“People love to help. I don’t have to be insecure and know it all.”
-CEO: Calvin McDonald
Business Model Innovation
Direct to consumer
For a company selling yoga pants for over two decades, promoting the vision of elevating the world from mediocrity to greatness sounds rather far-fetched. Yet, in all fairness, it’s not the first time we’re reading such over-the-top vision statements.
For this brand, the last 5 years have been nothing short of remarkable. The company has achieved almost one-third growth in its top-line and improved its gross margins by 3 percentage points.
The company’s stock has given a cumulative return of 360% in the last 5 years which is phenomenal in itself and unheard of in the apparel space. Retail is undergoing a digital transformation around the globe and Lululemon is doing all it can to ride the wave.
Further Schemes on the way
Amazon’s prime membership program was an innovative step in the history of e-commerce. The program was so successful that Amazon has over 100 million people in the US alone.
Taking a leaf out of Amazon’s cap, Lululemon has launched its own loyalty program for a modest $128 per annum. The service gives you access to a pair of pants or shorts as well as a set of curated workout sessions to attend, and free expedited shipping.
The company will soon expand its ‘buy online, pick up in-store’ option from 35 stores today to all of its stores in North America in order to boost online sales.
The company generated $858 million in online sales in 2018. The target to double its online sales in the next 5 years is in line with its current sales growth through such digital transformation. 2018 saw the firm deliver 48.6 percent annual growth in e-commerce sales. It ended the year with a 5-year CAGR of 26.7 percent through the digital vertical. E-commerce accounted for a quarter of Lululemon’s total sales and it will be phenomenal from a margin and growth perspective to continue to invest as well as grow the digital route.
The company’s growth strategy is predicated on three pillars:
- Double its revenue from the men’s vertical.
- Double its revenue through ‘digitally transformed’ e-commerce.
- Quadruple its revenue from ‘International’.
Digital is one of the largest revenue drivers for the company. It aims to draw in half of its total revenue from the direct-to-consumer e-commerce route.
Independent market analysts predict the company’s revenue to hit $6 billion by 2023. Half of the revenue would come due to its digital transformation. It would not only be gross margin growth but it will also put Lululemon in a pole position and unlock value across all of its products.