MA FINAL PROJECT IMC PLAN FOR LULULEMON ATHLETICA IN CHINA by weihan

MA FINAL PROJECT

INTEGRATED MARKETING COMMUNICATION PLAN FOR LULULEMON ATHLETICA IN CHINA

Luxury and Fashion Management Savannah College of Art and Design Winter 2017 WEI HAN

LULULEMON ATHLETICA

ABSTRACT Nowadays, more consumers are adopting healthier and more balanced lifestyles, and “athleisure” (athletics and leisure) outfits have gained popularity. Many designers of apparel and footwear have witnessed the growing “athleisure” trend in active wear. Various apparel brands in both mass and luxury segments responded to this growing trend and launched more clothing and footwear products that combine an athletic, comfortable and casual style. In China, athletic fashion leads the way. According to Euromonitor in 2015, the increasing consumer participation in sporting activities has seen the sports industry enjoy recovery after a decline. Sporty fashion has emerged as a key trend among young people since 2014. Lululemon, a 2 billion professional athletic brand from Canada, is over-reliant on the North American market for its revenue. Since the Asian Market is growing rapidly, there is a market potential for Lululemon to integrate the market into China. Lululemon has had its eye on a big expansion into Asia and Europe. The expansion is paying off. Lululemon opened stores in Hong Kong, Singapore, and Seoul in the last year. CEO Laurent Potdevin was “very happy” with the results, and Asia is far exceeding their expectations so far that he is expecting an 8 million revenues for two stores in Hong Kong. This ten-week project is to open a full-line retail store as well as to promote Lululemon Athletica into Chinese market in Beijing. This promotion includes creating an Integrated marketing plan for Lululemon to introduce the brand to the Chinese market and increase the brand awareness among Chinese consumers. This project will be based on secondary research and primary research to collect data, information, and Lululemon’s current market situation, consumers’ behavior and attitudes.

TABLE OF CONTENT ABSTRACT

PRIMARY RESEARCH

CONCLUSION

102

INTRODUCTION

TARGET CONSUMER IDENTIFICATION IN CHINA

BIBLIOGRAPHY

105

COMPANY OVERVIEW

MARKETING STRATEGY

APPENDIX

108

SECONDARY RESEARCH

MEDIA AND PROMOTION STRATEGY

MARKET OVERVIEW

BUDGET

103

LULULEMON ATHLETICA

INTRODUCTION LULULEMON ATHLETICA The eyes of the world are on the Chinese consumer. The economic is cooling down, the currency has depreciated, as well as the stock market performed unstable, all those facts are making political and business leaders doubt about that if the economic dream in China may have finally ended, and tough times lie ahead. However, though the economy seems has slowing down in its steps, consumers’ confidence has remained surprisingly resilient over the past few years, as salaries have continued to rise and unemployment has stayed low. Chinese consumers remain optimism about their futures, but there still concealed significant changes beneath this statement. Nowadays, Chinese consumers are selected about how and on what they spend their money. According to the China daily News, Chinese consumers’ spend is shifting from products to services, and from mass to premium segments. Consumers are seeking a more balanced life, where health, family, and experiences take priority. China’s healthy lifestyle trend has only just begun. Consumers are willing to try more products, activities and services to improve their health. The growing participation of sports and fitness has drive the sportswear market demand, and both international sportswear brands such as Adidas, Nike, The new balance, puma, Gap, as well as the domestic sportswear brands such as Xstep, 361 degrees, Anta, including independent activewear designers has captured the trend and continuously expanding their businesses in China. They have all seen the future in emerging consumer sales in China. As Chinese population state as one of the fastest rate of aging along with an exploding population in middle class, China has been undergoing a dynamic shift in consuming healthcare. With a population that has one of the fastest rate of aging coupled with an exploding middle class, China has seen a dynamic shift in how healthcare is being prioritized and consumed. More people have a health-conscious lifestyle, boosting the healthcare industry to new heights and opportunities. In this case, the growing market demand in China may be a good chance for Lululemon to expand its business in China. This project will develop an intergrated marketing communication plan including open a full-line retail store in Beijing for Lululemon to promote the brand as well as increase the brand awareness among Chinese Consumer. Rapid adoption of new trends amplifying the importance of how Chinese consumer cares about the wellness and fitness, and the willingness of keep up with trends. Chinese consumers are adopting new products, services, and retail experiences at a high rate in developed markets. According to the Mckinsey 2016 Chinese consumer report, mobile payment penetration in China went from zero in 2011 to 25% of the population in 2015.

