clothing and community operation with opinion leaders as its core to stand out in the sportswear brand.

In terms of products, Lululemon continues to provide high quality clothing for scientific and technological innovation for customers. From classic yoga pants to new ABC men's trousers, there are scientific and technological innovations in design and fabric. The products are comfortable and beautiful, and can meet people's daily sports needs.

In terms of brand promotion, unlike other brands, Lululemon did not sign big sports stars. Instead, it built the community operation mode with "opinion leaders" as the core, forming strong customer loyalty and brand reputation.

This promotion mode of "overtaking corners" is worth learning from.

3. how does the domestic sports apparel brand stand out in the middle and high-end market?

"People": focus on brand building and channel coordination.

Only by products can not support the premium of high-end brands, enterprises need to form a set of differentiated brand promotion based on their own brand culture, which needs to be constantly groped and adjusted; enterprise promotion channels can not be expanded simply.

The ambassadors plan and the community operation are all reference.

"Goods": continuous scientific and technological innovation, to provide high quality products.

Consumer demand for the appearance of clothing products is constantly changing. Under the wave of sports and leisure, the design must keep up with the consumer's demand for fashion. Consumers' demand for the functional preference of clothing products is also more stringent, while ensuring beautiful beauty, the fabric and design should be innovated, and product differentiation is realized through innovation.

"Field": improve the retail experience, grasp the new market opportunities.

In the context of the rapid development of online shopping market and the increasing willingness of consumers to purchase online, we are still optimistic about the business of doing well in store services and customer experience.

In this way, enterprises can expand new markets including overseas and network without losing their brand value.

Lululemon: a rising star in sportswear

Lululemon has become a black horse stock in the US apparel market.

The company mainly deals in sportswear, including products such as tops, shorts, trousers and other sports accessories such as bags, kettle and so on.

In 1998, the company was established in Canada, started selling women's Yoga Pants, opened its first store in 2000, started international expansion in 2004, and landed in the United States in 2007; in addition to women's sportswear, the company launched the brand Ivivva for girls in 2009.

As of November 28, 2018, the company's total market capitalization was as high as $16 billion 251 million, exceeding Anta's third place in the global sports (leisure) apparel business.

The company's revenue and net profit grew rapidly in the 2006-2017 years, and CAGR was 30% and 38% respectively.

Before 2012, the company's performance increased rapidly. Then, with the increasing competition in the industry, the company's product quality control, supply chain and other issues, the company's performance growth began to slow down.

In 2017, the company achieved operating income of 2 billion 650 million US dollars, an increase of 13% over the same period last year, and realized a net profit of US $260 million, down 14.7% from the same period last year. The main reason is that the cost of asset restructuring and the changes in the income tax policy resulted from the increase in the cost of sub brand Ivivva.

In 2018, the company's performance began to recover. Net profit in the first half of the year was $171 million, an increase of 113.76% over the same period last year.

Products: innovation promotes product differentiation, and supports premium of high-end brands.

The $100 yoga pants are popular all over the world.

In the early days of the "fist product" Yoga Pants, the wave of women's movement began. At that time, there were only a small number of sports pants specially made for women in the market.

At that time, sportswear worn by women was poor, overstaffed, airtight and poor in comfort.

After realizing this consumption pain point, the founder Chip Wilson improved the thickness, weight and shrinkage of the ski suit based on its fabric, and adopted the high price "flat seam" splicing design to solve the problems of breathability and tightness. The 20 year old yoga pants were born.

Since then, the company has been upgrading and upgrading. The current Wunder Under series is the main product of yoga pants.

Comfortable, Gacu average price of up to 100 U.S. dollars / fans still have a large number of fans cluster.

Through qualitative analysis of consumers' evaluation of Lululemon products, especially yoga pants on the social platform, we find that comfort is one of the main factors for consumers to buy Lululemon. They believe that Lululemon's yoga pants have the advantages of "slippery", "not tight", "comfortable" and "breathable" and so on, which significantly enhance the wearing experience.

Designing the beauty of the outstanding shape is more suitable for daily wear, and also lays the foundation for social media communication.

Compared with the professionalism of other sports brand products, Lululemon's overall style is more introverted and more suitable for everyday wear. At the same time, excellent design and tailoring highlight the beauty of consumers' shape. Consumers are very happy to expose themselves to Lululemon's "beauty photos" in social media and give positive evaluation.

