Kiley Fetherston
Mr. Reuter
Economics B1
28 March 2017
Will Lululemon Fall to Competitors?
The law of demand states that if price increases, the quantity demanded will decrease. Therefore, us, as consumers, tend to steer away from expensive products, especially if there is an alternative with similar value at a decreased amount. However, it has been noticeable that certain people are still drawn to certain products - despite the number on the price tag. Lululemon Athletica, a company specializing in athletic apparel, continues to raise their prices, while still drawing the attention of men and women across the world. Even though there are many other companies that sell similar products, such as Nike or Athleta, Lululemon should not fall to competitors in the near future due to their known quality, marketing strategies, and consumer tastes.
Lululemon Athletica, Inc. is a yoga and exercise apparel company that has flourished since 1998. Known for their original yoga designs created for women, Lululemon has broadened into an empire of athletic clothing to wear for running and training for both women and men. Since the company brands itself not only as a product, but a lifestyle, most men and women purchase their products for fashion apparel, not athletic purposes. A drawback in the company, however, is the knowledge of high prices in clothing that push the limit of most consumers. But due to this advertising as a lifestyle strategy, Lululemon has shown continuous success with their consumers. The opportunity cost of purchasing this expensive athletic clothing is to look fit and active, while still owning some style. Therefore, as you can see from the data below, the company’s revenue continues to increase. From January 2011 to February 2015, it has grown from approximately $711 million to $1.8 billion due to this marketing strategy, an 18% growth which surpasses competitor, Nike’s 11% growth.
With other athleisure companies on the rise, such as Nike or Under Armour, people are questioning if Lululemon will continue to demonstrate growing success. With their prices running much higher than other companies who sell similar apparel, as shown in the table below, what is keeping Lululemon from falling under such competitors? In a monopolistic competition where many firms sell similar products, there needs to be a way to go above and beyond to drawn the attention of consumers. Lululemon has mastered this concept. Instead of spending money on marketing and advertisements, a method Nike is known for, Lululemon builds its products with new, synthetic fabrics and higher qualities that specialize in comfort and style (Ballard). When a pair of running pants, or leggings, average at $100, customers will still pay the price because of the better quality. Due to the materials and lifestyles that are being advertised to their consumers, the consumer tastes increase the demand of Lululemon’s products and their better quality.
Even though most people are drawn to cheaper prices, certain brands and higher qualities bring consumers to look past the price tag. With this marketing strategy that Lululemon continuously demonstrates, they will see economic growth in these products for many more years to come. According to The Motley Fool, Lululemon is aiming to double their revenue in the next five years, which is a very achievable goal. When it comes to top quality and marketing an athletic lifestyle, consumers will begin to increase the demand of their products. Although it is a small company compared to others and its prices exceed what most can pay for, Lululemon should not fall to its competitors, especially when its market continues to grow.
Works Cited
Ballard, John. "Better Buy: Lululemon Athletica Inc. vs. Nike Inc." The Motley Fool. The Motley Fool, 14 Feb. 2017. Web. 26 Mar. 2017. <https://www.fool.com/investing/2017/02/14/better-buy-lululemon-athletica-inc-vs-nike-inc.aspx>.
"Lululemon - About Us." Lululemon . Lululemon Athletica, Inc. , n.d. Web. 26 Mar. 2017. <http://info.lululemon.com/about?mnid=ftr;en-US;about-us>.
Thangavelu, Poonkulali. "Understanding Lululemon's Business Model." Investopedia. N.p., 28 May 2015. Web. 26 Mar. 2017. <http://www.investopedia.com/articles/investing/052715/understanding-lululemons-business-model.asp>.
This is a very interesting debate considering the recent struggles of athletic wear companies, such as Sports Authority, which closed all locations this past summer. As more and more of these types of companies are introduced to the market, it only becomes harder for each to stand out. Thus, I would disagree with your claim that Lululemon will continue to grow despite constant price increases. With the growth of online shopping and other fashionable athletic alternatives such as Fabletics, I believe there will come a point when Lululemon produces a surplus and is forced to drastically decrease prices in order to regain equilibrium.
ReplyDeleteAthleta is where it's at. But I would have to agree I don't think that Lulu will fall under competitors because if the clothing they are making is high quality material and will last for a long time, that a big factor to what meets consumers needs. Like you said in your post that there are other store brands that make the same clothing I still think that Lulu will be at the top because they know how to meet the consumers needs and not just advertise like crazy to get consumers into their store.
ReplyDeleteYour argument was very well about how there is a possibility to fail due to the prices, however, I do not see that happening. As mentioned, the quality of the apparel is very good and people do wear the brand as more of a lifestyle. I typically see girls in particular wearing their lulus for style, and not so much running and training. Since Lulu is mainly intended for athletic stuff, they still make more money for the fashion side of things. Same goes with nike, and other brand names. Made out for athletics, worn for style.
ReplyDeleteLululemon is definitely a well known athletic brand and is also highly priced. I agree that the company will continue to grow as long as their styles stay modern and unique while maintaining the same quality. I own multiple things from Lululemon and I am very satisfied with their products. They also have a good return policy/warranty on their products since they are so pricey. Personally, I would rather buy better quality leggings at a more expensive price than lower quality leggings at a cheaper price. Consumers want better quality leggings and are willing to pay whatever price to satisfy their needs. With Lululemon leggings, although they are more expensive their quality and style sets them apart from competitors.
ReplyDeleteI would definitely agree that Lululemon has better quality with leggings that people are willing to purchase due to the longer lasting product. I would say that they may keep increasing growth within their company, but this may stop at some point. People right now are really into wearing athletic clothing so Lululemon has executed good quality products to satisfy this fad. Eventually, I think the sales will plateau or increase at a much slower rate because it may go out of style. This means that Lululemon will have to continue making new products that the consumers demand in order to increase their growth.
ReplyDeleteI agree with your statement that Lululemon will not fall to its competitors. Because it is a monopolistic competition it is all about competing on factors other than style, and in my opinion Lululemon has mastered that.They have such a high following that people can spot their leggings on anybody. Additionally, they are notorious for having really good quality with really good fit, which for a lot of people is well worth the price increase. There have been many times where I almost caved and got a pair, but I can't bring myself to pay that much for them. For me the opportunity cost of having those leggings is not worth the opportunity cost of not having them and keeping the money I saved on buying off brand leggings. However, just because I don't believe they are worth the money, a lot of people do and the number that do are growing, so their revenue will only continue to go up, because they are so much more known and popular than their competitors.
ReplyDelete