This project explores the strategies behind expanding the Lululemon brand into Italy. Lululemon is a Canadian sportswear brand who catalyzed the ever-growing “athleisure” subcategory by introducing workout-wear to be worn outside of the gym. With its history of fashion, unique cultural nuances, and growing sportswear landscape we believe that Italy would be a profitable new market for Lululemon to enter.
An Overview of Lululemon: Lululemon is a yoga-inspired, technical athletic apparel company for women and men. Originally founded in Vancouver, Canada in 1998, their product portfolio appeals to those seeking a healthy lifestyle and desire high-quality, chic sportswear for athletic activities. Selling exclusively through company-operated stores and through direct-to-consumer ecommerce, Lululemon operates 491 brick-and-mortar stores in North America, Europe, Asia and Australia and earned a net revenue of 3.98 billion USD worldwide in fiscal 2019. They distribute through 4 distribution centers located in Canada, the US, and Australia.
An Overview of Italy: The third most populated country in Europe, Italy has an estimated population of 60 million people. Italy’s average disposable income per capita ($26,588 a year) is distributed heavily in Northern and Central regions. Unemployment in the country remains well above the EU average, particularly with youth unemployment. The manufacturing sector is one of the most important components of Italian economy. Family-owned small and medium sized enterprises comprise over 95% of Italian economy, and contribute to 68% of its GDP.
Foreign investment remains a priority for Italian leadership. PM, Giuseppe Conte, encourages foreign investment by offering foreign-owned entities equal incentives as Italian nationals with subsidised loans, cash grants and tax credits. Even though the country’s tax system is problematic and expensive, Italy ranks 1st in ease of cross-border trading.
Italy is the seventh largest export economy in the world and the twentieth most complex economy according to the Economic Complexity Index (ECI). In 2018, the United States was Italy’s third largest destination for exports, with U.S. imports from Italy totaling $50.1 billion. Italy is the third largest import market for sportswear in Europe. In 2018, the value of its sportswear imports amounted to $2.3 billion. The Fashion Sportswear segment makes up a bulk of Italy’s Sportswear imports (72%) followed by Active Sportswear (19%) and Swimwear (8%).
Sizes and Growth: We have identified the Total Available Market, Served Available Market and Target Market to be All Apparel, Sporting Apparel and Women’s Sporting Apparel, respectively. The annual retail value as of 2019 and respective growth rates are visible in Figure 1 (Appendix). The targeted market, women’s sporting apparel, is growing at the fastest relative rate. A focus on this market yields opportunities for profitable growth. Sporting Apparel has been selected as the SAM to account for expansion into the menswear category.
Competitive Analysis: Lululemon considers sporting apparel brands that own more than 1% of total retail revenue share as potential competitors. On a Price against Quality perceptual map, a white space for mid-high price, high quality brand can be occupied by Lululemon.
Insight Analysis: The Sportswear/Athleisure category is viewed to represent an active lifestyle. Lululemon is a brand that is preferred by customers due to its reflection of self-betterment and self-fulfillment. To coincide with the Italian pursuit of excellence and match our aspirational branding, we’d believe in positioning Lululemon as a high-quality Sportswear/Athleisure brand that represents a community of individuals who seek self-betterment and community.
Launching in Italy
Lululemon’s Existing Strategic Vision
Lululemon’s existing 5-year growth strategy (dubbed the “Power of Three Strategy”) was announced in April of 2019. The first goal described a focus on product innovation, with further expansion in the women’s and accessory products alongside the ever-popular office/travel/commute lines that exemplify “athleisure.” It also pitches an openness to brand collaborations and the specific KPI for menswear sales revenues to double by fiscal 2023. Secondly, Lululemon plans to focus on omni-channel guest experiences by delivering integrated experiences across channels.
Lastly, Lululemon seeks to expand its presence across global markets such as China, APAC, and EMEA regions. While this last vision creates a compelling argument for Lululemon to enter the Italian market, the former two strategies laid the groundwork upon which a new market launch strategy can be developed to sustain growth for and match the Lululemon brand.
From the competitive analysis, Lululemon is a mid-priced branded range with competitive advantages over its globally recognized brand name and high-tech, patented textiles. The combination of a strategic pricing model and aforementioned brand advantages led to a 2019 Q1 growth of 80% sales for Lululemon compared to their “secret formula” in pricing has three stages: a high yet consistent price point, minimal discounting, and consumer awareness that they will pay full price.
Lululemon maintains pricing while its competitors (Nike, Adidas) regularly promote discounts of at least 40% percent. This consistency leads to a keen shopper awareness of pricing and brand recognition, which most will not expect price reductions. Lululemon’s price consistency resonates with Italian’s core for quality and pursuit for taste and excellence, which makes this brand more accepted and advocated by the Italian customers.
Lululemon is famous for its core athleisure lines and accessible office-travel-commute collections (a significant chunk of sales revenue). However, the menswear collection is exhibiting substantial market growth and future potential. Additionally, new launches of self-care products have proved to be profitable category extensions. By infusing current product lines with added lifestyle and community emphasis, Lululemon is extending their product portfolio, which helps them enter the Italian market.
We also plan to incorporate a unique collection exclusive only for the Italian market. Those limited editions will only be available in the flagship store in Italy and online sales channels. We hope to attract both local customers and tourists with a similar need in athleisure clothing when traveling to Italy.
Lululemon traditionally sells directly to their consumers through a brick-and-mortar in a select high-traffic locations or using their e-commerce website. Because this omnichannel model is consistent for Lululemon across every market globally, we would recommend that they match it for an Italian launch. Lululemon has a pre-existing manufacturing center in Switzerland which would be used here.
The brick-and-mortar presence would be located in Milan and provide customers with an immersive experience of the #sweatlife community. With the physical presence, store employees will build a community through educating customers about products, leading exercise classes, and providing excellent shopper experiences. Given Milan’s nature as a shopping capital, we recommend integrating digital experiences in-store to further enhance in-store experiences.
The ecommerce platform would operate as an alternative sales channel to the physical location, and will serve those who prefer online shopping. Through both the website and the newly-redesigned app, the direct to consumer channel could be leveraged by shopping, class-booking, and e-community interactions.
The Marketing Plan for Lululemon’s Italian launch coincides with aThink Globally, Act Locally approach. By leveraging digital channels, we plan to drive traffic in-store and online by delivering omnichannel experiences that matter. With a customer first approach and community ready to welcome them into the sweat life, Lululemon can create brand loyalists in micro-fitness communities united across the globe. Our team used a customer journey map to understand the activities, emotions, and awareness of customers from learning of the launch to joining the Sweat Collective.
Lululemon Targeted persona in Italian Market and an ideal physical store customer journey
Pre-launch, we will highlight unique selling points, emphasize quality, such and leverage Lululemon’s well-known brand name and self-fulfillment lifestyle representations. Using engagement with influencers and KOLs on social media, brand awareness, and increased customer excitement, we think Lulu will be in a good place prior to Italian market entry.
During the purchasing experience, the strategy to the Italian market is to emphasize the store shopping experience and the omnichannel engagement. There will be technology incorporated in the flagship store in Milan; there will be showrooming stations, relaxing spaces, experimental sections, and gym classes. Correspondingly, the official online channels will also include functions like webrooming, digital interactions, and community news/updates to assist customers’ shopping experience. After the transaction happens, the focus shifts to community building and customer service. We hope to continually provide lifestyle inspiration to cultivate brand loyalty and customer retention further.