Take yoga pants as an example, its unique design can improve the buttocks' stiffness and length, lengthen the leg lines, and make the female's aesthetic feeling of their own body highlighted.

Besides yoga pants, the price of other product lines of the company is generally higher than that of sports brands Nike, Adidas and Under Armour.

The company has started with yoga pants, and its main products include shorts, vests, jackets, corsets and other sportswear, including sports accessories such as bags, headwear, socks, sports pants, yoga mats and other sports accessories, including running, swimming, business commuting and other sports life scenes.

The main brand Lulelemon men / women each has 4 main product lines, and the main sales products are concentrated in the range of 80-130 US dollars.

Take sports bra as an example. According to data from Nike and Lululemon official website, Nike sells for $30-80 / Lululemon, and Lululemon's bra series is $68-108, which is an average of more than $30 over the former.

Focus on technological innovation and continuously provide competitive high quality products.

Behind the "comfort and beauty" needs strong technological innovation capability to meet the changing needs of customers and compete with other brands.

In the face of a large number of competitors such as Nike, Adidas and Gap, the company firmly chooses to promote and highlight its own high-end positioning through scientific and technological innovation, and bring the value and experience of other brands to customers by using top-notch design and fabric, and concentrate on putting superior resources into high value-added links such as design, research and development, and collaborate with the third parties in the production, logistics, outsourcing and quality inspection aspects of the supply chain.

Design Innovation: the company's design links are completed by Canadian researchers, scientists, engineers, designers and international designers.

The team adheres to the design concept of beauty, comfort and functional balance, with a healthy lifestyle as inspiration, continuous innovation of products, and providing high quality products for customers.

According to the official website of the company, in addition to the reports of the research institutions, the company itself also seeks to innovate by collecting data from customers and brand ambassadors.

For example, the "Elite Bra" launched in May 2017 is the result of two years of research after the cooperation between the company and several famous universities and many athletes.

Design innovation has the following three characteristics: 1) deep excavation and meet the needs of customers, combined with design mechanics, neurology and behavioral psychology to improve the design; 2) achieve a balance between shape and comfort, strong plastic effect can highlight the beauty of women's own lines, such as the classic yoga pants can help women improve the buttocks line, stretch legs and wear very comfortably; 3) design simple, style, to adapt to more scenes of life, for social media two times to spread a good foundation.

Fabric Innovation: the company continues to focus on customer needs and constantly innovates the fabric of products.

In the 20 years after the birth of yoga pants, the company, from the needs of customers, deeply collaborated with upstream suppliers to seek innovative fabrics of science and technology, adding lightweight, breathable, sweating, quick drying, shrinkproof, bacteriostatic, deodorant and anti deformation characteristics, and constantly upgrading and iteration to meet the different needs of customers' sports and daily wear, and enhance the customer's wearing experience.

Marketing: opinion leaders cooperate with the community operation in layers, and brand promotion is exquisite and rhythmic.

The core value of the company's brand is to help customers create a life attitude of "sweat life" (sweet life), sweating profusely through sports, and conveying a healthy and fashionable life taste to the outside world in the form of sunlight.

This kind of non single brand value determines that the way of brand communication must be fine and rich, and can not be achieved through simple and rude exposure.

Word of mouth marketing: taking opinion leaders as the core, using the power of consumers to promote marketing.

Social media has changed the way of communicating with customers. Lululemon has established a "three degree" model which is different from the traditional one.

According to the 2018 Instagram opinion leaders marketing report released by marketing platform Klear, in 2017, the number of Posts sponsored by enterprises increased by 100% over the same period in 2017, of which Lululemon was the fourth most active brand in social media.

According to the traditional marketing strategy, brand value should be implemented according to the traditional marketing strategy. Enterprises should follow the steps of "creating popularity, establishing reputation and cultivating loyalty", but Lululemon's strategy is anti traditional. First, look for a group of people to cultivate the initial loyalty. On this basis, we can enlarge the brand's popularity through the stars, and then form the brand reputation through the word of mouth spread of the ordinary consumers. Finally, we will drive the "customer assets" to buy products through the community marketing to cash in.

Waist opinion leaders develop loyalty through precision strike: the influential opinion leaders in the vertical movement field become the ideal target.

Unlike big companies such as Nike and Adidas, which spend hundreds of millions of dollars to invite sports stars to shoot advertisements, Lululemon has formulated the ambassador plan to promote brands since its inception.

