Case Study 2600 UofG PDF

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! University of Guelph

Lululemon Athletica Case Report

Daniel Ciaccia 1004168 MCS 2600 Victoria Taylor March 5 2019

Daniel!Ciaccia!

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Daniel!Ciaccia!

Lululemon Athletica was founded in 1998 by Dennis J. “Chip” Wilson. In June of 2015 Wilsons involvement in the company began to diminish as he sold half of his shares, and the company was leaning towards more of a female demographic. Some might say it was a good thing Wilson became less involved as he was very reckless with his speech and un filtered opinions which ultimately brought the companies view and moral down. In 2005, Wilson mocked the Japanese for their mispronunciation of Lulu’s name which is extremely rude. Wilson also made a comment about plus size clothing that enraged a lot of customers saying “plus size clothing is a money loser, since it required 30% more fabric but cannot not raise the price 30%” This is not only extremely offensive, but shows Lululemon does not care about all their customers. Which also contradicts the companies stated mission of “creating components for people to live longer, healthier, and more fun lives”. On top of Wilson’s bad image, the company has had some bad recall dilemmas with some of their projects. In March 2013, the company was forced to recall 17% of its black yoga pants due to the fabric being too sheer (thin/see through). Customers were forced to put on the pants and bend over to prove they were to sheer in order for a refund which is inappropriate, and all around a bad returning process. In June 2015, a joint recall of 300,000 Lulu tops was issued due to straps snapping back and causing injury. Customers also made complaints about the pants “pilling” in the inner thigh and Wilson’s response to that was “Some women’s bodies just actually don’t work for yoga pants. Clearly Wilson is an on going issue even after he sold half of his shares. A solution to this “Wilson” problem would be removing him as the face of the company. Even though Wilson stepped down in 2015 the damage he did stayed. A way of fixing this would be introducing a new face and company mission This way without Wilson in the picture the company can focus on becoming more female oriented and growing the business without Wilson tainting the company image.

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Daniel!Ciaccia!

Lululemon has a very strong brand and is especially known for their female line of yoga/fitness clothing. This brand awareness in the industry is a huge strength for Lulu as they are the most known fitness clothing appeal company. Although Lululemon has made some mistakes and these weaknesses could possibly tarnish that reputation. As an example, earlier I mentioned how Wilson shutdown the idea of plus-sized clothing for being “too expensive”. Although the company is missing the fact that this is a huge demographic that they should not be passing up on, as plus-sized or bigger customers looking to purchase fitness apparel are usually trying to lose weight by working out or doing fitness activities. Therefore, the plus-sized market could generate a lot of sales. Where as “Athleta” one of Lululemons competitors produced their products for all sizes 00-16 in stores, with plus size and maternity options online. This was not only successful for Athleta, but shows they care about every type of customer and them getting healthier. Which appeals to customers of all weight and size. This relates to the aspect “Threat of substitution” in porters 5 forces as Athleta found a way to make fitness wear similar to Lululemon and not only that but improve by offering apparel for all sizes, even a maternity line. Athleta succeeded in providing the needs/wants of their customers, something Lulu failed to do. This causes a problem for Lululemon because those plus sized customers will defer from lululemon and purchase Athleta fitness wear instead. Not only is Lululemon losing out on sales through not having a plus sized line of clothing, but now are losing customers to one of their competitors. Wilson again was a huge problem for the company as his decisions and rude personality kept leading to negative backlashes on the company. In November 2007, the company issued that there “VitaSea” clothing was made from seaweed having “antiinflammatory, antibacterial, hydrating and detoxifying benefits.” This product was forced to be removed by a Canadian oversight agency after laboratory tests failed to support these “benefits”.

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Daniel!Ciaccia!

This is terrible for a company and creates a huge weakness as they lose brand trust. The thought that Wilson would implement this clothing line is absurd as not only was it unethical and a lie, but makes it harder for customers to ensure trust in the brand. Once again Wilson’s mistakes are still weakening the companies image and pushing customers away from lululemon and towards competitors or substitutes. Lululemon is not too far to fix its issues. They are still a very big company and very well known. One of the most important things Lululemon needs to do is introduce a new face and direction of the company to cover up what Wilson tarnished. Even though he sold half of his shares and stepped down in 2015 what Wilson did still imposes a threat to the company as his antics and bad decisions left the company with a tainted image. Secondly, they need to focus completely on female apparel. This would eliminate the losses made in the men’s line and save the company money since they will not have to produce the male items again. With Wilson gone Lululemon should implement a strong female presence as the face of their company as they have much stronger sales in the female market. At the end of the day no guy wants to wear Lululemon because it is to known as a “female” clothing line. With the right direction Lululemon can focus on their female line and once again dominate the market if they find a way to retract all the bad publicity that Wilson created. This can be done by focusing on a new company stated mission which would focus on showing that they care about their customers, their health, and their journey to a healthy and active life. An advantage Lululemon still has is that people love there clothing. Even though there has been recalls and public embarrassment thrown at the company before, this does not mean that they are out of options. Lululemon still has products people desire, they just need to improve their image and direction as a business. Under a new board director this can be easily achieved and can bring the company back up. The revenue per square

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Daniel!Ciaccia!

foot in a Lululemon store in 2014 averaged $1,675, which was the fourth highest revenue per square foot retail store at the time. This proves that the company has the customers and the products that people want and are willing to pay for. Therefore, if the company can improve its social image and gain more trust from its customers this can generate a lot more revenue and create brand loyalty.

