“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, promulgating 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 little known ath-leisure brand, the last 5 years have been nothing short of phenomenal. 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 major transformation around the globe and Lululemon is doing all it can to ride the wave.
Amazon’s prime membership program was an innovative step in the history of e-commerce. In fact, the move was so successful that Amazon as of today has over 100 million people in the US alone subscribing to the service.
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, a set of curated workout sessions to attend, and free expedited shipping.
In an effort to further boost online sales, the company will soon expand its ‘buy online, pick up in-store’ option from 35 stores today to its entire fleet of stores in North America.
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 the online vertical. 2018 saw the firm deliver 48.6 percent annual growth in e-commerce sales, ending 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 and 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 ‘digital’ or e-commerce.
- Quadruple its revenue from ‘International’.
Digital is one of the largest revenue drivers for the company as it aims to draw in at least 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, and half of it coming from digital would not only be gross margin accretive but also put Lululemon in a commanding position to unlock value across all of its product offerings.