What Lululemon is prioritizing in the coming years

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Lululemon on Wednesday unveiled its goals for the next five years, which include doubling the brand’s revenue to $12.5 billion by 2026. In the growth plan, dubbed Power of Three x2, Lululemon plans to double its business and digital revenue for men, as well as quadrupling its international business. At the same time, the company’s women’s business, stores and North American operations are all expected to see double-digit growth.

The details of the plan are very similar to the company’s original Power of Three Growth Strategy, which included goals such as doubling its men’s business, doubling its digital revenue and quadrupling its international business. Lululemon also continues to focus its strategy on the three fundamental pillars it last identified: product innovation, customer experience and market expansion.

However, Lululemon’s business has changed since its previous growth strategy. For one thing, Lululemon is bigger: the retailer now earns more each year than Under Armour. In the past few weeks alone, Lululemon has launched its first footwear product and launched sport-specific collections in tennis and golf. And its offerings now extend beyond clothing. The question mark in Lululemon’s strategy for two years has been home fitness company Mirrorwhich the company acquired in 2020.

As the company looks to another five years of growth, here are some additional highlights from the day from Lululemon analysts.

Lululemon Studio is the future of Mirror

The future of Lululemon’s Mirror acquisition is much clearer now. The home fitness company’s membership program will be replaced by what Lululemon is calling Lululemon Studio. The replacement program costs $39 per month and includes all of Mirror’s workout content plus classes from Lululemon partners like Pure Barre and Dogpound.

Lululemon Studio also removes the need for a Mirror device: members of the Lululemon Studio program will be able to use an app to practice if they wish, which can connect to a SmartTV, iPad, phone or other device. All current Mirror members will transition to the new Lululemon Studio program when it launches.

“The Mirror brand continues, but it’s the hardware. It’s the Mirror,” said CEO Calvin McDonald. “It’s a device you can buy to interact with and enjoy your Lululemon Studio subscription.”

McDonald’s hinted that some of the content will be available for its free “essential” membership program to both drive engagement and convince shoppers to eventually pay the $39 monthly subscription. Lululemon Studio members will also be able to attend fitness classes at a discounted rate with its fitness partners.

“It’s going to drive revenue, it’s going to drive its own profitability, and it’s going to have the retention and spend benefits that you have in the loyalty program and something really unique in the market,” McDonald said of Lululemon Studio.

Celeste Burgoyne, President of Americas and Global Guest Innovation, said the company expects 80% of its customers to participate in one of its membership programs within the next five years. In addition to charging members for its premium program, high participation in its free program will also allow Lululemon to access more customer data.

Lululemon previously tested a membership program that was initially priced at $128, but the combination of Mirror and Lululemon Studio allows the company to focus its marketing efforts on a single membership program, according to brand manager Nikki Neuburger.

“I think the pooling of our efforts makes for one strong, connected community that also provides us with some leverage to invest in other areas of marketing strategy,” Neuburger said.

Lululemon’s international expansion includes Spain, Italy and Thailand

As Lululemon aims to quadruple its international business again, expanding into new markets was another hot topic during the analyst day. The company is opening its first stores in Spain (including Barcelona and Madrid), Italy and Thailand within the next 12 months and also has big plans for geographies where it has a relatively small presence.

André Maestrini, executive vice president of international, said the company plans to double down on its efforts in some of its most mature international markets, including Germany, South Korea, the United Kingdom and Australia. . Of these, Australia is the most mature, but “we still see the possibility of doubling the business,” Maestrini said.

Other notable openings include a store on the Champs-Élysées in France and a focus on Tokyo in Japan. China, however, is the company’s “biggest opportunity,” Maestrini said. Lululemon plans to grow from 70 stores nationwide to 220 by 2026.

As it enters new markets, tackling low brand awareness is paramount. Neuburger noted that Lululemon is building a diverse roster of brand ambassadors to appeal to a range of consumers, which so far includes British fitness trainer and YouTuber Joe Wicks, Utah Jazz player NBA Jordan Clarkson and former NCAA football player and Bachelor star Matt James. .

The company doubles the versatility of its products

Lululemon is still widely known for yoga — and executives know it.

“Yoga is where the brand started, so we are, unsurprisingly, the best known in the yoga business… But if we use it as the most established within Lululemon, we see a huge opportunity in running and training to continue to drive the awareness consideration for these activities,” McDonald said. “And we’ve proven through the growth of the past few years that the brand is more than yoga. It’s rooted in yoga, but the versatility of the product and the ability to meet those unmet needs – customers are engaging and we’re seeing new customers coming in through new business.”

The company plans to capitalize on the versatility of its products as it expands into new spaces. For example, with the tennis and golf launches, only about 20% of this product is designed specifically for those sports. Otherwise, Lululemon took their existing products and just showed consumers how they could be used for those sports. As a result, many of its flagship products saw increased sales as the collections were released. The company wants to continue to build on some of these core franchises, which can drive significant sales – for example, its Align product line is a nearly $1 billion franchise.

Next up is a hiking collection launching over the summer, which will include “adaptable, convertible and packable items that consider storage solutions and thermal comfort,” chief product officer Sun Choe said. As part of this effort, Lululemon will release a backpacking bag that takes weight distribution into account.

“Thanks to COVID-19, we noticed that our customers are spending more and more time outdoors, and there was an unmet need to offer technical solutions for hikers who were still focused on a feeling, a fit and a premium design aesthetic,” Choe said. “We’re bringing a new design perspective to the exterior – one that combines versatility and adaptability with a stylish aesthetic unique to the category.”

More pop-ups and experiential stores to come

Regarding store strategy, Lululemon will increase square footage by 5% per year, which includes new store openings and optimisations. Burgoyne said the company will continue to research new concepts such as college campus stores, in addition to its experiential megastores and short-term pop-ups.

Lululemon’s third large-format experiential store will open this fall in Houston. In the past, Burgoyne told Retail Dive that the concept could eventually represent 10% of Lululemon’s total footprint. Lululemon currently has 60 pop-ups in North America and that will continue to be “a big part of our future,” Burgoyne said.

“This strategy not only allows us to capture seasonal demand, acquire new customers, but also gives us the opportunity to test and learn in new markets to help inform our permanent openings,” Burgoyne said. “We will continue to focus on exploring and testing new markets through this approach.”

Lululemon’s strategy is much the same as in recent years, and since it emphasizes direct sales to its consumers, it has also become a strategy similar to that of many other retailers of the time. But McDonald’s has sought to make a distinction between how other companies think about DTC and how Lululemon thinks about it. For Lululemon, it’s about building relationships with customers, not just increasing margins, although those are helpful. By knowing consumers, Lululemon is able to gain feedback and continue to create products that meet the needs of its customers. And at the end of the day – as evidenced by its growth – Lululemon doesn’t need to change much.

“We don’t need to create something unproven to double that business,” McDonald said. “We don’t need to expand into high-risk areas.”

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