strategic review of lululemon athletica
TRANSCRIPT
lululemon athletica
Agenda
• About lululemon• Situational overview• Lululemon’s current mission and vision• Company mantra• Customer profiles• Customer needs• Vision reviewed• The lululemon value proposition• Company challenges• Critical Success Factors• Key Results Indicators• Key Performance Indicators
About lululemon
• Founded in 1998• Determined the create more
appropriate yoga apparel• Started as combined yoga studio
and clothing store• Shifted to apparel store with staff as
yoga educators• 2011 sales of $710M• 133 Stores in the US, Canada and
Australia
From a hobby to an athletic-apparel powerhouse
Situational Overview
• Lululemon has been experiencing growing pains
• Professional management has taken over from the founder
• Due to demand the company has lost profit due to back-orders
• A reevaluation of the company’s vision is required
• The company’s current strategies have been developed despite a poorly articulated vision but hold merit
Our observations as management consultants
lululemon’s current Mission and Vision
Mission“Creating components for people to live
longer, healthier, more fun lives.”
Vision“Elevating the world from mediocrity to
greatness.”
lululemon’s values
Who are lululemon’s core customers?
Officially Stated Target Market:
• 32 year old woman (18-65 range)• Sophisticated• Educated• Active Lifestyle• Balances Career and Family
The actual lululemon customer
Women• 18-65 years• Original Target +• Street wear inclined• “Badonkadonk” Improvement• Middle-Class to Affluent• Fashion Conscious• Young Urban Professionals• Tweens & Teens
Men• 18-45 years old• Legitimate Athletes / Yogis• Street Wear
M(ASS) APPEAL! (so to speak)
What do lululemon customers need?
Yoga-Inspired Athletic Apparel
Function
Quality
Fashion
Availability
Education
Customers need “Function”
• Appropriate for sports• Compression garments• Moisture-wicking• Remains in place in Yoga poses
Customers need “Quality”
• Durable product• Will resist strenuous use• Low-maintenance
Customers need “Fashion”
• Fashion-forward garment• Aura of athleticism• Improves body appearance
Customers need “Availability”
• Should have stock available• Sufficient colors and sizes• Avoid turning away customers
Customers need “Education”
• Model driven by Yoga enthusiasts• Word of mouth promotion• Why spend $100+ on sweats?• Benefits of athletic wear
Updating lululemon’s Mission and Vision
Mission“Creating components for people to live
longer, healthier, more fun lives.”
Vision“Elevating the world from mediocrity to
greatness.”
Mission“Creating components for people to live
longer, healthier, more fun lives.”
Vision“To become the number one women’s
athletic apparel brand”
Current lululemon challenges
• Unable to meet sales demand • Hasty expansion to new locations
with insufficient research• Profit-margin erosion due to
supply pressure• Word-of-mouth promotion
restricts speed of growth
The value proposition
Product Leadership
Reinforced by Mission:“Creating components for people to live longer, healthier, more fun lives.”
Finding Critical Success Factors
Strengths- Innovative Product- Cult-Like Brand Loyalty- High profit margins
Weaknesses- Brand recognition restricted- Sourcing cost pressures- Distribution challenges
Opportunities- Untapped Markets- New Sports Focii- Street wear
Threats- Strong Rivals- Can be imitated- Small, Faddish Market
SWOT
lululemon’s strategic initiatives
• Improve same-store sales• Add 20-25 new high-productivity stores• Evolve ecommerce channel to hybrid model
Sales Growth
• Invest in Human Resource Information Systems• Implementation of Business Intelligence Systems• Vendor/Manufacturing Management Systems
OperationalImprovement
• Manage Sourcing Cost PressureCost Containment
• Hot Yoga Product Line / Yoga Accessories• Running Line• Bras and Tops
Product Innovation
Proposed Key Result Indicators
Number of Stores Opened (Growth in Sq Ft)
Employee Satisfaction Survey
Aggregate $ per Sq Ft
Brand Awareness – Multi-Dimensional Customer Survey
Gross Margins
SG&A as a % of Sales
Sales (annual, quarterly, monthly, same store sales)
Operating Margin
Return on Invested Capital
Proposed Key Performance Indicators
Sales Growth
Sales/ Sq Ft
$ / Purchase
Items / Purchase
Yield / Foot traffic
eCommerece % of Sales
Operational Improvement
Sell Through %
Safety Stock
% of inventory available
Forecast Accuracy
Distribution Lead Time
Cost Containment
Mfg Schedule Adherence
On-Time Delivery %
Defect Rate %
Cost / Quoted Cost
Tendered Q$ / Preferred Q$
Product Innovation
New Product / Store Inventory %
Time to Market (days)
R&D $ / Sales
%FTE for Innovation
Products / Concepts %
Conclusion
• Maturing Company• Evolve to Professionally Managed• From healthy lifestyle to healthy
business practices• Alignment is simple but highly
effective and relatable• Happy healthy customers lead to
happy healthy financials• Reinforce what makes us
successful• Measurable goals
Aligning Mission, Vision, Strategies and Indicators