Why did Lululemon make Adi Nike panic?

Recently, the yoga apparel brand Lululemon announced its third quarter earnings report as of October 30. According to the financial report, Lululemon's net income increased by 13% year-on-year to US$544.4 million, and net profit increased by 28.5% from US$53.2 million in the same period last year to US$68.3 million, which far exceeded market expectations and its Q3 gross margin. And earnings per share also performed well.

Its group, CEOLaurentPotdevin, said that good results for the quarter benefited from the strong implementation of the Group's business strategy in all regions. After its announcement of third-quarter results and upward revisions, the group's share price rose 12.6% to $67.4 per share, and the current market value is about $8.2 billion.

Just last year, management issues, inventory management and other issues, have plagued Lululemon, causing it to suffer from a decline in passenger flow and pressure on gross margins in the past two years. However, with the implementation of its five-year plan, the situation has been reversed. As of October 31, its group's net profit for the nine months increased by 12.5% ​​to US$167.2 million, and net income increased by 14.6% year-on-year to US$1.55 billion.

Lululemon's five-year plan includes product innovation and global expansion plans to clarify the 2020 sales target of $4 billion, in addition to the development group's digital ecosystem.

“China will be a development focus next time,” AmandaCasgar, head of Asia Pacific brand and community, told e-commerce online reporters. As a step in its expansion strategy, China has been highly anticipated. Lululemon is determined to enter China in full this month, opening three stores in mainland China, including the IFC International Fund Center in Shanghai, Jing'an Kerry Centre and Beijing Sanlitun, which previously stated that the Chinese market is about twice as large as the US.

"The yoga trend in China is gradually emerging. You can see some yoga classes are hot, and people are starting to wear yoga clothes and Legging (legging pants) to go out for a lunch or a meeting with friends." And this trend has also made sports brands like Lululemon have the opportunity to enter the casual wear market. Amanda said that the brand is developing and innovating for the comfort and functionality of wearing, and it is also highly sought after in terms of fashion.

According to the world clothing and footwear network, the Chinese yoga market is three times faster than the current US, and this also means the rise of peripheral products such as sports underwear and yoga wear. Adidas, Nike, UnderAmour, Decathlon, and traditional brands such as Antarctica and Langsha have launched related products in this market, and some small and beautiful brands are trying to squeeze into this separatist.

In contrast, Lululemon's consumer groups are positioned in the “new middle class”, who are less sensitive to price but more concerned about quality. The brand cuts into the market segment from the high-end products of women's yoga and promotes the lifestyle advocated by its brand to operate the user community. This is also the reason why it has no marketing department, never advertises, never asks celebrities to endorse, and is called North America into business.

“Lululemon doesn’t just emphasize functionality, we’re also shaping a way of life,” and this lifestyle is a positive, sunny life that the brand advocates, and this lifestyle is called “sweatlife” by the brand. Lifestyle).

The specific concept of the brand concept is to build a community of free courses including yoga and running, which has become the carrier of brand promotion life philosophy.

From the high-end products in women's yoga to the market segment, promote the lifestyle advocated by its brand to operate the user community.

Initially, its brand founder, ChipWilson, relied on a model of collaboration with coaches and sponsored community yoga classes to create a community and group atmosphere that accumulated a large number of fans in a short period of time and stood out from the many sports brands. After that, every time a city is developed, the brand will send a team to participate in local yoga-related activities, discover and explore the “opinion leaders” in the yoga field, let them experience the products, and convince them to be “community contacts”. The brand refers to these people as “Ambassadors” (ambassadors), composed of yoga teachers or students who have studied yoga for many years, and spends free time teaching yoga in the brand showroom.

Therefore, building a community is the first step for Lululemon to enter China. “In the form of a showroom, we first set up a community, let people perceive the brand, build customer relationships, and integrate into the local market. We do this in Shanghai and Beijing,” Amanda told reporters. Lululemon prioritizes urban population density, secondly considering rent and area, and internal display and design is supported by the headquarters team.

The specific concept of the brand concept is to build a community of free courses including yoga and running, which has become the carrier of brand promotion life philosophy.

"The choice to enter Tmall is also to follow this logic," Amanda said. As early as three years ago, Lululemon entered China in the form of Showroom, but it did not like the other underwriters who threatened Nike and Adidas to invite the stars to make marketing for the store. Instead, they chose to enter Tmall as another in November last year. beginning.

Lululemon opened their first showroom in Beijing in Sanlitun Taikoo Li

“Tmall can enable more consumers to experience Lululemon at home and showcase brand culture.” She said that the time for the brand to enter China is just right, because digitalization and mobilization have rapidly spread in the past five years, compared to some entering the domestic market earlier. The brand has been hampered by past strategies, and the brand can quickly promote online and offline marketing plans to implement the group strategy.

In addition to the more popular female market, another major step in Lululemon's five-year plan strategy is to expand the male market and hope to increase the men's wear revenue to 40%, which is expected to reach $1 billion. In 2013, it announced the opening of men's clothing stores. It is understood that as of September, its men's clothing style is close to 20%. In the Tmall flagship store, there are nearly 200 products under the men's category, and nearly 500 products under the women's category. Analysts have commented that the growth of men's wear line can help them compete with competitors such as Nike and UnderAmour, while UnderAmour, which focuses on the male fitness market, is also expanding its women's line and expanding its share.

In addition to the more popular female market, another major step in Lululemon's five-year plan strategy is to expand the male market and hope to increase the men's wear revenue to 40%, which is expected to reach $1 billion.

Some analysts have researched Lululemon, saying that it needs to focus on product design, production efficiency and supply chain. Amanda said, “Building a strong supply chain requires continuous investment. We have been doing it for the past few years.” Group CEOLaurentPotdevin has said that this year's new high-tech fabrics have been loved by many consumers, and sports underwear revenues this season recorded 20 With the growth of %, the Group will continue to innovate in products next year.