Lululemon Case Study

Introduction
Lululemon is one of the Canada’s best retailers of technical athletic yoga apparel. Lululemon’s yoga inspired apparel is marketed under the two brand names Lululemon Athletica for more mature women and Ivivva Athletica for younger girls. Lululemon primary target customers are educated and hard working women, who understand the importance of healthy and active lifestyle. Majority of these women are Caucasian who are mainly urban and have higher income, since Lululemon is an expensive brand .Most of their products are design to offer fit, performance and comfort while incorporating both style and function. On another hand, American Apparel (AA) is a US company that manufactures, sell and distribute trendy fashion apparel.

American Apparel primary target customers are younger girls and boys, who value quality and inexpensive clothing. American Apparel is eco-friendly manufacture that uses solar energy to provide 15% of its power at its corporate headquarters. American Apparel attracts their consumers by using recycles and cruelty-free materials. Finally, Roots Canada Ltd. designs, develops, manufactures and sells athletic wear for women, men, children and babies around the world. The company operates and owns retail stores in over 260 stores across Canada, US and Asia. Roots Canada Ltd, is privately owned by Don Green and Michael Budman.

Majority of their consumers are women and men that have middle or upper middle income. As we can see, all three clothing manufactures have similar clothing products, all of them are focusing on the athletic appeal. But how are they going to attract consumers from different cultures or differentiate from their competitors? They are strong Canadian and US brand names but they need a new marketing strategy to attract new consumers and adapt to the weak economy. In terms of entering new markets, Lululemon, AA and Roots might face the challenges of replacing their success in social/demographics norms that may be very different than North America’s and US. Also, constantly produce top of the line products without distracting from their core consumers and introduce new appeal. However, introducing new products might hurt their brand if substandard products and materials are used. Therefore, product image and quality are important in sustaining the Lululemon Athletica, AA and Roots Canada brands. Research Objectives

This is a case study of Lululemon Athletica, AA and Roots. The case study includes a summary of the overall strategic positioning, SWOT analysis and what kind of business problems they are facing or are likely to face in the near future. This case study reveals the techniques to be used in gathering the data and recommendations to deal with potential threats. Lululemon Athletica, American Apparel and Roots, should customize their strategy to local markets and take on a transnational approach by acting globally. An analysis of the external opportunities, weaknesses, internal strength and competitive threats will help to determine the key trade market demographics Research Method

Exploratory research is most suitable to gain current and relevant background information about Lululemon Athletica, American Apparel and Roots brands. . Exploratory research also helps to identify dimensions of consumer’s satisfaction with the brand quality. Library database and the Internet offer access to large amounts of Secondary Data recourse that can be used for SWOT analysis. As social and demographics changes, the consumer’s behaviours will change because of changes in lifestyles and shifts in the age. A qualitative research needs to be conducted, in order to find out what people/customers are saying about the Lululemon Athletica, American Apparel and Roots brands. Study Findings: Lululemon

Lululemon Athletica, has done a tremendous job communicating their brand to consumers. However, in 2013 Lululemon faced some tough challenges when their famous Luon fabric was too see-though. “It states the company’s stock declined by 10 percent in 2013 after it recalled a large batch of its black Luon stretchy pants” (EBSCO, Nov 11, 2013) However, Lululemon overcame this crisis by acknowledging the situation upfront and recalled 17% of their inventory, allowing their customers to a refund their sheer pants. Finally, Lululemon’s founder, Chip Wilson, made a publicly offensive suggestion, that some women’s bodies were not made to wear his yoga pants. “The problem was that the yoga-apparel company has been having with its pants on the size of women’s thighs” (EBSCO, Nov 14, 2013).

After making those comments discourage plus size customers were embarrassed and felt like they don’t want to shop at the store anymore. Some women blamed CEO for making products that don’t last long. One of the examples from Financial Post. However, despite the unfortunate occurrences last year Lululemon is in a very healthy position in the Canadian and US markets. In addition to that, Lululemon’s baggiest competitor is now Sears Canada. Sears became a new stop for consumers who want high-quality and affordable yoga gear. “The struggling department store chain says its Pure Energy Athletics line of yoga clothes has been a hit with customers since they were introduced in February. The chain says it sells yoga pants for $14.99 or $29.99 — a steal compared to similar clothing from other retailers, like Lululemon Athletica” (Edmonton Journal, May 21, 2014).