China is the world’s largest e-commerce market, generating revenues of nearly RMB 4 trillion last year – around the same as the US and Europe. Yet, physical stores remain important as consumers engage with brands both online and offline. While consumers continue to express higher satisfaction with physical stores than online channels, and the gap is narrowing as online stores grow in popularity. (see Appendix) Health awareness continues to be a social priority as the middle class and urbanization expand. In China, as the history of traditional Eastern medicine and lifestyle practices that involve activities such as tai chi, the importance of maintaining good health is very important for most Chinese citizens. The differences nowadays are more about the variety and heightened awareness of accessible health options and practices. Yoga, in the mean time, is more convenient for those people in urban area who don’t have time to go to the park to do Tai chi and want to heal the bodies through exercises, as yoga shares the similar essence as tai chi to connect the mind and the body. Lululemon, in the meantime, as a yoga inspired athletic brand, shares the same core value with traditional Chinese well being spirit which uses gentle, slow, deliberate, meditative body movements (and carefully prescribed stances/positions) to achieve mental and bodily relaxation, and somehow interacted with Chinese people in a cultural level. The project will target the right consumer based on the secondary and primary research and gives a full insights of consumer behavior and purchase preferences. Then, based on findings, the project will provide a marketing strategy involving the placement of the full-line retail store, the product, price, as well as the convenience factors for customers to shop lululemon. The promotion will take both the secondary and primary research into account and provide the digital, PR&Event, print ads, out-of-home, and direct emailing strategies for Lululemon to increase the brand awareness among Chiness consumer. The goal of this project is to increase brand awareness among Chinese consumer, and consolidate the relationship between Lululemon and the Chinese consumers as well as to improve the company’s competitive position in Chinese market.

LULULEMON ATHLETICA

COMPANY OVERVIEW

We live a life we love. --- LULULEMON ATHLETICA

COMPANY OVERVIEW

LULULEMON ATHLETICA

COMPANY HISTORY Lululemon is a yoga-inspired technical athletic apparel company for women and men. Chip Wilson found Lululemon in Vancouver, Canada in 1998 as a design studio for Yoga. In November of 2000, the first standalone store was open in Vancouver. Now, the chief-executive of Lululemon is Laurent Potdevin, and Seventy percent of managers are hired internally, according to a company source. Lululemon Athletica Inc. as a designer, distributor and retailer of technical athletic apparel, operates business include Company-operated stores, Direct to consumer and Other. The company offers apparel such as pants, shorts, tops and jackets that designed for healthy lifestyle activities and athletic pursuits, such as yoga, running, other sweaty pursuits and accessories for women, men and female youth. The Company conducts its business through two channels: Company-operated stores and direct to consumer. It operates approximately 360 Company-operated stores located in the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany and Puerto Rico. Its direct to consumer segment includes lululemon and ivivva e-commerce Websites, www.lululemon.com and www.ivivva.com, and other country and region specific Websites. Since Lululemon’s inception, the brand has developed a distinctive corporate culture with a mission to “produce products which create transformational experiences for people to live happy, healthy, fun lives.” (Lululemon) The brand promotes a set of core values in its business which include “developing the highest quality products, operating with integrity, leading a balanced and fun life, and nurturing entrepreneurial spirit.”(Lululemon athletica 2016) These core values attract passionate and motivated employees who are driven to succeed and share the brand’s purpose of “elevating the world from mediocrity to greatness.”( (Lululemon athletica 2016))

As it shown on Lululemon’s website, initially, Lululemon first story was not only selling products, but also acommunity hub for yoga lovers to learn and discuss about the both mental and physical aspects of a healthy life. However, the difficulties of conducting their retail store with the community hub made it very busy for their company. In order to change the situation, they turned to focus more on training their staff so that the staff could positively influence their families, communities and customers. This positive influence has built a very healthy brand image among the consumer that when they think about Lululemon, they think about fun and healthy life. Meanwhile, in order to achieve their vision: “to elevate the world from mediocrity to greatness”, Lululemon partnered with right people and developed three effective business strategic sales programs to spread the essence and philosophy of yoga. They concentrate on quality rather than quantity. Besides producing high quality yoga and athletic clothing, they integrated high quality in building relationships with their partners (Lululemon Athletica, 2013). The positive healthy brand image among consumers helps to contribute in its market success.