According to the official website data of the company, as of December 2018, there were more than 1400 shop ambassadors.

Take the example of Mai Cheng Si, an ambassador of Taigu Hui store in Guangzhou, micro-blog fan 73w is an opinion leader in the fitness field. He often releases professional fitness training videos on social platforms. At the same time, he is also the former partner of the fitness head public number Fittime Rui Jian and the founder of brand Evenso.

He has a certain influence in the field of fitness, and has high quality fans who love sports and pursue healthy life. These characteristics have made him signed as a brand ambassador by Guangzhou stores.

The relationship between fans and these ambassadors will generate "empathy effect", so that they can establish emotional connections with brands, similar to "friendship", get richer brand experience, and loyalty is higher than the general brand communication.

Brand Ambassadors not only wear these costumes in front of students, but also provide feedback to the company on design, and guide students to experience products and promote social interaction.

In addition, they can also sell apparel and offer prizes such as free yoga courses to purchasers.

The head opinion leader "Star" expands its brand awareness through its own influence: the star with the greater influence and the head net red are naturally the company's favorite partners.

Not only foreign stars such as Jennifer Jana, Avril, and Kim Dai Shan are drying their pictures of sporting life in Lululemon on their social media, but the protagonist Andy in the head drama "Ode to joy" even wears Lululemon directly in the play.

This kind of "soundless and silent" implantation eliminates the rigidity of the celebrity endorsement brand, and delivers better brand value through the star's lifestyle. A strong fan base can also help the brand rapidly expand its popularity.

In 2018, Lululemon signed the actress Chen Yao as the brand ambassador of China, and 80 million of fans, she had the title of micro-blog queen.

Grassroots opinion leaders enhance brand reputation by creating content: every ordinary consumer is the opinion leader of his own life circle, and the content produced is an important part of brand communication.

According to eMarketer statistics, the apparel industry can better utilize user generated content (UGC) for marketing than other industries.

Lululemon has beautiful, comfortable and athletic attributes. Ordinary consumers will wear Po's sports photos or life photos on social media, and tend to give positive evaluations such as comfort and beauty.

The operation of the community is progressively progressive, and the rhythmic way of promoting the core value of the brand penetrates the hearts of the people.

The promotion of specific brands combines the efficiency of centralized leadership. The management can analyze the brand maturity (permeability, conversion rate and other comprehensive considerations) to determine whether stores need to expand, and whether they need to organize cross regional brand activities. It also includes an innovative mode of self-organizing management, where stores can independently recruit opinion leaders and organize community activities.

This way of promotion is gradual, and the company's top executives call it "a disciplined way of promotion".

It helps brands pfer core values to consumers and establish closer ties.

From breaking cycle to budding: set up experience exhibition shop to get seed customers.

In the early days of brand penetration, Lululemon often set up experience display shop (showroom), specializing in communicating with customers, launching various activities, offering yoga courses and selling thematic products.

The first step is to set up a small exhibition shop, send a team joint brand ambassador to develop Yoga activities, open 3-4 days a week, and then choose experienced experiencer to constantly copy and iterate this process, and establish contacts with ambassadors.

For example, before China opened its first community store in 2016, the company has opened 3 show room in Shanghai and Beijing respectively.

This steady way makes Lululemon often not yet enter the market and has a good customer base.

From sprouting to growth: building a community to create different experience marketing for customers.

When the local demand signal is strong enough, the company will grow into a fully mature shop and build a community based operation with its stores as the core: the brand ambassadors and stores at all levels will work together to open up online social networking and offline store activities through store activities, and establish a community based marketing model.

They will improve yoga, fitness, running, dancing and other sports to create a group activity suitable for the crowd to participate in, and then promote activities around the store or community to attract potential customers who are in tune with the brand.

Compared with community operation, community operation can build stronger emotional connections, form higher brand loyalty and bring higher conversion rate.

Participants can learn about Lululemon's products, brands and ideas after training. After the event, the brand ambassadors will advise you to stay and chat with the people around you.

In this way, we can enhance the emotional connection between brands and customers. Meanwhile, businesses can deeply touch consumers' groups, penetrate their habits and habits, and collect consumers' feedback and constantly improve their products.

From growth to maturity: continuous unlocking of new brand activities as an extension of community operation

Companies continue to try to unlock more extensive activities, breaking the geographical boundaries of the community.