The tactical plan for Lululemon is not that complicated. Looking at the marketing mix or the 4 P’s of marketing which are Product, Price, Promotion, and Place. Lululemon has already successfully achieved Product, Price, and Place, as their products are desired from consumers, their prices are at a level that’s not to high where people will still purchase, and in 2015 Lululemon recorded having 280 retail stores. The big one that Lululemon needs work on is promotion. Not necessarily promotion in terms of product awareness, since they already have great product awareness. Although promotion in the sense of repairing their companies image. This can be done through several ways. As seen through Under Armor, Lululemon could introduce some ads or commercials with famous women athletes that specifically portray the new view or company stated mission. A famous and well respected athlete will appeal to women and make consumers trust Lululemon (if she wears Lulu then we should). Through this they can implement values such as caring for their customer’s fitness, health, and well being, something that would appeal to ALL women looking for fitness wear. Lululemon should really focus on switching to a fully female clothing company, as state before not a lot of guys would purchase Lulu, and a fully female apparel line will appeal to females more. Another thing that struck me as unethical is that Lululemons target customer for women are between ages 18-34 years old. It is a pretty broad age range although Lululemon is still missing out on a couple big age ranges.

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Daniel!Ciaccia!

Something they should implement is new product lines for kids and seniors. This way the main focus for the target customer is still between 18-34 years old, although they can provide a wider demographic. Kids sports is a huge market, things such as uniforms, fitness undergarments etc. The kid market could be a huge demographic to target as maybe not fitness/working out but kids love sports and being active as well which creates a demand. Also for seniors as silly as it sounds many seniors do activities such as polities, pool aerobics etc. If Lululemon created a senior line of apparel that advertised more mobility and comfort this could be a big hit for seniors if they create a demand. Seniors would love a clothing that can help them not only exercise but maybe move better, or easier, if Lululemon can create a technology in the fabric to help with this that could be huge. Something else Lululemon can do is create a customer support or customer recommendation line, whether on their website or in store. This would show customers that the company really cares about their customer’s opinions, unlike how Wilson was running it shutting down the idea of plus-sized clothing in such a rude fashion that portrayed Lululemon as a company that doesn’t care. Lastly, Lululemon needs to focus on product quality, every recall that comes out brings tainted image that Lululemon is cheap or that their products are defective. Product quality is very important in a brand as customers want to feel safe and trust that the product will work as advertised. This will create brand trust that will make customers want to come back, and also maybe recommend the company or products to friends and family. Lululemon also needs to refrain from lying in its promotions, like the VitaSea line that was made with “seaweed”. Lying about a product can be catastrophic to a company when proved false, and drastically lower sales and shares/stocks. How is a customer supposed to feel comfortable with their purchase if they hear that Lululemon is lying about there products and how they are made. Scandals like this send a strong message to consumers that is often not forgotten easily.

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Daniel!Ciaccia!

Overall Lululemon just needs to recreate their image and promote that their company is about health, fitness, caring about their customers, and quality. If done correctly this could put Lululemon back on top.

In conclusion, Lululemon still has a strong brand image in the fitness clothing industry, ultimately Lululemon just needs to improve their brand image since Wilson tarnished it. It is very important for Lululemon to implement strong promotional techniques to win back their customer loyalty/trust, brand quality, and image as a company. As a company they need to stress to their customers that quality, fitness/health, and combining these two aspects to please their customers is their one and only focus. Companies who care and show that they care about their customers through listening to concerns/complaints and providing the highest quality products are companies that gain customer loyalty. People feel the need to trust the company they purchase products from and need to trust where they come from or how they are made. The promotion of these new company values should start off with a new board director. A strong female face as the head of Lululemon would benefit the company a lot, as moving into an all female market this provides a sense of connection between customers and the brand. As well, it isn’t a secret that not a lot of people liked Wilson for his rude comments and sexist/racial demeanor. Having a new female face would show the female customers that the company is running in a completely new direction. To promote this new direction lululemon should make promotions such as ads or TV commercials with famous or well respected female athletes that promote the companies new values. Consumers are often influenced heavily from their favourite athlete or someone famous in general. This creates the desire to be like them, and if the famous person loves Lululemon then they feel they should as well. This would attract people to pay

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Daniel!Ciaccia!

attention to the ad and persuade them that Lululemon is in a new direction as a company. Thus once Lululemon has recreated their image as a company I think they can start dominating the fitness apparel industry....