However, Lululemon has a tremendous e-commerce platform that is very popular with their community based marketing approaches and accessible worldwide. The website provides a mass useful information regarding their, services, products and information about the company. Also, Lululemon Has an app called ‘OM finder yoga app’ which allows yoga instructors to buy their products and find out information about yoga classes. SWOT analysis will provide better understanding of Lululemon positioning in the market. Strengths

-Online business grew by 86% in 2012 (Lululemon Athletica, 2013) -Opened 37 new stores globally in 2012 resulting in 211 stores worldwide -Launched 5 E-commerce sites in UK, Hong Kong, Europe, Australia & New Zealand

-Well trained employees
-Premium store locations across the glob
-Ivivva stores have now made $800 per square foot, making it a top performer in the retail business “(CANACCORD, December 3, 2012)

 Recycling and reusing products to make better merchandise
-Ambassador program, Lululemon supports fitness instructors who lead yoga -Lulu can now ship to 51 new countries to accelerate international brand presence Weaknesses

-Limited stock (tight inventory)
-Recall on pants, 17% of yoga pants as pants too sheer and see-through, this result in a loss of sales -Don’t have sizes greater than 12 and 14 and concentrated on more fit women -Very weak brand recognition in the US as many stores are Located in Canada —Not to many retail outlets that are located across major city -Sales decline after Chip Wilson made a comment that women’s bodies do not work for Lululemon clothing. Opportunities

-Improvements to the E-commerce development
-Build global brand recognition through advancements (ei. Technology) -Introducing other fitness appeal other than yoga fitness
-New market segments of men
-Right now majority of people prefer healthier lifestyle trend. Being more active especially with younger and older demographics (which means more potential customers)
Threats
-Sears Canada introducing similar product for cheaper price -Many known brands (for example, Adidas, Nike and Gap etc.) carry similar products, same quality and half the price (competition) -Lululemon focused on word of mouth, they should look into other marketing strategy to attract more customers and enhance sales Recommendations

One of the potential challenges Lululemon might be facing in near future is the lack of sales in the US stores and their high prices. Many of their competitors (GAP, Old Navy) have now introduced yoga appeal at affordable prices. Right now consumers want a high quality products but with low prices. Lululemon should produce top of the line products and not cheapening their products too much (as has been recently with the see-through yoga pants). Also, introduce new products, increase brand awareness, and expend beyond North America. Study Findings: American Apparel

American Apparel is a manufacture, retailer and wholesaler of branded fashion basic apparel. The company has 251 stores in 20 countries. As the largest domestic US apparel manufacture, AA offers quick response leverage and times infrastructure, “with the ability to produce up to one millions units on a weekly basis” (Brean Capital, LLC, Feb. 26,2013, pg 2.). AA is able to respond to key fashion trends in less than seven weeks and customer demands quicker. AA sells majority of their clothing throughout retail 28 % and wholesale 63% channels, according to the Chart 1 (Brean Capital, LLC, Feb. 26,2013, pg 2.). AA continues to maintain the strongest brand that has demonstrated the loyalty to their consumers. However, in 2009 AA had to lay off approximately 1, 800 of their workforce after government investigation.

Government found out that those workers were illegally in the country.” American Apparel’s cut and sew operations, which are undertaken on a team basis, had to be restaffed and retrained, resulting in material drops in productivity and quality control and an inability to ship goods in a timely manner. When combined with the fixed cost infrastructure of American Apparel’s factory infrastructure, margins were materially impacted.” (Brean Capital, LLC, Feb. 26,2013, pg 4.). Below is a SWOT analysis to help us to understand better about AA market positioning. Strengths

-Fully vertically integrated corporation
-Different from other brand, by selling trendy cloth
-American made brand
-No outsourcings
-Good quality clothing
-Strong market positioning
-Effective marketing strategy and quick response time
-The wholesale, can fulfill orders overnight
-“Approximately 45% of the company’s stores (and slightly under 40% of revenue) are international, as American Apparel represents a truly global brand aesthetic for the younger, urban customer”.(Brean Capital, LLC, Feb. 26,2013, pg 2.). Weaknesses

-Over priced
-Clothing with no patterns or designs, just bland American apparel
-Limited customer base, as they don’t have products to suit different cultures
-Recent finical troubles in 2009-2010 that were driven by internal and external issues
-Their marketing strategy is just focusing on ads that are proceeded through print and internet
-Has no logo, hard to recognize

Opportunities
-E-commerce business
-Create more discounted stores
-Expend outside of US/Europe
-Create new products
-Shift to positive operation
Threats
-Rising costs of raw materials might result in higher prices
-More competitors with lower prices and high end clothing
-Economic slowdown

Recommendations
Many people consider AA too expensive (example from Gawker), the reason why is because of their production in USA. Also, their appeal is solid without any patterns and no logo. AA should design appeal to target different consumes and design their logo to stand out. In addition, they should consider outsourcing jobs, so they can lower their products costs. Materials and labor are cheaper in other countries. Study Findings: Roots Canada Ltd.