In recent years, Lululemon has also launched a number of cross community brand activities, including the half marathon in Vancouver, the devil run in 15 cities in North America, the heart exhibition of 6 cities in China, the hot sweat festival in London and so on.

In 2017, Lululemon launched the first global brand campaign "This Is Yoga" (this is yoga). This is the company's first global exploration of brand activities.

Such cross regional activities, as an extension and supplement of community operation, can further expand the influence of brands.

Channels: focus on direct camp, the store is flat and effective.

The main sales channels of the company are direct shops and self operated electricity suppliers. Only a small number of products are sold through brand discount stores (Oteri J), temporary experience stores, wholesalers, exhibition booths, shopping centers, Franchising (Middle East and Mexico).

According to the company's announcement, 90.65% of the company's sales in the first half of 2018 were contributed by the direct channel, and only 9.35% generated from non direct channel.

Direct store store efficiency up to 120 thousand yuan / square meter, leading the clothing industry.

The company's direct shops are mainly located in the bustling office buildings and residential areas of the first tier cities, or the prominent location of shopping centers, which coincide with the coverage market.

According to the annual report of the company, the types of stores include ordinary stores, flagship stores, showrooms and laboratories. The average area of ordinary stores is about 200 square meters, and the smaller community stores are around 100 square meters. The flagship store will be larger because of the coverage of more people, such as the Manhattan store in New York, which has an area of about 557 square meters.

The store is second only to apple, Murphy America (petrol station) and Tiffany, ranking fourth in the US retail industry and the first in clothing retailing industry.

Through strong community operation and strong user stickiness generated by brand promotion with opinion leaders as the core, Direct stores have super high traffic and conversion rate, and the efficiency of operation is amazing.

In 2017, Lululemon's annual sales amounted to 17 thousand US dollars per square meter (120 thousand yuan contract), and its main competitors Under Armour and Nike were not as good as its 1/3.

The number of stores is flexible, and the market focus is shifting to Asia Pacific.

After a series of optimization and correct digital marketing strategy, the problem of online sales has been effectively solved.

According to the company's earnings, in the first quarter of 2017, Lululemon's official website had no more color choices due to its spring sportswear, and the website interface failed to correctly show the company's "design vision", resulting in a decline in online sales.

Then the company made timely adjustments to the product, and the correct strategy adjustment in the digital marketing activities. According to the company's report, the conversion rate of e-commerce in Q2 company increased by 20% in 2017, and the traffic volume of the website increased by 30%.

Online and offline stores will be able to supplement the online shopping experience with offline services.

According to the official website of the company, in the first quarter of 2018, more than 300 stores in Lululemon began to launch the "online purchase store delivery" service; in the second half of the 18 year, the online shopping store picking service was launched.

The profit contribution ratio of e-commerce channel is increasing year by year.

In the first half of 2018, most of the net profit of the company was generated in the direct store, which accounted for 66.96% of the total profit. However, the proportion of profit contributed by the direct store decreased by 12.59 percentage points from 79.55% in 2012 to 66.96% in the first half of 2018, while the proportion of self employed electronic commerce contributed profit increased by 9.29 percentage points in the same period, and 23.69% in the first half of 2018.

Accelerate the development of e-commerce channels, open online and offline

After a series of optimization and correct digital marketing strategy, the problem of online sales has been effectively solved.

According to the company's earnings, in the first quarter of 2017, Lululemon's official website had no more color choices due to its spring sportswear, and the website interface failed to correctly show the company's "design vision", resulting in a decline in online sales.

Then the company made timely adjustments to the product, and the correct strategy adjustment in the digital marketing activities. According to the company's report, the conversion rate of e-commerce in Q2 company increased by 20% in 2017, and the traffic volume of the website increased by 30%.

Online and offline stores will be able to supplement the online shopping experience with offline services.

According to the official website of the company, in the first quarter of 2018, more than 300 stores in Lululemon began to launch the "online purchase store delivery" service; in the second half of the 18 year, the online shopping store picking service was launched.

The profit contribution ratio of e-commerce channel is increasing year by year.

In the first half of 2018, most of the net profit of the company was generated in the direct store, which accounted for 66.96% of the total profit. However, the proportion of profit contributed by the direct store decreased by 12.59 percentage points from 79.55% in 2012 to 66.96% in the first half of 2018, while the proportion of self employed electronic commerce contributed profit increased by 9.29 percentage points in the same period, and 23.69% in the first half of 2018.

