If you invested in Lululemon in 2007 at $2 share, your investment would have more than quadrupled. The shares have since risen to as high as $81, and investors are still optimistic about the company's future. The Canadian athletic clothing retailer has a lot to be proud of. What started off as a humble Vancouver company in 1998 has risen to a billion-dollar multinational with over 200 stores across North America, Europe, and Asia. 28 Lululemon athletica has been called the "Nike for Women."29 In an already competi- tive sports retail market, how did this small yoga company rise to such greatness? Two Canadian marketing academics agree that Lululemon offers something unique: a high-quality product for yoga enthusiasts. "Lots of people can make a good product, but this is [a] product really specially designed for stretch, fabric, and the age of people who do yoga," explained Alan Middleton, marketing professor at York University's Schulich School of Business.30 According to Michael Mulvey, University of Ottawa marketing professor, Lululemon's product is known for its superior design and high quality. Mulvey also credits its sales staff, called "educators," for their focus on the customer. Mulvey explained that its customer ser- vice is superior and appeals to the target market. Since Lululemon is not selling an undiffer- entiated product to the mass market, it is not a traditional mass-market retailer.1 Beyond a quality product, interest in the company has grown through the use of social media. The yoga community is a well-connected demographic, says Mulvey. "In where they put stores, in how they linked into local yoga clubs where their stores were .. e... and them being engaged in the whole promotion of yoga," he explained. "They've got a very nice niche."32 Clearly, strong community ties have resulted in less advertising costs. "We don't do ads," says Nina Gardner, Lululemon's community relations manager. "All of our market- ing is done word-of-mouth and grassroots. The only place you'll see ads is in Yoga Journal and Runners World, two national publications." 1933 Lululemon, of course, is not just selling yoga clothes, it's also selling a lifestyle. You can it see in its stores and its slogans. On a typical Saturday afternoon, its employ- ees are busy helping customers and community building. According to Timothy Taylor of the Globe and Mail, in stores you'll see a unique shopping experience. Taylor explains that customers, mostly women, are called "guests," ranging in age from young teenag- ers to senior citizens. In fact, it is not just about yoga pants. The youthful staff are modelling wraps and toques and advertising product features, and customers are com- paring fabrics. 34 CEO Christine Day argues that yoga isn't just an exercise. It represents a broader trend to take better care of yourself and live a healthier lifestyle. According to Day, Lululemon is "part of, and contributing to a bigger macro-trend that affects consumers from their early teens to their 70s. Investing in your health will pay big dividends for individuals and society... elevating the world from mediocrity to greatness." "1935 Part of this lifestyle is also seen in its slogans such as "Friends are more important than money" and "Dance, sing, floss and travel." Strategically, the company has also done something else differently. The company uses a "scarcity model," keeping inventory supplies low. According to Day, this creates fanatical shoppers who return frequently to the store. 36 Few sales are offered, which means customers must buy products at regular price. Typically, yoga pants range from $75 to $128, when similar products can be found at Old Navy or the Gap for under $30.37 The company's reputation for quality and authenticity is one of the reasons customers keep coming back. Marina Strauss of the Globe and Mail refers to the clothes as "aesthetically pleasing, functional and pricier." Day calls it the "Apple Model." The company keeps improving its clothing features and fabrics, and customers show their appreciation through their ongoing loyalty.38 Clearly, Lululemon is focused on its customers and their love of yoga. In recent years, this ancient Hindu custom has become a popular trend in Canada and around the world. Indeed, the practice of yoga is on the rise. The number of people that engage in some form of yoga has risen to over 20 million in the United States alone. It is evident that Lululemon has been able to appeal to this growing market. Certainly, the value and popularity of the brand is growing. In 2012, the company was ranked the 7th most popular Canadian brand by Interbrand in its biannual Best Canadian Brands report. 39 The company is also unique in how it treats its employees. Often referred to as "educators," Lululemon employees receive special training to ensure professional- quality service for their customers. After their first employment anniversary, staff receive a "learning library" that includes books such as The Seven Habits of Highly Effective People, The Phoenix Seminar: Psychology of Achievement, and Landmark Forum Seminars. What's next for Lululemon? The company has started to expand into traditional apparel as well as swim and surf clothes to appeal to a larger customer base. In fact, in 2013 Lululemon decided to develop a men's clothing line to appeal to both runners and male yogis. "They have moved from being strictly yoga to a lot of running stuff, which sort of broadens the appeal," says consultant Maureen Atkinson. "From the point of view of men, it becomes more acceptable to be in a store that focuses on running instead of "40 (just) yoga." Retail consultant Howard Davidowitz agrees. "Yoga is recognized not only by women," Davidowitz said. "If you call health clubs, more men are attending yoga classes. Men are going to show up with their wives and their girlfriends to shop now. [I'd] say 90 percent of their business is women's wear. If they can add 10 percent for men... I look at it as a very strong market for them."41 The greater challenge is keeping the company's "aura of virtue" and "specialness" while appealing to the mass population. After all, investors are demanding growth.42 According to David Ian Gray, a retail strategist, "the specialness of a brand is hard to sustain when you see it on every street corner or, in this case, on every other woman in your yoga class or in the elementary school playground when you pick up your kids. That sense of being part of a haloed community starts to dissipate when the group has grown so big that it encompasses almost everybody-which is exactly what happened mid-90s to the Gap, or mid-2000s to Starbucks." 1943 Has Lululemon made any mistakes? Some analysts believe the yoga giant could have made even greater sales if it was better at matching supply with demand. The question is, can Lululemon now expand beyond yoga wear and be successful with aiming its products at the mass market? Many say, why not? "Is this a powerhouse company? My answer is yes," Davidowitz said. "Will it be five years from now? Yes, because they're so dominant and so recognizable. They've established themselves as the headquarters for yoga wear in the United States."44 Certainly, other retailers have tried to tap into the yoga market. Under Armour, Nike, Adidas, Victoria's Secret, and American Eagle are a few companies that have sold yoga wear. But so far, they haven't captured Lululemon's market share. It seems that Lululemon is doing something special; and for now, it's going to keep on doing it. There is a saying: "Do what you love and the money will come"-for Lululemon, it's the love of yoga. Questions 1. Analyze the yoga clothing industry using Michael Porter's five-forces model. 2. Conduct a VRIO analysis of Lululemon. 3. Discuss which of the three kinds of business-level strategies you think Lululemon is employing or should employ.