Chip Wilson Founded Lululemon How To Break Through $50 Billion Market Value

It took Adidas 70 years, while lululemon only took 23 years, from its establishment in 1999 to its launch on the NYSE in 2007, and then to a market value of US $50 billion in 2022.

As a result, people have been involved in the discussion of the common topic: why lululemon?

A pair of Yoga Pants costs nearly 1000 yuan and is popular all over the world

In 1998, chip Wilson sold his longtime ski clothing company and returned home to take a yoga class. In yoga class, chip Wilson found that female students in yoga classes generally wear dance clothes to practice yoga, but this kind of dance clothes do not match the yoga movement.

Chip Wilson is keenly aware that behind this is the long neglected potential needs of women. Soon chip Wilson founded lululemon and opened its first offline store.

Lumon has been developing rapidly in Canada for more than 20 years. In 2019, the market value of lululemon surpassed under armour, becoming the third place in the sports footwear industry after Nike and Adidas. In recent years, lululemon has become a competitor mentioned in succession.

By November 2021, lululemon's share price once reached a historical high of $485.82/share, with a total market value of more than $62 billion, equivalent to nearly 400 billion yuan.

It's worth noting that lululemon is not cheap. A pair of yoga pants can be sold for more than 600 yuan to more than 1000 yuan. Yoga pants with a price of nearly 1000 yuan are popular all over the world. How does lululemon do it?

First of all, it is closely related to the operation of lululemon's community. When lululemon chooses store managers, he likes literary and art workers who have experience in journalism and coffee industry, and they are good at accepting and spreading brand culture. Lululemon endows each executive with the title of "product educator" and makes all members of the store Koc oriented.

Moreover, lululemon doesn't hire celebrity spokesmen, and public data show that its marketing costs account for only 2% of revenue. But lululemon encourages employees to get out of the store and go to yoga clubs, dance rooms, swimming pools, gyms and get on with coaches. In this way, 4-5 coaches will be invited to become store ambassadors. The ambassadors will take promotional photos and formulate matching courses for lululemon. Lululemon will provide a product usage quota of 20000 yuan a year. After the quota is used up, they can enjoy a 60% discount on shopping.

These brand ambassadors are actually KOL. Make use of KOL to create traffic and influence consumers with the help of word-of-mouth of professionals. According to official data, lululemon has up to 1500 global store ambassadors. At the same time, lululemon has signed 9 global Yoga ambassadors among the top masters in the global Yoga field, and then signed 35 elite ambassadors among international star athletes. The three together constitute the brand ambassador team of lululemon.

This kind of community operation mode is copied by lululemon to every newly expanded City, and quickly completes the radiation of brand power.

The users they ultimately focus on also have a clear positioning. Chip Wilson's user portrait is: "a 32 year old single woman with an annual income of $100000 has her own apartment. She is keen on fashion and sports. She will spend an hour and a half exercising every day while she is busy. She is willing to spend $100 to buy a pair of Yoga Pants."

In addition to community operation, lululemon has done a lot of research and development in design, cutting technology, decor, technology and other aspects to solve the users' pain points such as transparency and unsightness of yoga pants, making the products more comfortable, stylish, breathable and soft, and finally breaking through. This is one of the reasons why lululemon is considered fashionable and everyday by most women.

Lululemon commissioned a third-party company to conduct a survey before listing. It was found that only 25% of the purchasers of the company's brand specifically purchased yoga, while the rest of the purchasers focused on the fashion of the product, which can be used for daily wear and match.

DTC is also a feature of lululemon. DTC refers to a kind of sales channel or mode, so that the brand can directly reach the consumers and make the consumers complete the purchase on the official website, etc.

Lululemon's DTC mainly includes its official website, e-commerce platform official stores and other self-supporting online channels. According to the financial report of 2020, lululemon's DTC revenue accounts for 52%, compared with 29% in 2019. In addition, lumon does not include the direct stores to some extent.

It can be said that community operation, product R & D innovation and DTC mode constitute the underlying logic of lululemon's popularity. At the same time, challenges are coming.

　　 The first is the category wide challenge.

It is worth noting that lululemon, which has been established for 23 years, still relies mainly on women's wear business.

According to the financial report, in the third quarter of fiscal year 2021, lululemon's women's wear products had net revenue of $985 million, accounting for 67.93% of total revenue. Previously, in the 2018-2020 fiscal year, lululemon women's clothing products accounted for about 70% of the total revenue.

In fact, with the popularity of yoga pants, lululemon is aware of the limitations of the single category. Since 2017, lululemon has been vigorously developing men's clothing line, and has successively launched products such as men's yoga clothes, yoga mats and sportswear.