Supply chain: strengthening quality control from the source and lean inventory management

The upstream supply chain is decentralized to enhance product quality control.

The purchase of surface accessories and the production of garments are the weak links of the company. In 2010 and 2013, the company recalls the product quality problems. In 2013, the public relations crisis was triggered by too much fabric and too many parts of customers.

The company began to decentralize the upstream supply chain, reducing reliance on single suppliers or producers.

The company is becoming more and more decentralized to suppliers and producers. In addition to reducing their reliance on them and increasing their voice, they can also ensure the quality of products from the source.

According to the annual report of the company, there were 65 suppliers of fabrics in Lululemon in 2017. The single supplier supplied no more than 35% of the total demand, while the first five suppliers supplied about 59%. The total number of manufacturers was 47, and the single manufacturer produced no more than 25% of the total demand, while the former 5 produced about 64%.

Decentralization is also a comprehensive consideration of the efficiency and cost savings of the company.

The proportion of American products produced by the company increased year by year, which means that the supply distance of the core market in North America is shortened, and the reaction can be made faster.

The company's producers are mainly concentrated in Southeast Asia and South Asia, and the proportion of production in China is gradually decreasing, which is related to the gradual increase in the cost of labor and raw materials in China.

The increase in the number of manufacturers brings new challenges to the company's quality control.

In order to strengthen quality control, the company is strengthening the quality inspection of its products. The joint third party independent evaluation agency supervises, checks and tests the accessories and products, and the indicators include whether pilling, shrinkage, wear resistance and color fading.

At the same time, a perfect mechanism is introduced to evaluate manufacturers, including pre production evaluation, project evaluation, continuous improvement, purchase test and continuous tracking.

Increase patent input and weaken upstream discourse power

Most of the patents for surface accessories are in the hands of suppliers.

Although the company has established long-term cooperation with suppliers and manufacturers, they have not signed long-term contracts. This means that the fabric can not constitute a competitive barrier between the company and other clothing brands. The company can not use intellectual property rights to resist the invasion of the market share by the competitors of the shared suppliers.

According to the company's annual report, the Luon family, which has the largest demand in the company (30% of its total fabric used in 2014), is provided by Eclat Textile, a supplier of Taiwan, while Eclat has long term cooperation with top brands such as Nike, Adidas and Under Armour.

The company began to invest more in fabric patents to enhance its voice with upstream.

In 2017, lululemon bought part of the stake in 7mesh bicycle of the Canadian bicycle clothing company in order to get a breakthrough in the fabric technology. In 2018, the company launched the Warpstrem patent cloth, and this year's brand's hot line -- ABC men's trousers is made of this fabric.

This fabric can meet the needs of sports and daily needs, and provide a sense of comfort for the whole day. It is not inferior to the high-tech fabrics developed by the supplier.

Lean management inventory helps new retail of clothing

With the globalization of the market, world-renowned retailers and brands use RFID (radio frequency identification) technology to improve supply chain operation.

RFID is to give every product a "identity card". By putting the RFID tag on the product, the store system can get the link with the merchandise.

The RAIN RFID Alliance announced that more than 100 brands retailers and companies including 7-11, Zara, Burberry, C&A, Decathlon, H&M, La Chapelle, Macy's, Marks&Spencer, Target and Macy's have publicly indicated that they are using the technology.

In the retail industry, especially in the retail apparel industry, the speed of RFID popularization is accelerating. According to the data of RAIN RFID alliance, 8 billion 500 million passive RFID tags will be used in the clothing industry in 2018.

RFID technology not only improves Lululemon's accuracy in inventory control, but also improves customer experience in stores.

At present, the company has extended the Tyco's TrueVUE RFID inventory solution to all the North American stores. Based on the RFID store system, Lululemon can realize the fast stocktaking, sending and receiving, searching and settling of goods in the store, reducing the time spent by employees in stocktaking, and effectively raising the turnover speed of the inventory. The staff and customers can quickly find the items needed, increase the visibility of store inventories, and help Lululemon achieve the "online shopping line".

Competition is intensifying, and Lululemon explores the way to break the situation.

Global sports and leisure heat

Sportswear and leisure clothing gradually break through the limitations of the scene and become an important part of people's daily fashion.

Sportswear and leisure clothing can not only meet the needs of sports but also wear everyday. With the change of the boundaries between leisure and formal clothes and the pursuit of healthy lifestyles, leisure sports clothes that can be switched freely on social occasions, workplaces and sports occasions are naturally favored by people.

