Introduction
Many factors affect a business’s success. In the case of Lululemon, a successful sportswear retailer, the coronavirus pandemic had a significant impact on its retail stores. Walking-in stores are threatened, despite the growing demand for online shopping and the profits generated from these sales. The study of the problem faced by Lululemon provides valuable insights for determining recommendations to change the situation and increase demand and profit from retail stores.
Synopsis of the Case
The main problem faced by Lululemon Athletica was the decline in sales and profitability of its retail stores. Despite the company’s significant growth, after the coronavirus pandemic, many retail outlets struggle to maintain their revenue. It is noted that “end of fiscal 2016 on January 31, 2016, Lululemon’s revenues had almost doubled and net profits were up 243 percent,” however, this aspect concerns both online and in-person sales (Thompson et al., 2020, p. 68). At the same time, due to the increased popularity and convenience of online stores, most of the financial profit comes from them, with a profit of $1.14 billion in 2020, compared to $5.2 million in retail stores. Therefore, Lululemon Athletica’s managers face the task of developing a strategy that will provide an opportunity to increase the profit of retail points through the sale of goods.
Relevant Factual Information about the Problem or Decision the Organization Faced
The primary challenge faced by the Lululemon sportswear company was the decline in profitability and popularity of its retail stores, due to the growing demand for online shopping. Following the COVID-19 pandemic, the latter gained relevance among the company’s target audience, which negatively impacted the attendance and revenue of retail outlets. Compared with the financial indicators of 2016, the percentage of sales revenue fell from $5.83 million per store in 2012 to $5.2 million in fiscal 2020 (Thompson et al., 2020). This circumstance raises concern, as the popularity of sports and yoga has grown during this period, which should have had a positive impact on the company’s profits.
Explanation of Relevant Concepts, Theories, and Applications Derived from Course Materials
A unique aspect of the company’s retail stores is “selling all of the items in its retail stores at full price” (Thompson et al., 2020, p. 78). This aspect contributes to the popularity of online stores, as various sales often take place on this platform. This is also because many consumers may exceed their financial capabilities to purchase the products of this brand. Therefore, if customers want to purchase a Lululemon product, they will turn to the company’s website, as they can afford to buy it at a discount.
Another valuable aspect contributing to the decline in the popularity of retail stores is the opportunity to get a more extensive selection of goods. In walk-in stores, a limited selection of colors, sizes, and types of sportswear is often available. In other words, online stores provide a wide variety of new collections and past items sold at discounted prices. Thus, individuals can choose their goods depending on their financial capabilities, desires, and preferences. This factor can be attributed to the concept of the consumer decision-making process (Mishra et al., 2021). Before making a purchase, customers research the company’s offerings and opportunities. Regarding this model, consumers prefer online stores, as they dramatically simplify this procedure by providing the necessary information to consumers.
Recommendations
A change in pricing policy is the main recommendation that can be highlighted to increase the popularity of retail stores. One aspect that reduces the demand for Lululemon retail stores is the sale of goods at full price, which is why consumers prefer online shopping due to the availability of discounts. This is because “price is considered an important estimator of consumers’ purchasing decisions” (Büyükdağ et al., 2020, p. 148). Thus, companies should pay attention to providing sales or unique offers available only in walk-in stores.
Alternative Recommendations
An alternative recommendation to increase the demand for retail stores is the introduction of technology. One innovation that can attract more customers is the provision of self-service capabilities. This technology implies “technological interfaces that enable customers to produce a service independent of direct service employee involvement” (Park et al., 2021, p. 371). Therefore, this innovation can significantly increase the customer experience and the popularity and profitability of retail stores.
Conclusion
In conclusion, this research paper investigated the problem faced by the Lululemon sportswear company. Following the coronavirus pandemic, sales in online stores increased significantly, while the profitability of retail stores declined substantially. To address the issue, recommendations were proposed, including the introduction of self-service technologies and the provision of discounts and special offers in retail stores. These measures can help increase customer engagement, improve their experience, and boost profits.
References
Büyükdağ, N., Soysal, A. N., & Kitapci, O. (2020). The effect of specific discount pattern in terms of price promotions on perceived price attractiveness and purchase intention: An experimental research. Journal of Retailing and Consumer Services, 55. Web.
Mishra, R., Singh, R. K., & Koles, B. (2021). Consumer decision‐making in Omnichannel retailing: Literature review and future research agenda. International Journal of Consumer Studies, 45(2), 147-174. Web.
Park, J. S., Ha, S., & Jeong, S. W. (2021). Consumer acceptance of self-service technologies in fashion retail stores. Journal of Fashion Marketing and Management: An International Journal, 25(2), 371-388. Web.
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. (2022). Crafting & executing strategy: The quest for competitive advantage: Concepts and cases. McGraw-Hill Education.