Our proposal is to import the North American brand “Lululemon” (LL) into the Danish market

starting with a store in Lyngby. When looking at the competitive retail environment in Lyngby,

we looked at which markets are not currently being served and discovered a niche market for

trendy athletic apparel, which can be referred to as “athleisure”.

Founded in 1998, LL opened its first store in 2000 in Vancouver BC. From the beginning, LL has

been about more than just selling clothing. As a company, they have a strong emphasis on

community involvement and promoting a healthy lifestyle for their customers. The popularity

of the brand increased quickly and currently LL operates 201 stores, with the majority in North

LululemonDecision Memo

GROUP 6:Sandra Beenfeldt-Hansen, Sofie Reland Iversen, Amalie Rasmussen, Matej Andras, Joyce DKogsgaard

Retail ManagementSpring 2015

America. LL also operates stores in Australia and New Zealand with showrooms in Hong Kong,

Great Britain, Amsterdam and Germany1.

Environmental Analysis

Trends in the industry

By analyzing the industry with tools, such as PESTEL framework and collecting secondary data,

we discovered trends within the fitness apparel industry. There is currently a fashion trend of

athleisure clothing, which means wearing primarily fitness clothes outside the gym as part of

the fashionable closet of customers2. Other trends in DK are running and fitness fever together

with the trend of high interest in living a healthy lifestyle3.

As in all other retail industries, e-tailing is on the rise but, it still does not have a major share on

the market. In terms of Danish consumer, their disposable income is more stabilized since the

financial crisis and they are more confident in their buying behavior and expenditure.4

Threats for the industry may be the fashion industry itself being unstable with trends changing

rapidly and the increased number of players in the industry is outgrowing the demand of

customers. Another threat is the intertype competition from companies who traditionally have

not sold fitness apparel merchandise, such as H&M, Fotex etc.

Economic situation of DK

Real GDP is expected to grow by 1.1% in 2014 after contracting by 0.1% in 2013.

Annual growth of 1.7-1.8% per year is expected in the medium term. Domestic demand

and exports will be the main drivers.5

Customers

1 http://en.wikipedia.org/wiki/Lululemon_Athletica2 Market Line3 Retailing in DK, Euromonitor analysis4 Consumer Lifestyles in DK, Euromonitor analysis5 DK, Country Profile, Euromonitor

We conducted an online survey where we asked 296 respondents in total 9 questions. Our

respondent base had 81.6% between the ages 15 to 30. 77.3% of respondents were women.

The most important findings from this survey were that 43% of our respondents would be

interested in having yoga classes if they were offered it. Their favorite brands were Nike(86%)

and Adidas(49%),with this result we can conclude that our potential customers are buying

fitness clothes from brands that operate in similar price range as LL’s products. 52% of our

respondents are wearing fitness clothes outside of the gym. 90% of our respondent have not

heard about LL before. This gives our brand and store a neutral brand image on which we can

work in the future.

Current competition in the market

In order to assess the current competitive situation for LL, we looked at the current market

situation in our trade area, Lyngby. We defined our competitors by two factors, merchandise

offered and in store experiences and expertise that the competitors are offering.

Local competitors in Lyngby offering similar merchandise are Sportmaster, Intersport and

Stadium as they carry a broad range of large US brands such as Nike and Adidas. A large

majority of their staff are part time and have not had training in the fitness industry. However,

our competitors with a similar level of experience and expertise are stores like Løberen and

RitterCykler. Within Lyngby, there are 12 stores that we would in competition with. This shows

that the customer base has a strong interest in our products and therefor would be responsive

to our marketing.

Retail Concept and Strategy

Target Market:

Compared to LL’s target market in the US, we can see that the Danish store would need to be

slightly adjusted due to cultural differences. In the US, LL is targeting mostly moms, whose

primary focus is on the “Athleisure” fashion trend the status symbol associated with the brand.

There is less focus on the performance of the clothing during workouts. In contrast to this, in

DK, it is more reasonable to target women who are living on their own but before starting a

family, who are fashion conscious and maintain healthy and active lifestyle. Their main focus is

on how the apparel performs during workouts with a secondary focus on the “Athleisure”

fashion trend. In addition to this group of women, we would also target women who have

children and the same behavioral criteria as listed above.

Retail Format:

LL already has a strong unique retail strategy that we also utilize in DK with some adjustments

for the Danish culture and market.

Merchandise: Fitness (yoga and running) apparel with a heavy emphasis on fashion-

“athleisure”. We will offer a limited selection of the LL’s products at our launch. Our idea

is to have an assortment of 14 tops, 19 pants, 5 sports bras, and 5 jackets. In addition to

these basic pieces, we would be offering one special collection per season. In addition to

the clothing, we would carry the accessories lines including yoga mats & props, bags,

headwear & scarves, and socks & underwear.

Services offered: Another aspect of the current retail strategy used by LL that would add

value for our customers are the unique services offered including our staff having a high

level of expertise within the fitness industry and free yoga classes offered in the store

twice per week. In addition we would offer outdoor yoga classes to the Lyngby

community during the summer months. LL currently has an interactive webshop that

can be seen in Appendix 2.

Pricing Policy: LL operates with a value perceived pricing strategy, where they rarely

place merchandise on sale.

Advertising and promotion program: LL uses a unique method that they call “grass-

roots” advertising which means they prefer to gain popularity through word of mouth

and local influencers rather than spending money on large advertising campaigns6. They

do this by working with an Ambassador program where they recruit members of the

community to teach classes in their store on a voluntary basis with the benefit of getting

6 http://www.itsallyogababy.com/lululemon-ambassadors-yoga-marketing-warriors/

free LL products7. In addition to this, LL is quite active on social media with channels on

youtube, facebook, instagram, pinterest and twitter.