However, lululemon's men's wear road is clearly not so smooth. In the 2018-2020 fiscal year, lululemon men's products net revenue increased from $690 million to $953 million. As of the first three quarters of fiscal year 2021, the company's net income of men's products was US $981 million, an increase of 76.12% over the same period of last year, exceeding the growth rate of women's wear business.

However, compared with the women's wear business, men's products accounted for 23.76% of total revenue, less than a quarter.

Besides men's products, it also extends to women's products. According to the official data of lululemon, five women's shoes will be launched this year. The first one is the blissfeel women's running shoes, which costs $148. There are 10 colors to choose from. Then, low and medium top women's sports shoes chargefeel, strong feel women's training shoes and restfeel slippers will be launched one after another.

By next year, lululemon plans to launch the men's shoe series, and expand the variety of shoes through special models and seasonal series.

Lululemon said that the brand is committed to expanding the product category and providing customers with sports wear options from clothing and accessories to shoes and whole body needs. The strategy of launching footwear products came into being.

The industry is cautious about lululemon's multi category development. Changjiang Securities research paper points out that for minority brands, category and brand expansion may be more difficult. The expansion of multiple brands and categories is not only the replication of the operation experience of a single brand and category, but also involves the allocation and optimization of limited internal resources, which puts forward higher requirements for management ability.

Industry insiders also pointed out that lululemon can also achieve certain success in men's wear and personal care products, but it is difficult to reproduce its absolute influence and dominant position in the women's yoga clothing market, because they are faced with different competitors, historical background and consumer demand.

As a professional yoga clothing brand, lululemon has occupied the user's mind and firmly holds the position of the first brand of yoga clothing. Category expansion means that the positioning of lululemon will change, and at the same time, it also needs to occupy the user's mind.

Second, lululemon also faces supply chain challenges.

Lumone is heavily dependent on suppliers.

On the one hand, lululemon products are often out of stock in both online and offline stores. In this regard, many experts said that this phenomenon is due to the lack of supply chain stability. On the other hand, as early as 2010 and 2013, lululemon had product recalls due to quality problems, and in 2013, due to too thin fabric and improper remarks of the founder, it once caused a public relations crisis.

Lululemon also disclosed the drawbacks of the supply chain in its financial report. Because lululemon does not produce its own products or raw materials, it relies on suppliers. A variety of special fabrics used in its products are advanced textile products developed and manufactured by a third party, with limited production capacity in the short term.

Although we have established long-term cooperative relations with suppliers and manufacturers, they have not signed long-term contracts with each other, which means that fabrics can not constitute a competitive barrier between lululemon and other clothing brands.

In response to this disadvantage, lululemon has launched a number of measures since 2017. In 2017, lululemon acquired part of the equity of 7mesh, a Canadian bicycle clothing company. In 2018, lululemon launched the warpstrom patent fabric. The brand's hot series ABC men's pants are made of this fabric.

In addition, by decentralizing the upstream supply chain, we can reduce the dependence on a single supplier or manufacturer. In addition to reducing dependence on them and increasing their voice, this move can also ensure the quality of products from the source.

According to the financial report, there were 65 cloth suppliers in lululemon in 2017, with a single supplier supplying no more than 35% of the total demand, and the top five suppliers supplied about 59%; There are 47 manufacturers in total, and the production of a single manufacturer does not exceed 25% of the total demand, and the top five manufacturers produce about 64%.

By 2019, there will be 76 cloth suppliers in lululemon. The largest single supplier produces about 32% of the fabrics used, and the top five suppliers supply about 59%; There are 39 product manufacturers, with a single manufacturer producing about 17% of the products and the top five about 56%.

On the whole, there are some measures in the supply chain, but the effect is still not obvious. Whether the development of supply chain can support the whole category development of lululemon is still a question. In addition, the clothing industry itself is difficult to form the core barrier advantage, and the stability of lululemon supply chain has certain shortcomings, which is also a common fault of the industry.

Moreover, the pursuit and competition from peers can not be underestimated.

Today, Nike Adidas also focuses on the field of yoga clothing and has launched interactive projects such as teaching courses. Puma, a German sportswear brand, has launched puma studio series. In addition to launching puma studio series, it has also opened hip-hop yoga courses in keep and held hip-hop Yoga parties off-line. The ambition of lululemon is very obvious. Surrounded by the giants, lululemon is obviously not easy to run.

To address these growth barriers, lululemon may need more keen consumer insight, R & D innovation to keep up with demand, and make breakthroughs in the supply chain. For example, the sports shoes market has been extremely subdivided. Whether lululemon can open up a segmented and differentiated sports shoes market, such as indoor fitness shoes, is particularly crucial.

Lumon is not only a new way of consumption, but also a new way of fashion. With adinike's layout of yoga pants and the reverse operation of lululemon into the whole category, a new round of shuffling of sportswear industry may come.