Retail Case Study: Lululemon’s E-Commerce Journey

Oct 25, 2022

Lululemon is a name that many people know and love.

What started off as a small, family-owned business in Vancouver, has turned into a multi-billion dollar company with a market cap of over $45 billion. Today, it is one of the best-performing retailers in the world, with a growth trajectory that is envied by many.

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In spite of the challenges brought about by the pandemic, the athletic apparel fashion brand has achieved multiple milestones in the last few years. Follow us as we take you through the brand’s e-commerce journey and explore the strategies they implemented along the way that helped them achieve such phenomenal growth.

March 2020 – Stores closed due to lockdowns

In March 2020, Lululemon announced the acceleration of digital efforts on e-commerce as physical stores were forced to close down during the pandemic outbreak. Instead, Lululemon made good use of its physical stores to fulfill its online orders; shifting its focus on its e-commerce operations to cushion the impact to retail sales due to COVID-19. 

In the same quarter, Lululemon reported a 41% jump in digital sales, accounting for $464 million in revenue

“Since closing, our digital business has picked up, but it’s obviously not recovering all the volume loss from our store networks being closed, but we have seen our online business accelerate in terms of growth. But obviously, it cannot pick up the entire demand. So it is responding well, and we’ve adjusted our digital marketing initiatives," said Calvin McDonald, CEO at Lululemon

May 2020 – Stores reopening post-lockdown

Following China’s footsteps, Lululemon announced its plans to reopen physical stores post-lockdown. Towards the end of May, over 150 stores have reopened across North America, Europe, Asia, New Zealand, and Australia. 

“As we begin to reopen Lululemon stores around the world, we are taking a balanced and thoughtful approach to ensure all necessary precautions are in place and to prioritize the safety and wellbeing of our people, guests and communities," Calvin remarked.

In order to maintain safe distancing, the retail brand closed off its fitting rooms, adopted a cashless payment method, and offered buy online, pick-up in-store services. 

June 2020 – Emerging stronger post-lockdown due to wellness and fitness boom

Despite Lululemon reporting a 17% decline in sales in June, analysts were optimistic that the retail brand will continue to accelerate in growth post-lockdown. According to Jeffries analyst Randal Konik, the boom in the wellness and fitness industry during lockdown had put Lululemon in a great position. During the lockdown, consumers were shopping for comfortable and durable fitness wear, which signified the shift towards a healthier lifestyle. 

“We expect accelerated consumer gravitation toward fitness/wellness apparel in the wake of COVID-19, of which Lululemon should capture outsized share,” the analyst shared. 

July 2020 – Acquired home fitness brand, Mirror at $500 million

Lululemon announced its $500 million acquisition of home fitness startup, Mirror. This was the company’s attempt to invest in home fitness as home workouts increased in popularity during the lockdown period. 

Mirror’s responsive software allowed users to access weekly live classes, on-demand workouts, and personal training with a fitness coach. Mirror’s functionality tied in well with Lululemon’s intention to grow its presence in the home workout scene. 

“In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect,” Calvin added. “The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweatlife.” 

September 2020 – Surge in online sales by 150%

Lululemon’s online sales in Q2 of the fiscal year saw a 150% surge. The company also reported that its direct-to-consumer net revenue contributed 61.4% of total net revenue when compared to its 2019 revenue. In face of the spike in e-commerce demand, Lululemon had prioritized its digital efforts – from site enhancements, omnichannel functionality, and fulfillment capabilities. 

"These… were on our roadmap for the next two years and given our e-commerce business has currently accelerated beyond our expectations we [are prioritizing] and pulling forward these investments,” explained Calvin.

December 2020 – Online sales accounted for 43% of total retail sales in Q3

Lululemon Q3 earnings were reportedly a 22% increase in revenue as compared to 2019. Its e-commerce sales also had a 93% year-on-year growth – which by the third quarter had contributed 43% of its total revenue.

“We have been investing in our digital capabilities and enhancing the experience of our e-commerce sites for several years, which enabled us to quickly respond to the accelerated shift to [omnichannel] this year," Calvin commented.