COMPANY OVERVIEW

LULULEMON ATHLETICA

CURRENT MARKET

ululemon has a strong optional network that helps the company to attract and serve its customers in a diversity base. According to the Lululemon annual report 2016, Lululemon sold its products through 363 corporate-owned stores in the US, Canada, Australia, New Zealand, the UK, Singapore, Hong Kong, Germany and Puerto Rico. It operates 320 stores under brand lululemon athletic and 43 stores under brand ivivva athletic. The company also has two licensed stores in the United Arab Emirates. Lululemon operates and own a 307,000 square feet distribution center in Columbus, Ohio. The company also operates distribution facilities in Washington (167,000 sq ft), British Columbia (120,000 sq ft) and Victoria (54,000) under lease. It sources raw materials through a network of 57 suppliers.

The net revenue of Lululemon in 2015 is 2 billion US dollars. (See Appendix) The company is a global designer, retailer and distributor of athletic apparel with operations in including the US, Australia, New Zealand, Hong Kong and the UK among other countries. It operates a design center in Vancouver, British Columbia in association with international designers. Lululemon has two licensed stores in the United Arab Emirates. In FY2016, approximately 44% of the company’s products were produced in South East Asia followed by South Asia (28%), China (20%), North America (2%), and other regions (6%). Geographically, the company operates its business through three regions, namely, Canada; the US; and Outside of North America which includes Asia, Australia and New Zealand. In FY2016, the US accounted for 73.2% of the company’s total revenue, followed by Canada with 20.2%; and Outside of North America with 6.6% respectively. (See Appendix)

Revenue Segment Value 1600

1200

800

400

0 2012

2013

2014

2015

2016

America Canada Out-side North America

London North America Saudi Arabia

Hong Kong

The growth in Corporate-owned stores business enabled the company to increase its revenue. Corporate-Owned Stores segment is the major contributor to the company. According to Lululemon annual report 2016, in FY2016, the segment reported revenue of US$1,516 million, which accounted for 73.6% of company’s total revenue and increased by 11.91% year over year. This was the result of increase in the store network. In FY2016, the company added 61 new stores to its network of which 49 stores were in the US followed by Canada with three stores, four stores in the UK with, two stores in Hong Kong, and one store each in Germany, Puerto Rico and Singapore. The Corporate-owned stores accounts for 1,516.32 billion US dollars for its net revenue, ad the direct to consumer segment accounts for 401.53 billion US dollars by 2105.(See Appendix)

Hawaii

Singapore Australia New Zealand

COMPANY OVERVIEW

LULULEMON ATHLETICA

CURRENT MARKET Since Lululemon has built successful healthy brand image among consumers, it is easier for them to target the right customer and right market. The successful business trategic has showed up with the healthy financials. Lululemon now has become one of the major players in the athlesure market. Compared to its competitor Nike and Under Amour, Lululemon reported better-than-expected fourth-quarter earnings and the market shares were up over 6% for the year 2016 based on its 363 retail stores globally and direct to consumer channel. Comparing the results to its competitors, Lululemon Athletica Inc reported Total Revenue increase in the 3 quarter 2016 by 13.49 % year on yevr. The sales growth was above Lululemon Athletica Inc’s competitors average revenue growth of 6.73 %, recorded in the same quarter. In the same time, with net margin of 12.54 % company achieved higher profitability than its competitors. However, Lululemon Athletica Inc. Net Income in the 3 quarter 2016 grew year on year by 28.47 %, slower than its competitors’ income growth of 61.45 %. The reason behind the slower growth of the net income may stand on the over concentrated market area. Based on the Lululemon’s annual report, one can easily find out that Lululemon is over rely on its revenue on North America market since more than 300 of its retail stores are located in North America. Though Lululemon’s retail stores that out-of-North America are limited, the revenue from other parts has higher growth rate than from the North America market, especially from the Asia pacific area which only has four stores located in this area as we can see from the chart. (See Appendix)

