Will Lululemon Fall to Competitors?

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>.

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