Geography Analysis of Lululemon

Lululemon is a designer and retailer of yoga lifestyle apparel that operates mainly

out of North America. Dennis Wilson in Vancouver, British Colombia, founded

Lululemon in 1998 as a result of the growing trend of healthy lifestyles that included

athletics and staying in peak physical shape. Wilson saw an opportunity in the athletic

apparel market that had not yet been filled in the field of yoga wear. It was Wilson’s goal

to create a lifestyle brand of comfortable athletic wear that was specifically targeted to

yoga and people that wanted to live long, healthy and happy lives. (annual report)

Products

Lululemon’s products strive for a premium quality that is manufactured with the

right materials to accommodate perspiration during athletics. These products include

tops, bottoms and accessories for men and women. There are many different options

when choosing a Lululemon product and each product falls under a family of a different

fabric. (lulu fabrics) Luon is the signature fabric that is designed to ensure comfort by

stretching and breathing during athletics. There are four grades of Luon that are

manufactured for different activities. These include: regular luon, full-on-luon, light luon

and extra light luon. The luon fabric gives a feeling of not wearing anything. Luon is

trademarked by the brand, made of 86 percent nylon and 14 percent Lycram and accounts

for 17 percent of all women’s sales at the apparel retailer. (business insider) Lululemon’s

other product lines are made from other fabrics such as luxtreme, swift, natural fibres,

mesh and liners and silverscent. These products all have a function of providing comfort

for customers that live an active lifestyle. (lulu fabrics)

Competition

Lululemon has strengths that there brand implements to differentiate them from

their competitors and contribute to the success of the retailer. The first and most

observant is there dedication to a premium active brand and providing customers a

superior product with trademark fabrics. This focus on a premium active wear is mainly

focused on women’s apparel, which is also an important differentiator them from

competitors. Next, Lululemon positions their retailer stores in locations based on the

expectation to become an integral part of the community. (annual report) Employees of

Lululemon are trained to develop a relationship and personal connection through a shared

active lifestyle with each customer that ultimately aims to develop a community feel

unlike other retailers. One last important competitive advantage of Lululemon is the core

values and mission statement that surround the brand. “The founding principles

established by Mr. Wilson drive our distinctive corporate culture with a mission of

creating components for people to live long, healthy and fun lives.” (annual report) These

deep rooted beliefs in employees and product designers are all part to the experience of

entering a Lululemon store that provides a community feel from the service received to

messages of goal achievement and love that are sub-consciously planted in stores and the

customized bags.

Competitors of Lululemon are companies that target the active lifestyle customer.

Competition in this industry is highly competitive with many big players. Direct

competitors are Nike, Adidas and Under Armour. These companies are wholesalers and

direct sellers of athletic apparel for both men and women. Lululemons main product

focuses are on women so other competitors include BEBE sport, The Gap, and Lucy

Activewear. (annual report) These companies have targeted women through there athletic

apparel that mirror lululemons luon pants at a lower price. The Gap’s Athleta brand is a

perfect example of this. Lululemon pants sell for $98+ while Gap’s Athleta pants sell for

20-30 dollars less. These pants are breathable and stretch like Lululemon’s trademark

Luon fabric. (athleta)

Market Size

Lululemon is a national chain that operates in 7 provinces across Canada although

majority of their stores are located in Ontario, Alberta and British Colombia. There are 54

stores across Canada with 20 in Ontario, 13 in Alberta, 12 in British Colombia, 5 in

Quebec, 2 in Saskatchewan, 2 in Manitoba and 1 in Nova Scotia. (Annual Report)

Lululemon Canadian Locations (annual Report)

Examples of Locations

Geodemographics adds geography to segmentation variables in recognition that

people’s behaviour is also influenced heavily by where they live. This form of

segmentation is not just tailored to just ethnic and income-based clustering but also to

segment people with similar attitudes to property and status. Geodemographics shows

that the neighbourhood a customer lives in is meaningful to his own behaviour and will

tell how he may act. By analyzing three of Lululemon’s popular stores we can examine

the lifestyle types of people living in nearby neighbourhoods to understand the store

placement. A tool we can use to observe store location is PRIZM5 which classifies all

Canadians into one of 68 lifestyle types based on there demographics, marketplace

preference and psychology based on social values (lower ranking representing better

lifestyle). (PRIZM5) By taking a postal code of a house from a neighbourhood

surrounding the mall where a Lululemon store is located the target market can be

observed. Samples can be taken from surrounding of one popular location in Toronto,

Vancouver and Edmonton.