January 2021 – Online sales accounted for 51.8% of total retail sales 

In January last year, Lululemon reported that its direct-to-consumer (DTC) sales accounted for 51.8% of total sales in the first nine months of 2020. 

Even before the pandemic, the retail brand had already been investing in digitalization for the past 3 years. This definitely paid off during the pandemic-driven shift towards online shopping.

“COVID has shifted the world in some ways and has allowed us to take advantage of all the investments we’ve made in our digital ecosystem and leaning into our omnichannel strength. That has been one area that we have pushed into leveraging physical and digital,” said Celest Burgoyne, President at Lululemon, Americas. 

February 2021 – Revenue from China market increased by 45%; China becomes Lululemon’s main growth focus

With Lululemon China’s revenue doubling up during the pandemic, it announced its plans to grow its footprint in the Chinese market. In a survey conducted by the Nasdaq-listed company, China received a total well-being score of 79 out of 100 – higher than the global average 65, thus indicating a surge in interest towards wellness-related activities across the country. As of Q2 2021, there were 59 stores located all over the Mainland China.

"We are particularly pleased with the growth rate we're experiencing in China and see opportunity for both revenue and gross margin expansion and operating margin expense," said Chief Financial Officer Meghan Frank.

April to May 2021 – Launch of key sustainability initiatives

In Q2 2021, Lululemon announced a couple of new sustainability initiatives that emphasized its commitment to its Impact Agenda while also highlighting its ongoing Corporate Social Responsibility (CSR) efforts.

First and foremost, the company introduced its recommerce initiative called "Like New", which aims to encourage customers to trade in their clothing in exchange for a gift card. Next, Lululemon also launched a new, limited-edition collection of products made with lower-impact dyes that were upcycled from the waste from agricultural herbal industries.

August 2021 – Unveiled the largest global campaign 'FEEL'

On 17 August, Lululemon unveiled what it claims to be the "largest, fully integrated global advertising campaign" called 'FEEL'. In line with its long-standing belief that "the better you feel, the better you'll perform", the campaign aims to encourage its customers to "immerse themselves in their practice, resulting in a difference they can truly feel".

"Supporting our guests’ desire to feel their best in any moment, through the products we create and community connections we help build, is a shift that we believe consumers and the category will benefit from," said the Chief Brand Officer Nikki Neuburger.

Done in collaboration with Droga5, the campaign ran until the end of September and took place across Asia Pacific, North America and the EME (Europe, the Middle East and Africa) regions. There were also a variety of media outlets used throughout the campaign, including television, online videos, visual merchandising, and influencer marketing.

January 2022 – Surpassed $6 billion annual revenue milestone

On 30 January this year, Lululemon published its results for Q4 2021. According to their report, Q4 net revenue increased 23% to $2.1 billion while the total comparable sales rose by 22%.

“2021 was another successful year for Lululemon, which speaks to the enduring strength of our brand and our ability to deliver sustained growth across the business. We are proud that we passed the $6bn in annual revenue milestone for the first time, and successfully achieved our Power of Three growth target ahead of schedule. This was especially impressive given the challenging macro backdrop,” says Lululemon Athletica CEO Calvin McDonald. “We are entering the new year from a position of strength, which we’ll build upon to continue delivering for our guests and shareholders in the years to come.”

April 2022 – Reveals roadmap to double revenue by 2026

Following a historic fiscal year, Lululemon revealed its business plan which places a focus on growing two emerging areas of its brand: menswear and international expansion. Building upon the momentum of the past three years, the company also announced what it calls the “Power of Three x2” strategy. As part of its new five-year growth plan, the company hopes to double its revenue to $12.5 billion by 2026.

What’s Next for Lululemon?

2021 was indeed a fruitful year for the retail brand. However, with the current uncertainties surrounding the pandemic, it is difficult to predict how this year might turn out for retailers and e-commerce merchants alike. Nevertheless, we are very much looking forward to Lululemon’s growth in 2022 and beyond.

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