According to the Google search index, the global search fever of "athleisure" has been growing rapidly since 2014.

Our global sports and casual wear industry has been on the rise. Sports and leisure market segments have become one of the core driving forces of the growth of the apparel industry in the United States. In 2007 -2015, the global market for sportswear and clothing increased by 42%, from $188 billion 400 million to $281 billion 900 million. According to the Morgan Stanley report, this growth trend will continue to grow, and will grow to 365 billion 200 million dollars in 2020.

Meanwhile, according to the US clothing industry report released by NPD, in 2017, the non sports apparel market achieved a negative growth while the sales of sportswear sales increased by 2 percentage points to 48 billion dollars.

It can be seen that sports leisure has become one of the core driving forces for the growth of the apparel industry in the United States.

The trend of sports and leisure will continue and the market will continue to expand.

We believe that the core of driving growth is as follows:

(1) the concept and mode of healthy life are more and more popular.

People's functional demand for clothing has gradually increased, and gradually began to pursue the balance of comfort, beauty and function.

(2) continuous innovation of fabrics and products can not only enhance the comfort and wearing experience of clothing, but also better meet the needs of people's sports and improve people's sports performance.

(3) scene compatibility is high.

Sportswear and leisure clothing can be integrated into most social occasions. The design of the Joker plus sweating, breathable and suppressing tastes is crowed by more people.

(4) the rise of social media has changed the way of brand communication. More and more celebrities will show their lifestyle and dress matching in social media such as instagram, twitter and micro-blog.

Influenced by the consumption concept of celebrities, fans will also buy celebrities.

The coconut shoes cooperated with Adidas have become phenomenal shoes since the early stage of the listing.

(5) the rise of net red (group of opinion leaders) makes the influence of the brand expand.

Compared with the stars, the influence of the net red group can sink to more consumer groups, and the brand side can also cover more consumer groups at lower cost.

(6) the pformation of fashion culture.

Because of the changes in the market, the fashion circle has introduced sports and leisure products frequently. Sports and leisure have gradually become the trend of today's trend. People gradually melt this culture into a part of life. People walk in the streets wearing yoga pants, and office workers also change their sports shoes into office buildings.

Giants enter competition

In recent years, there have been two trends in the clothing market in recent years: the sportswear movement and the sportswear leisure.

The former, due to the lack of sports genes, can not meet the increasingly demanding functional requirements of consumers in terms of professionalism. Therefore, in addition to a small number of products such as Valentino, GUCCI, Paris and CK, and even the secret of Vitoria, they have a sports product line. Most of the popular brands such as Zara, UNIQLO and H&M are not good at sports and leisure market.

By contrast, sports brand leisure is much better.

Sports brands began to gradually tackle the female market and sports leisure market, followed by ALO YOGA, ALALA and other local minority Yoga Fitness brands.

The company's competitors are mainly sports brands Adidas, Nike, FILA, Under Armour, etc., and are also squeezed by high-end brands such as Valentino, GUCCI, Paris, CK, Vitoria secret (sports product line) and mass media Zara, H&M and Gap.

The Lululemon category is too single, which is not enough to reduce the number of competitors from different competitors.

The company continues to expand the track, plus men's business.

Horizontal competition, companies expand the target consumer groups.

At the beginning, the target group was mainly working women aged 25 to 34 who loved sports. In 2009, the sub brand Ivivva was set up to provide sportswear for 6-14 year old girls. In 2013, men aged 25-34 and relatively rich and energetic were added to the men's business.

In the vertical competition, companies expand their categories to seize more consumer "wardrobe space".

Taking yoga pants as the entry point to enter the market, they begin to cover more sports and daily scenes, including yoga, swimming, running, training, business commuting, leisure, golf, and gradually occupy more consumer "wardrobe space" to meet almost all the needs of consumers besides formal business occasions.

According to Lululemon official website statistics, as of November 2018, the Female Yoga related SKU accounted for 16.7% of the total.

Brand gradually "feminization", men's clothing business or will become a new growth point.

Although the company started running men's clothing, mainly golf Polo shirts and men's underwear and other basic products, Lululemon has always been considered a strong feminine brand.

According to the company's annual report, in 2013, the company began to make men's clothing business. In 2014, it opened the first men's wear independent store in New York. In 2017, the men's clothing business was one of the three major business growth points. According to the company's official website, as of November 2018, the proportion of SKU in men's clothing and accessories has increased to 28%, and the ABC series of men's trousers and their jogging funds will also be launched.