Toronto

(A map of Southern Ontario and its Lululemon locations.)

The population of Ontario is 12,851,821, with 908,607.67 in square kilometers

and a 14.1 population density per square kilometer. The city of Toronto’s population is

5,583,064, with 5,905.71 in square kilometers and a 945.4 population density per square

kilometer. (statistics) For Toronto the location sampled is Yorkdale mall and the

neighbourhood of Wilson heights that is located just north of the shopping centre. A

neighbourhood near the shopping centre falls under the 03 cluster of Arts and Affluence.

This cluster is a group of wealthy and overwhelmingly urban households with large

families. These families have lofty incomes nearing 170,000 and have achieved success.

They also are involved in extra curricular activities and staying in good physical shape.

(PRIZM5) “Yorkdale is Canada’s premier shopping centre, located in the heart of the

Greater Toronto Area. Its exclusive list of retailers – totaling more than 240 – is

highlighted by many first-in-Canada and flagship stores, including J.Crew, Tory Burch,

Crate & Barrel and Burberry, as well as such sought-after destinations as Tiffany & Co.,

Holt Renfrew, Apple and Cartier. Yorkdale ranks as one of the highest performing

shopping centres in North America with sales of over $1,300 per square foot.” (YD)

Vancouver

(A map of Southern British Colombia and its Lululemon locations.)

The population of British Colombia is 4, 400,057, with 922,509.29 in square

kilometers and a 4.8 population density per square kilometer. The city of Vancouver has

a population of 2,313,328, with 2,882.55 of square kilometers and a 802.5 population

density per square kilometer. (statistics) For Vancouver the location sampled is Oakridge

mall. A neighbouring area falls under the 05 cluster of Asian Sophisticates. One third of

people in this cluster are Asian and are well educated. They enjoy upscale incomes of

130,000$ and are able to enjoy active lifestyles. They have kids they also enrol in extra

curricular activaties. (PRIZM5) “Oakridge Centre is Vancouver's most stylish shopping

destination, with over 150 premium shops and services.” (oak)

Edmonton

(A map of Southern Alberta and its Lululemon locations.)

The population of Alberta is 3, 645,257, with 640,081.877 of square kilometers

and a population density of 5.7. The city of Edmonton has a population of 1,159,869,

with 9,426.73 square kilometers and a 123 population density per square kilometer.

(statistics) For Edmonton the location sampled is West Edmonton Mall. A neighbourhood

close by falls under the 14 cluster of Diversity Heights. This cluster is made up of diverse

middle-aged families with an average household income of 112,595 and a high

concentration of older children. These families are known to enjoy outdoor sports and

activities. (PRIZM5) “West Edmonton mall is 5.3 million square feet and is the size of a

small city. It is home to more than 800 stores and services and including nine world-class

attractions. West Edmonton Mall has visitation of 30.8 million people annually making it

the number one tourist attraction.” (WEM)

Target Market

Lululemon targets a sophisticated customer that is indulged in an active lifestyle.

This is mainly focused on the young women, age 18-34 that enjoys a healthy l8 lifestyle

and is active through yoga or other activities. Lululemon offers a line a line of apparel

designed for athletic activities like yoga and running. It is important to Lululemon that

customers that are undertaking the stress of balancing career and family and health can

escape with exercise and do so in comfort of there clothing. The price point of

Lululemons products targets premium customers that are willing pay for a premium

product. These products are made from trademark fabrics that provide comfort that

differentiates them from other choices. After realizing the ideal customer Lululemon can

now locate stores in response to market conditions and if the population mix or market

potential is appropriate and can attract the right customer. Lululemon can use information

they find out about certain areas for purpose of viewing clusters of potential customers to

identify areas that are large enough for marketing purposes, targetable and reachable

populations. By determining that these clusters match their pre determined target market

they can make an informed decision on where to locate. It is clear that from the three

examples from locations in Toronto, Edmonton and Vancouver that there is a potential

market for growth.