Roots Canada Ltd. is vertically integrated company and most of their products are made in Canada. The products are active athletic wear, leather goods, and yoga wear. Roots Canada Ltd. is very committed to their ethical standards, that they implemented a Workplace Code of Conduct that set minimum requirements that all suppliers must meet in order to do business. For the past years, Roots has expanded internationally to US, Asia and Europe. Also, in 2013 Roots partnership with Target to sell their “Roots Outfitters collection including fashions for women, men, boys, girls and toddlers, will be available from March to June” (CBCnews, Jan 24, 2013) .Bellow is a SWOT analysis to determine Roots Canada Ltd. Market positioning. Strengths

-Canadian heritage and strongly recognized in Canada
-Good quality products
-Private own company
-Logo-> store appearance and layout
– Was official outfitter of clothing for members of the Canadian Olympic Weaknesses
-Limited online stores and intentional shipping
-Even know the Brand is Canadian, 40% of their clothing is manufactured outside of Canada Opportunities
-Technology
-E-commerce
Threats
-Economic Recession
-Competitors ( Gap, Old Navy…etc)

Roots has positive brand image as they are constantly providing loyal customer service and high quality products. People on the Facebook were pleased with their products and only had positive things to say about Roots. Implications/Recommendations

However, Roots should design trendier and more fashionable clothes to suite all ethnicity and diversity. I just think that Roots are stuck in 1900’s and they haven’t changed the design of their appeal. They need to refresh the image of the company! Also, Roots could issue loyalty card to attack new customers and keep current once. This way they can monitor or manage their database to determine what item sells and gather feedbacks to help them to improve the new appeal. Study Limitations and Directions for Future Research

I had hard time finding information about Roots Canada Ltd., as they are privately own company there is not much information available online. I used Business Source Elite the most. However, when you are searching for Roots Canada, you have to make sure you include “Ltd” because if you don’t, the database will give you historical sources about America. I looked at Merger Online as well, and I was only able to find information that was the same as their company’s website. I work for finical institution, even on Bloomberg you can’t find much.

Merger Online, Business Source Elite and Business Insights: Global were very helpful to find current information about Lululemon and AA. Had journals and company’s finical report that were most up to date. Social media (Facebook, twitter..etc) I would consider it as biased because they can pay their family friends to promote their companies brand. In terms of future research, I would suggest to conduct infield research of companies. Go in to the store and ask costumers what they think about the brand.

References
American Apparel Has a ‘Full Body Head to Toe’ Employment Policy. (2010, June 9). Gawker. Retrieved May 30, 2014, from http://gawker.com/5559165/american-apparel-has-a-full-body-head-to-toe-hiring-policy Beder E.(2013, February 13) Initiation of Coverage. American Apparel, Inc. Retrieved May 21, 2014 from Brean Capital, LLC Dockterman, E. (2013, November 14). Searching: Business Source Elite . What Lululemon Could Learn From Abercrombie About Fat Shaming. . Retrieved May 28, 2014, from http://www.ebscohost.com/

Nguyen, L. (2014, May 21). Sears Canada focuses on affordable yoga gear market, posts Q1 net loss of $75.2M.www.edmontonjournal.com. Retrieved May 28, 2014, http://www.edmontonjournal.com/business/Sears+Canada+posts+loss+revenues+weather/9862547/story.html

Press, T. (2013, January 24). Target stores to offer Roots clothing. CBCnews. Retrieved May 29, 2014, from http://www.cbc.ca/news/canada/toronto/target-stores-to-offer-roots-clothing-1.1305588

Shaw, H. (2013, December 10). Lululemon founder Chip Wilson’s 5 most controversial quotes. Financial Post Business Lululemon founder Chip Wilsons 5 most controversialquotes Comments. Retrieved May 28, 2014, from http://business.financialpost.com/2013/12/10/lululemon-athletica-chip-wilson-controversy/

Lululemon athletica inc. (2012, December 3). Canaccord Genuity. Retrieved May 20, 2014, from https://research.canaccordgenuity.com/_layouts/researchnoteviewer .aspx? pubid=85428