Store design and visual merchandising: LL does not have a standardized store design

that it uses in all of its stores, instead it gives the store managers freedom to design

their stores to best fit with their community. “The result of all this hard work is a store

that feels personal, local and as special as the community it serves.8” For our store in

Lyngby, we plan to use a boutique layout, which focuses on the hedonic needs of our

customers. As you can see from our store design in Appendix 1, we would use mostly

wood to create a warm and inviting atmosphere while reinforcing the company’s stance

on being close to nature.

Location: We have chosen to open our store at Lyngby Hovedgade 15F. This location is

174 square meters. It is ideal because it is situated in an area with several other higher

quality and more expensive stores for example, Irma, Bahne, Stuhr and Hi-Fi Klubben.

There are also two fitness centers located within 700 meters of the location. Lyngby is

an ideal area to open the flagship store of LL in DK due to its higher than average

income level9 in the community as well as the large international population.

Competitive Advantage

Based on our SWOT analysis and the VRIN framework, we have identified sustainable

competitive advantages for LL. These are advertising by word of mouth, strong US brand, and

staff expertise. The main advantage is their advertising by word of mouth. They have proven to

create a following of loyal customers to the brand in the US market and able to continue their

grassroots marketing by using social media and email. This is both a valuable and rare form of

omni-channel approach in the fitness industry where advertising costs are kept to a minimum.

LL’s staff are put through a thorough training program both in yoga classes and knowledge of

their products. This creates value for the customer to experience LL’s expertise in the health

and fitness industry therefore setting them apart from their competitors.

7 http://strategyonline.ca/2012/09/28/brands-of-the-year-lululemon-takes-local-to-the-next-level/88 http://www.lululemon.com/about/careers/store-support-centre/store-design-development/9 Danmarks Statisktik

Team and Other People Involved

By looking into the stake holders map below, we are able to identify those entities that need to

listened to closely when we are making decisions about the company such as our investors, LL’s

HQ, and our future customers from both the Fashion and Fitness communities. We also

identified those stakeholders who need to be kept satisfied being the local government- this is

important to pay attention to because of the potential increase in interest if they are unhappy

with our decisions. The final segment are those stakeholders who need to be kept informed, as

they have a high interest in our company but relatively low power over our decisions. This

group includes our staff, media and our competitors. The media and competitors both have a

high potential for moving up in power depending on the current situation.

Financial Plan

We found the average turnover per square meter in Lyngby Storcenter, which is 59.000kr

annually. We used this as a baseline for us to calculate our expected turnover for our store of

174 square meters, which would mean that we could expect to have an annual turnover of

10.266.000kr.

We then found the average price of our assortment, which was approximately 400kr. Based on

this we would need to sell 2,027 products per month. However, our goal is for customers to

purchase the more expensive clothing items, so we also calculated without the cheaper

accessories, which gave us an average price of 668kr. This in turn, means we would need to

make 1281 sales per month.

By having the goal of selling this amount of merchandise each month, we will be spending

approximately 300.000kr per month to replenish our stock. This is our starting assumption,

however once the store is open and we can evaluate the buying trends of our customers we will

of course need to adjust this number. In the short term, we are relying on the WALLMOB

technology that is provided by Visma that allows us to order products in store for our

customers if we do not have it on hand. The products will be sent directly to the customers who

can then return in store if necessary.

We realize that this is an unrealistic expectation for

the first period after opening a new store, we

estimate that we will only earn 20% of our target

turnover which is 855.500/ month during the 1st

and 2nd month. After this our turnover will increase

with 5% each month until we reach our target

turnover in month 35. We ask our investors to cover

21 months of costs before we can expect to be able

to cover our monthly costs and begin paying off our

debt which at this point will be approximately

3.120.000kr for monthly costs plus our start up costs which are 732.500kr. This adds up to

3.852.500kr. After 38 months we will reach our breakeven point.

Funding Request

Based on these figures, we are asking you as investors to consider investing not only your

money, but also your passion into our plan to bring LL to the Danish market by opening a

flagship store in Lyngby. Financially, we are requesting 4.000.000 kr to cover our start up costs

and the first 21 months before we reach our break even point.

Appendix 1: Store Design

Appendix 2: On-line Solution

Context

The interface of the Lululemon European website has a very simple clear design. They have photos displayed on the front page you can click into making it user friendly. It is clear to find how to order, and a large customer support in place with

Content

Top left corner there is ‘find a store’, a login for members under ‘my account’ and a customer service ‘need help’ drop down.

In the right hand corner of the screen it promotes free shipping alongside what country you are ordering from. You are able to

change what country you are in if you want it delivered elsewhere.

My shopping cart is also in the far right corner.

There are drop downs where the first drop down is their new products, then specifically into women, men, features, education, community and blog.

There is a large banner photo that you can click on that takes you straight to the womens yoga section. Below are photos in a grid where it is easy to click into these sections rather than use drop down menus.

Product information is detailed with statements why we made it, fabric and features and the fit and function. You can view product from many different angles, choose the colour, size that is available and quantity. You are able to make a review on the product along

Features on the website are Lululemon’s ambassadors where they also promote this through their blog and all social media channels. Lululemon has 3 different apps for support for location of stores, personalizing what products you like to see and also a training app for a half marathon event in Vancouver.

Lululemon work closely with providing a sustainable future with the communities that are involved with their value chain. They have a close relationship with vendors to ensure quality, innovation and code of conduct to adhere by.

Communication

Lululemon has a live chat service on there website. It is very clear on different methods of communication via email, call, live chat, faq and returns service.

They are dedicated to answering comments on facebook within a reasonable manner.

The do not have catalogues due to their marketing strategy to have new products weekly and want to provide the sense that there is limited stock. The loyalty program is sending weekly emails on new products.