Key Success Factors

There are many key factors to Lululemon’s success in Canada but mainly it

comes down to their ability to find an emerging niche market. The inception of

Lululemon was for the purpose of filling a market need that was not being met. By

creating a specialty brand for yoga lifestyle a new brand of athletic wear was born. The

changing demand for healthy lifestyle is obvious as many people are now becoming

health conscious. (health article and stat) Lululemon bases their core values on women

living a longer healthier and happier lifestyle through the athletic experience of wearing

Lululemon apparel. These core values that are embedded in the employees and customers

create a brand loyalty that enables them to be successful. Lastly Lululemon has a

perceived value to its customers that are willing to pay a premium price.

Challenge in Canadian Marketplace

One of Lululemon’s key success factors has recently become one of its challenges

especially in the Canadian marketplace. Many new substitute products have come into

the market place by other athletic wear companies. One company that has come into

direct competition with Lululemon’s Luon pant for women is Gap with their Athleta line.

At Yorkdale, Oakridge, and West Edmonton Mall (the three sampled locations) there is a

Gap store in the same shopping centre. With Gap stores in close proximity it is a direct

challenge for Lululemons locations. The Athleta line is supposed to parallel the Luon

fabric and provide the same quality and comfort for almost 30 dollars less. (Athleta)

Lululemon sales are also affected by consumer spending “In an era where people have

historically high debt loads and relatively stagnant incomes, and the sense is the cost of

living continues to go up and economic pessimism is rising, it’s a difficult environment to

project a lot of increased consumer spending.” (Cut Spend)

Future Growth Predictions

From Lululemons 2010 fiscal year end to the 2014 fiscal year end Lululemon grew their

Canadian locations from 45 to 54. Three of these new stores were located in Ontario and

three were located in Alberta. As southern Ontario and Alberta becomes more populated

with higher incomes as shown by the neighbourhoods beside the sample locations there is

the opportunity to open up more locations for national growth. (Prizm5) Many malls in

Canada are expanding, as metropolitan areas grow larger. One of their strategies for

growth in every annual report since 2010 has been to iincrease our Brand awareness and

customer loyalty through the core values and marketing efforts to eventually lead to store

expansion. It is Lululemon’s belief that increased brand awareness will result in increased

comparable store sales. (annual Report) Along with this increased brand awareness

Lululemon will look to expand into men’s wear and other product developments. These

product developments will look to expand their brand to become a leader in not only

yoga but also in other physical activities like swimming and tennis and expand there

target market with other product offerings. (annual report) The past growth of 2010-2014

shows Lululemons intent to expand nationally and move into other existing markets and

compete for that business.

Refrences

http://www.businessinsider.com/what-is-luon-2013-3 (business insider)

http://investor.lululemon.com/secfiling.cfm?filingID=1397187-14-21 (annual report

2014)

http://info.lululemon.com/education/fabricsandtechnologies (lulu fabrics)

http://yogabycandace.com/blog/athleta-vs-lululemon (athleta)

http://www.lululemon.com/stores (maps)

http://www.environicsanalytics.ca/prizm5 (PRIZM5)

http://www.statcan.gc.ca/start-debut-eng.html (statistics)

http://www.businessblueprint.com/posts/success-stories/secrets-to-success-lululemon/

(key fac)

http://strategyonline.ca/2015/03/04/canadian-consumers-to-cut-spending/ (cut spend)

http://www.wem.ca/about-wem/overview (WEM)

http://www.yorkdale.com/about/ (YD)

http://www.oakridgecentre.com/ (oak)