The activewear and athleisure market continues to boom, expected to reach $69.2bn in 2020. This month, Lululemon Athletica reported double-digit Q1 sales for 2019 and a gross margin of 53.9% – an increase of 80 base points compared to the first quarter of 2018.
So how do they do it? While perfecting second-skin, four-way stretch, moisture wicking leggings in all your favorite colors may have something to do with it, Lululemon also knows how to get its prices right.
The secret formula of Lululemon’s pricing strategy is:
- Functional garments at a high but consistent price point
- + Minimal discounting, even in peak sale periods
- = Customers understanding they have to pay full price, keeping Lululemon’s margins healthy.
Keep reading as we track Lululemon’s pricing strategy over time. Interested in knowing how you can use EDITED’s retail data platform to back up your strategic pricing decisions? Reach out for a demo here.
While the prints on Lululemon leggings and sports bras have changed over the past two years, the price has remained consistent. Mapping out the average price points over time, powered by EDITED data, we can prove prices for these core items have remained stable since 2017.
The total average price of leggings in the US since 2017 is $90, while sports bras come in at $47. Keeping core products at a consistent price point means the customer will be buying at full price and not expecting a reduction.
It is apparent Lululemon has cracked the activewear pricing code. Need proof? Check out these products that have been available season on season at the same price…and they keep on selling!
How do other activewear brands compare?
Analyzing the full price of leggings reveals Lululemon’s high pricing interval strategy. Half of the styles currently retailing in the US are priced up to $20 higher than the majority of leggings at Adidas, Athleta, and Gap Fit and even higher than Nike, where the bulk of the range is priced between $40-$60.
How does your sportswear compare? Get started to monitor where you sit within your competitors.
The digital customer knows where to buy the cheapest product and when the best sales are, making it harder for retailers to entice them with full price product. While hard to do, breaking the discounting cycle means fewer markdowns eating into your margin. This is something Lululemon has executed from the get-go. Even at peak sale periods such as Black Friday and Mid Season sale, Lululemon has the lowest proportion of product discounted compared to other activewear retailers.
Lululemon’s minimalistic discount tactics translate into its advertising. For Black Friday and Cyber Monday promotions, instead of pushing aggressive discounts, Lululemon nudged customers towards a sale edit in its email newsletters. This lets them clear out excess stock before new season arrivals, keeping up with their less promotionally-driven image. In comparison, Puma and Adidas both steered towards percentage off messaging in their communications.
Keeping assortment tight is at the core of Lululemon, this helps them maintain minimal discounting. New product arrivals have been pulled back by 9.4% in the past 6 months as the retailer focuses on tried and tested styles. In fact, 18% of Lululemon product currently in stock has been replenished at least once. This proves that they know what its customer wants.
The bottoms category is the most significant business for Lululemon across men and womenswear. While leggings make up 54% of bottoms currently stocked online in the US for women, it is only 2% for men whereas men’s shorts equal 55%.
Despite closing its standalone menswear stores in the US and Canada, Lululemon has stated this will not affect its plans to double revenue for that area of the business by 2023. YoY, we have already tracked 58% more men’s product retailing in the US with options for both tops and bottoms categories doubling.
So, what’s next?
Lululemon has ventured into the ‘active beauty’ space, launching a line of gender-neutral moisturizer, dry shampoo, deodorant, and lip balm. Titled ‘Lululemon SelfCare,’ prices start at $12 for deodorant and exit at $28 for moisturizer. Despite the high priced strategy we’ve just discussed for apparel, Lululemon’s first beauty drop actually comes in cheaper than other players in this market. For example, Sweatwealth’s bamboo charcoal deodorant retails for $16, and CliniqueFit’s Face + Body hydrating spray costs $13. A strategic move or still settling into the market? Watch this space.
At EDITED, we optimize retail decision-making using data, automation, and A.I. Not only do we work with some of the biggest activewear retailers such as Puma, but we can also help you refine your activewear pricing strategies. Remember, a bad buying decision never helped any retailer win!