No retail category will emerge from the coronavirus pandemic unscathed. However, activewear and athleisure have fared better than most with consumers prioritizing fitness and wellness while interest in home workouts skyrocket. Find out how the Lululemon pricing strategy prevailed in this time.
The number of items arriving and selling out in this space over the past three months has outpaced 2019 by 13% and 9%, respectively, while discounting remains flat compared to last year. All healthy indications of success, according to EDITED Market Intelligence.
In the midst of it all, Lululemon reported a 2% YoY increase in revenue to $903 million during the quarter ending August 2, with online sales surging 157% as stores temporarily closed.
So how did Lulu do it? 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, implementing a staunch strategy that refuses to budge even during a period of great disruption.
Keep reading as we unpack the secret formula of Lululemon’s pricing strategy. Get in touch for a demo to perfect pricing for your business.
Functional garments at a consistently high price point
While the prints on Lululemon leggings and sports bras have changed, its pricing remains consistently high, unwavering as other retailers scramble to slash prices to offset the pandemic’s economic fallout. Mapping out the average price points over time, powered by EDITED data, shows consistent pricing throughout 2020.
Benchmarked against the rest of the activewear market, the average price point for leggings and sports bras in August remained stable compared to pre-COVID times. Lululemon actually raised the average price of these top-performing categories after May.
The total average price of Lululemon leggings in the US stocked between May and August is 5% higher than in 2019, while sports bras have taken a 12% hike. Despite the raised price tag, these styles continue to perform well. The number of products selling out of majority SKUs from these categories combined between May to August eclipsed January to April numbers by 152%.
By raising prices of core categories helps to protect margins, creating a necessary buffer during this volatile trading period. Additionally, Lululemon keeps its consumers happy by maintaining the price points of its evergreen items – styles that remain in assortments season-on-season are never advertised as discounted and get restocked after selling out. Check out these hero products that have remained the same price for years and continue to sell!
How do other activewear brands compare?
Analyzing the full price of leggings reveals Lululemon’s high pricing interval strategy. Over half of the styles currently retailing in the US are priced up to $20 higher than the majority of leggings at Fabletics and Gap, and even higher than at adidas and Puma 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 consumer knows where to buy the cheapest product and when the best sales are, making it harder for retailers to entice them with full price products. While hard to do, breaking the promotional cycle means fewer markdowns eating into your margin, something more retailers are considering as they recession-proof their discounting strategies to survive COVID.
This is something Lululemon has executed from the get-go. Even at peak sale periods such as Black Friday and Mid Season Sale, Lululemon maintains the lowest proportion of product discounted compared to other activewear retailers combined with minimalistic advertising centered on clearing excess stock instead of aggressive markdowns.
Lululemon’s strict discounting strategy was unshaken even as markdowns during COVID reached Black Friday levels. Since January, the percentage of products reduced at Lululemon hasn’t exceeded 20% of its total range compared to the larger proportions noticed at its competitors. Even at its highest in July when 17% of products were reduced, the average discounting amount remained lower than the rest of the market at 30% vs. 31% at adidas, 35% at Puma and 43% at Fabletics.
With core products at a consistent price point combined with minimal discounting, its customer is trained to purchase at full price without expecting a reduction, keeping Lululemon’s margin and brand value intact.
Keeping the assortment tight is at the core of Lululemon, helping it maintain minimal discounting. Despite the activewear market growing, even as COVID caused delays to newness, the number of arrivals this year have contracted 10% YoY as the retailer invests in tried and tested styles. In fact, 35% of Lululemon products currently in stock have been replenished at least once. This proves that it knows what its customer wants and delivers.
The bottoms category is the most significant business for Lululemon across men and womenswear. While leggings make up 50% of bottoms currently stocked online in the US for women, it is only 3% for men whereas men’s technical trousers equal 39% and shorts are 37%.
So, what’s next?
In May, Lululemon acquired Mirror, a home fitness tech startup, an innovative investment to bolster revenue and expand beyond apparel – especially timely given the rise of home workouts. Later this month, it plans to claim its stake in the size-inclusive market, starting with offering products in sizes up to 20, with more arriving later.
It appears not even a global pandemic can stop the activewear juggernaut, making market intelligence essential to compete in this space and the new era of retail.
At EDITED, we optimize retail decision-making using data, automation, and AI. Not only do we work with some of the biggest activewear retailers, but we can also help you refine your pricing strategies. Remember, a bad buying decision never helped any retailer win!
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