It took Adidas 70 years to hit the New York Stock Exchange in 2007 and $50 billion in 2022, compared with 23 for lululemon.

As a result, people have devoted themselves to the common topic of discussion: why should lululemon?

A pair of yoga pants sells for nearly a thousand yuan and is popular all over the world.

In 1998, Chip Wilson sold his long-running ski clothing company and returned to his hometown to sign up for a yoga class. In the yoga class, Chip Wilson found that female students in the yoga class generally wear dance clothes to practice yoga, however, the dance clothes do not match the yoga movement.

Chip Wilson is keenly aware that behind this is the potential demand of the female group that has been neglected for a long time. Soon, Chip Wilson founded lululemon and opened its first offline store.

The rapid development of lululemon, after more than 20 years of development, it has gone from Canada to the world, with more than 500 stores in the world. In 2019, the market capitalization of lululemon surpassed that of Under Armour, becoming the third place in the sports shoes and clothing industry after Nike Inc and Adidas. In Nike Inc's financial results in recent years, lululemon has become a competitor mentioned in succession.

By November 2021, lululemon shares reached an all-time high of $485.82 per share, with a total market capitalization of more than $62 billion, equivalent to nearly 400 billion yuan.

It is worth noting that the price of lululemon is not cheap, and the price of a pair of yoga pants ranges from 600 yuan to more than 1,000 yuan. Yoga pants, which sell for nearly 1,000 yuan, are popular all over the world. how on earth does lululemon do it?

First of all, it has something to do with the social operation of lululemon. When lululemon chooses a store manager, he likes writers and artists with experience in the news industry and coffee industry, who are good at accepting and spreading brand culture. Lululemon gives every grass-roots executive the title of "product educator" and turns all members of the store into KOC.

In addition, lululemon does not invite celebrity spokesmen, and public data show that its marketing costs account for only 2 per cent of revenue. But lululemon encourages employees to get out of the store, go to yoga studios, dance studios, swimming pools, gyms, and have a good relationship with coaches. As a result, 4-5 coaches are invited to become store ambassadors, who take promotional photos and develop matching courses for lululemon, while lululemon offers a product quota of 20, 000 yuan a year and a 40% discount on shopping after the free quota is used up.

These brand ambassadors are actually KOL. Use KOL to create traffic and influence consumers with the help of professional word-of-mouth. According to official figures, there are as many as 1500 ambassadors in lululemon's global stores, while lululemon has signed nine global yoga ambassadors among the world's top masters and 35 elite ambassadors among world-class star athletes, making up lululemon's brand ambassadors.

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

And the users they finally focus on also have a clear positioning. The user profile given by Chip Wilson is: "A 32-year-old single woman with an annual income of $100000 has her own apartment, loves fashion and sports, spends an hour and a half exercising every day and is willing to spend $100000 on a pair of yoga pants. "

In addition to community operation, lululemon has done a lot of research and development in design, cutting technology, color, technology and other aspects to solve the user pain points such as transparent and unattractive yoga pants, making the products more comfortable, stylish, breathable, soft and skin-friendly, and finally break through. This is also a big reason why lululemon is regarded by most women as a fashion for daily wear.

Lululemon commissioned a survey of third-party companies before its listing, which found that only 25% of the buyers of the company's brand were specially purchased for yoga, while the rest of the buyers focused on the fashion of the product, which can be used for everyday wear.

DTC is also a major feature of lululemon. DTC refers to a sales channel or model that gives the brand direct access to consumers and enables consumers to complete their purchases on official websites, etc.

Lululemon's DTC mainly includes its official website, e-commerce platform, official stores and other self-operated online channels. According to full-year 2020 results, lululemon accounted for 52% of DTC revenue, compared with 29% in 2019. In addition, lululemon's DTC does not include offline stores, but it also belongs to DTC to some extent, considering that most of its stores are operated directly.

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

Hidden worries of lululemon

The first is the challenge of the whole category.

It is worth noting that lululemon, which has been established for 23 years, still takes women's clothing business as its main source of revenue.

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

In fact, with the popularity of yoga pants, lululemon has realized the limitations of the individual category. Since 2017, lululemon has made great efforts to develop men's clothing line, launching men's yoga clothes, yoga mats, sportswear and other products one after another.

