Lululemon’s patient, ambitious European strategy
Lululemon is going on the offensive in Europe. The Canadian sportswear brand recently opened a new Parisian store in the Saint-Germain-des-prés area, and is broadening its horizons in Glasgow, Scotland, by opening a store at 18-20 Royal Exchange Square.
Lululemon is no lightweight in the sports apparel and equipment arena. For the 2019 financial year, the brand founded in 1998 by Chip Wilson is targeting a revenue of $3.8 billion (€3.4 billion),
enough to make it a leading player on the sport market worldwide. The 2019 annual target was recently revised upwards, after Lululemon, renowned for its yoga and gym outfits, reported its H1 results: in the period, sales rose by 23% at constant exchange rates, reaching $883 million, while comparable sales were up 17%.
Annual growth of minimum 30%
Lululemon, whose new CEO Calvin McDonald has been in charge for a year, is targeting $4 billion in 2020. In April, it set out a five-year plan labelled ‘Power of Three’, which notably includes the goal of quadrupling sales outside the domestic market - though it did not disclose how much its sales are currently worth in Europe.
“The target regards Asia, but we have the same goal in Europe,” said Gareth Pope, Lululemon’s general manager EMEA. “We have been posting double-digit growth since we entered the market. We recorded a 35% rise in the last quarter and, in order to mathematically quadruple [revenue] by 2024, we must maintain an annual growth rate between 30% and 40%,” he added.
Nevertheless, since making landfall in Europe, Lululemon hasn’t exactly shown a voracious appetite, and it currently operates less than 30 stores in the region.
“The biggest challenge is to have time to grow, and to define the number of markets on which we are to focus. We look after our stores in Zurich and Amsterdam, where we have a loyal following, but we are concentrating on the UK, Germany and France, and within these countries, we’re working on key cities,” said Pope.
In Paris for example, Lululemon has had a presence for four years. Before the summer, it opened its first mainline store at 47 rue Bonaparte in the French capital, where the brand showcases a wide range of mixed-gender products. As a general rule, Lululemon closes down showrooms to open larger stores, as it is about to do in Paris’s Marais area and with its future store in Glasgow.
“Compared to other major players, Lululemon is different in its approach to the creation of communities,” said Pope, adding that “we establish a strong relationship with our followers. One of the challenges is that it takes time. We need to reach a critical mass. We have been gradually opening a number of stores in London, where we currently operate 10, and we are now beginning to enter other cities too.” Lululemon has in fact opened stores in Manchester and Edinburgh, and has set its sights on other UK cities. The strategy is different in Germany, where major cities are extremely important. Lululemon operates two stores in Berlin, and is also present in Düsseldorf, Hamburg, Frankfurt and Munich.
The other crucial element for the brand’s expansion is that the health & fitness trend is still booming. “The stronger this trend is, the better for us. In London for example, the number of yoga studios and gyms is simply soaring. It's a way of life,” said Pope.
Within the dynamic, highly competitive athleisure market, Lululemon has positioned itself as a specialist. Leggings, whether for yoga, fitness or running, are the brand’s leading product category (each store dedicates an entire wall to displaying all the leggings models), and they are priced between €88 and €128. To convince customers, Lululemon is keen for them to try out its products, using an approach that has proved successful in America.
Lululemon likes to gain a foothold locally by forging relationships with sporting clubs, recruiting ambassadors (often sport coaches) and organising events at its stores. The store interiors have a modular structure which enables classes to be staged: on average, Lululemon stores hold two free classes each week, hosting between 10 and 25 people.
“Another of Lululemon’s specificities is that its retail teams are independent,” said Pope. “Each store manager has their own budget dedicated to community initiatives. Investment is geared to local brand ambassadors, not global ones. We believe in a bottom-up approach,” he added.
Another way for Lululemon to win over customers is to rely on its tech expertise, through the technologies developed by its R&D lab, called Whitespace. Alongside the growth of online sales and of omni-channel capabilities, product innovation is one of the strategic mainstays of Lululemon's five-year plan. Its R&D department is currently testing a technology which will enable the creation of bras adapted to each customer’s morphology, in the same way that gait analysis is used to personalise footwear.
Indeed, Lululemon wants a much larger slice of the European sport market’s pie. “For us, North America means over 300 stores and more than $3 billion in revenue. Other major groups are present in both markets. It’s a big challenge, but there’s no reason why we shouldn’t manage to carve out a space for ourselves,” said Pope.
So long as the health & fitness trend continues to boom, Lululemon has a strong argument to make.
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