Business judgment is wrong, and sub brand Ivivva has become "chicken ribs".

Because of the problem of operation, the company began to reorganize the next store of Ivivva line.

According to the company's 2017 annual report, in 2017, the company closed 48 Ivivva stores.

The former CEO Lraurent Potdevin admitted that this is not due to the excessive environmental pressure of the retail end, but because "Ivivva can not be built into a brand worth billions of dollars".

The failure of Ivivva is due to the multidimensional discomfort of brand, channel, marketing, price and so on: (1) the decision-makers are misplaced with the actual consumers; the children's clothes are usually bought by their parents to go to the exclusive stores; 2) the marketing methods of community marketing are invalid, and the lack of emotional connections will weaken the premium of the brand; (2) although girls have certain demand for sportswear, but the demand level is not enough to support the expensive direct store network; (3) girls are in the growth stage, they need frequent change of clothing, and the 44-78 dollar pricing target market is too narrow.

Financial comparison: profitability and operational capability

Revenue side: revenue in recent years and Anta were flat, the growth rate over the old leading Nike, Adidas

Due to product category restrictions and smaller target customers, the company's revenue scale is not as old as the leading brand, but it is stable in recent years.

From the income data, the volume of global report revenue of the old leading Nike/Adidas in 2017 amounted to 363.97/254.57 billion, which is 14/8 times the volume of Lululemon; however, 2015-2017 years CAGR 12.0%/6.0% was 12.0%/6.0% respectively, which was lower than 13.4% of Lululemon (from 2 billion 61 million US dollars in 2015 to US $2 billion 649 million in 2017).

In 2017, the company's overall revenue was flat with Anta, but according to Anta's 17 annual report, Anta's stores were up to 1.

In the first half of 2018, the company's revenue growth rate improved significantly, up 24.7% to 1 billion 373 million US dollars over the same period last year.

According to the company's 18 - year semi annual report, passenger growth is the most important reason for accelerating the increase in revenue. The increase of electricity supplier traffic is more than 20%. Secondly, Asian revenue grew by 55% over the same period last year, and the growth of China's electricity supplier revenue is more than 2 times, which is also the main reason for promoting the performance.

The company's net profit in 2015-2017 years and three years fluctuated greatly due to the adjustment of the income tax policy, and the net profit growth in the first half of 2018 was ahead of the industry.

According to the company's annual report, the company's pre tax net profit growth slowed from 10.1% in 16 to 9.1% in 17 years, and the growth rate remained stable. After tax profits decreased from 303 million US dollars in 16 years to 259 million US dollars, the effective corporate tax rate was 28.2%/43.8% in 2016/2017, which shows that the decline of net profit in 17 years is mainly due to the adjustment of income tax policy.

Net profit growth in the first half of 2018 was much higher than expected, an increase of 113.8% over the same period, which is faster than that of Anta, which is due to the growth of men's clothing business and overseas market.

Profit margin: gross margin is the top priority, net interest rate won the top spot.

In the past 8 years, the gross profit margin of the company is among the first in the same industry, and the net interest rate in the past 5 years is also at a higher level in the industry.

In 2017, the gross profit margin was 52.8%, showing an upward trend; net interest rate was 9.76%, and book net interest rate was lower than that of Anta's 18.92%.

Lengthening the observation cycle and eliminating the impact of Trump tax reform on profits (Nike/Under Armour is also implicated), the company's net interest rate and Anta's gap can be reduced to 4-5 percentage points. The main gap comes from operating costs and income tax costs.

Operational efficiency: inventory, accounts receivable management capacity and industry leader.

Inventory turnover management, the company ranks first in the industry.

Due to the majority of direct operations, the company's inventory turnover efficiency is not as good as that of Anta, but compared with the leading Nike in the industry, it has maintained a leading edge in the past 9 years.

In the first half of 2018, the number of days of inventory turnover was 102.8 days, while that of Andrew was 168.8 days.

Accounts receivable turnover management, the company far exceeds peers.

Due to the less direct sales share and the strict control of terminal inventory, the company's accounts receivable turnover efficiency is higher than that of its peers. In 2017, the turnover time was less than 1.9 days in the Nike 35.5 day 1/10.

Source: Huatai spinning clothing writer: Chen Yufeng Zhang Qian