However, the menswear road of lululemon is obviously not so smooth. Net income from lululemon men's products increased from $690 million to $953 million in the 2018-2020 fiscal year. In the first three quarters of fiscal 2021, the company's net income from men's products was $981 million, up 76.12% from a year earlier, outpacing the women's clothing business.

However, compared with the women's clothing business, men's products account for 23.76% of total revenue, or less than 1/4.

In addition to men's products, there is also an extension in women's products. According to lululemon official information, five types of women's shoes will be launched this year, starting with the $148USD Blissfeel running shoes, with 10 colors to choose from. Then, the women's sports shoes Chargefeel, Strongfeel training shoes and Restfeel slippers will be launched one after another.

By next year, lululemon plans to launch a line of men's shoes, while expanding the range of shoes through special and seasonal collections.

Lululemon said that the strategy of launching footwear products came into being when the brand was committed to expanding its product range to provide customers with sports options ranging from clothing and accessories to shoes and the whole body.

For the multi-category development of lululemon, the industry holds a cautious view. Changjiang Securities Research News pointed out that for minority brands, category, brand expansion may be more difficult. The expansion of multi-brand and multi-category is not only the replication of single brand and category operation experience, but also involves the configuration and optimization of limited internal resources, which puts forward higher requirements for management ability.

Industry insiders also pointed out that lululemon can also achieve some success in men's wear and personal care products, but it is difficult to reproduce its absolute influence and dominant position in the female yoga market, because the two face different competitors, historical background, consumer demand and so on.

As a professional yoga clothing brand, lululemon has occupied the minds of users and firmly sat on the position of the first yoga clothing brand. And category expansion, which means that the positioning of lululemon will change, but also need to reoccupy the user's mind.

Secondly, lululemon also faces the challenge of supply chain.

Lululemon has no independent product supply chain and relies heavily on suppliers.

On the one hand, lululemon products are often out of stock in both online and offline stores. In response, a number of experts said that this phenomenon is due to the lack of stability of the supply chain. On the other hand, as early as 2010 and 2013, lululemon had product recalls due to quality problems, and in 2013 it caused a public relations crisis because the fabric was too thin and inappropriate remarks made by its founders.

Lululemon also disclosed the shortcomings of the supply chain in its financial statements. Because lululemon itself does not produce products or raw materials, it depends on suppliers. A variety of special fabrics used in its products are technologically advanced textile products developed and manufactured by third parties, and the production capacity is limited in the short term.

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

In order to deal with this malpractice, lululemon has carried out many measures since 2017. In 2017, lululemon bought a stake in Canadian bicycle clothing company 7mesh and launched Warpstrem patented fabric in 2018, which makes the brand's hit line, ABC men's pants.

In addition, it reduces the dependence on individual suppliers or manufacturers by decentralizing the upper reaches of the supply chain. This move not only reduces the dependence on them and increases the voice, but also ensures the quality of the products from the source.

According to the financial report, in 2017, lululemon had a total of 65 fabric suppliers, with a single supplier supplying no more than 35% of the total demand, and the top five suppliers supplying about 59%. There were 47 product manufacturers, with a single producer producing no more than 25% of the total demand, and the top five producing about 64%.

By 2019, lululemon had 76 fabric suppliers, with the largest single supplier producing about 32 per cent of the fabrics used, with the top five suppliers supplying about 59 per cent, and 39 product manufacturers, with a single producer producing about 17 per cent of products and the top five producing about 56 per cent.

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

Moreover, the catch-up and competition from peers should not be underestimated.

Today, Nike Adi has also set its sights on the field of yoga clothing, launching interactive programs such as teaching courses. German sportswear brand Puma is full of firepower. In addition to launching the Puma Studio series, it also offers hip-hop yoga classes in Keep and hip-hop yoga parties offline, pointing to lululemon's obvious ambition. Surrounded by the giants, it is obviously not easy for lululemon to "run fast".

To address these growth obstacles, lululemon may also need more keen consumer insight, R & D innovation to keep up with demand, and breakthroughs on the supply chain. For example, the sneaker market has been extremely subdivided, whether lululemon can open up a subdivided and differentiated sneaker market, such as indoor fitness shoes, is particularly critical.

It is conceivable that the broken circle of lululemon not only shows us another unique new style of the new consumer brand, but also stirs up a new splash in the sportswear category. With Adi Nike's layout of yoga pants and the influx of lululemon reverse operations into the full category, a new round of reshuffle in the sportswear industry may come.