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Lululemon SWOT Analysis
Lululemon is an athletic apparel company specialising in the design, distribution, and retail of technologically-sophisticated activewear. Encompassing a network of 406 stores, Lululemon maintains storefronts in 12 countries throughout North America, Europe, Australia, and Asia (Lululemon, 2017). This network includes locations for Lululemon's subsidiary brand, Ivivva, a line of athletic wear specifically tailored to appeal to female youth.
One of Lululemon's most noteworthy strengths is its unrelenting emphasis on quality. Athletic apparel manufactured by Lululemon consists of advanced waterproof fabrics with membrane technology to wick water away from the body while simultaneously preventing it from entering deeper layers of the fabric (MarketLine, 2016). The fabric composition of Lululemon's athletic apparel also prohibits odours from developing because technology in the material prevents bacteria from growing on the outside surface of the clothing. While Lululemon incorporates a broad spectrum of fabrics in its activewear, all materials used are of an upper echelon quality, and the company leverages this trademark skilfully to its advantage (Nam, Dong, & Lee, 2017).
Another strength of Lululemon involves the company's use of multiple channels to market and sell its athletic apparel. In addition to its network of store locations, Lululemon maintains active e-commerce channels through its websites. Revenue from Lululemon's direct to consumer e-commerce channels comprised nearly 20% of the company's revenue in 2016 and grew by 13% over the prior year (Lululemon, 2017). Wholesale channels comprise another significant revenue stream for Lululemon, comprising approximately 7% of its revenue. Lululemon partners with elite yoga studios and high-end fitness facilities that share its affinity for health, fitness, and quality, thus enabling specific types of activewear to be featured among clientele with the kind of social demographic characteristics Lululemon targets (Seifert & Chattaraman, 2017; Webb et al., 2017). The company can also use these avenues as a platform to feature new clothing products and stimulate demand for specific lines of athletic apparel.
Lululemon's use of technologically sophisticated fabrics and materials contributes to its brand image and overall marketability, but it is also a weakness because the company depends on a short list of third-party suppliers and manufacturers (MarketLine, 2016). Firms dependent on a low number of suppliers and manufacturers are highly susceptible to the operational fluctuations, time delays, and quality standards of these companies (Desai, 2015). In Lululemon's case, this weakness is made worse by the fact that few alternative suppliers and manufacturers exist with similar quality and technology capabilities. Thus, while Lululemon's proprietary blend of fabric technologies and exemplary quality distinguish it from its competitors, the preservation of these factors lies in the hands of third parties.
Sales throughout Lululemon's store locations remain solid, and the company should pursue expansions to grow its store network. Lululemon's implementation of its subsidiary brand, Ivivva, is also helping to diversify its expansion activities by opening up channels to new market segments (MarketLine, 2016). At present, 296 of Lululemon's 406 stores are in the United States and Canada. However, due to the amount of success surrounding it store operations in Australia, New Zealand, and the United Kingdom, Lululemon should focus on opening additional stores in these regions now that its brand is more well-established (Lululemon, 2017). Lululemon also has storefront locations in China, South Korea, Germany, Puerto Rico, and Switzerland. Since the Lululemon's brand is less matured in these areas, it should consider expansion in these regions as well, but at a more cautious pace. According to its 2016 annual report, Lululemon (2017) also secured contracts in the first quarter of 2017 to begin offering products through partnerships in the United Arab Emirates, Qatar, Oman, Bahrain, and Kuwait, although it is too soon to tell whether these channels are performing well.
Another opportunity available to Lululemon includes expansion opportunities through its e-commerce channels. For the period of 2010 to 2015, the compounded annual growth rate (CAGR) of online retail sales in the United States grew by 15%, whereas total retail sales increased by a marginal 1.4% (Lululemon, 2017; MarketLine, 2016). It is also worth noting the global sportswear industry generated $97 billion in gross sales in 2015, which is expected to climb to $178 billion by the end of 2019 (Nam et al., 2017). Alas, consumer preferences for e-commerce purchasing and the rising popularity of quality athletic apparel are factors Lululemon can combine and leverage to its advantage.
Lululemon's ability to enter a highly competitive market alongside brands such as Nike, Adidas, and Under Armour is noteworthy because the athletic apparel industry is notoriously difficult to penetrate. However, more athletic companies are experimenting with fabric technologies than ever before, and breakthrough innovations could disrupt Lululemon's business model. Thus, competition remains a threat to Lululemon (MarketLine, 2016). Also, should larger athletic apparel companies like Nike or Under Armour procure contracts with Lululemon's third-party suppliers and manufacturers, the company could lose business through supply chain disruptions.
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