Tangible: Distribution facilities: Lululemon, as recognized as one of Canada’s fastest growing brands, has three large distribution facilities which allow the company to operate efficiently and distribute its products to its stores around the world. Manufacuture: Meanwhile, they mainly manufacture in Southeast Asia, and about 20% of the product are produce in China which makes it more cost efficient if they expand their business into the market in mainland China. Globalized stores In addition, Lululemon has globalized stores which helps the company establish its presence as a major player in technical athletic apparel market. Intangible: Reputation: Lululemon has a strong reputation with not only the customers but also with its suppliers. Capabilities: Lululemon has very efficient inventory management which allows the company to run a healthy business. Also the company concentrate on building relationships between suppliers and its employees. Their product designs allow them to keep up with the newest market trend, and they provide good service on yoga and education. They trained their employees well to spread the core value of the brand, and also have a successful community-based promotion strategy to generate the brand into sales.

COMPANY OVERVIEW

LULULEMON ATHLETICA

CURRENT MARKET

However, the company also faced problems that they over-rely on the North America market which limited their possibility of growth in global market share. Since the Asia Pacific market has grown very fast, especially the huge demand in mainland China market, it is a good Chance for Lululemon to expand their business into China and promote their brand among Chinese consumers based on their healthy financial back-ups and the huge market demand in China. As the report has analyze the internal factors that support the brand in entering new market, it is also important to take a look at the external factors that may effect the plan.

COMPANY OVERVIEW

LULULEMON ATHLETICA

THE FUTURE OUTLOOK According to the Lululemon’s CEO, the company is still in a very unique position that allows Lululemon to see a brighter future. Lululemon has margin structure with the access to the same quality of construction that other athletic brands don’t possess, in the mean time Lululemon keeps the technical mindset that those fashion brands are somehow lacks. In the future, the company will keep those advantages, and continue to achieve their goals through their strategies. In the future, the company could benefit from the positive outlook for e-commerce market. As online shopping has become the key trend in the marketplace in the recent years, Lululemon will also enhance costomers’ shopping experience by providing user-friendly online shopping channels such as website, collaborated e-commerce, and mobile application. According to industry estimates, the global e-commerce market is expected to reach approximately US$2.5 trillion by 2018. With brand promotions, coupons and attractive features in its website, the company can attract more customers and generate higher revenues.

The company focuses on expanding its operations through several initiatives in the future. To expanding the business outside the North America become the priority in the company’s business strategy as the sportswear market in Europe and Asia has seen a healthy growth in the future. In the future, the company is looking for expansion outside of the North America since the net sales of outside north America has grown very fast in 2016 which accounts 20.2%percent of the total revenue compared with 5.9% in 2015. (See Appendix) According to Statisca, in the future, the company is expecting a Net revenue of 3.25 billion US dollars, and up to 5.17 billion US dollars by 2022 which includes the 3.14 billion US dollars from corporate-owned stores and 1,570 million US dollars from direct to consumer segment. (See Appendix) while the revenue from outside North America is expecting an 30% in the 2020. The company is expecting to expand its retail stores to 653 worldwide by 2022.(See Appendix)

COMPANY OVERVIEW

LULULEMON ATHLETICA

SWOT ANALYSIS

Opportunities:

Strength:

• The growing sportswear market in China • Premiem brand image • The athelasure trend’s spread through • Brand image makes customers feel healthy, distinguished and goal-driven. China • Government support for fitness. • High-quality materials. • Expanding the company’s image to reflect • Technical Product innovation. varieties of exercise apart from Yoga • Vertical retail distribution strategy • Consumers have higher interests in digital technology

Weaknesses: • Weak brand image among Chinese consumers compared to the competitors. • Culture and linguistic differences • Seasonal business

Threats

Operational network, global presence and business performance of Corporate-Owned Stores segment are Lululemon’s key strengths. In addition, Lululemon has premier brand image, and the brand image makes customers fell heathy, distinguished and goal-driven. Moreover, Lululemon use high-quality materials, and concentrate on innovative products. The vertical retail distribution strategy also benefits the company. However, higher costs of operations remain an area of concern for the company. The brand has weak brand image among Chinese consumers compared to the competitors and the culture and linguistic differences may also harm the business. In addition, market competition, fast changing fashion trends and pricing pressure and growing counterfeit products might affect its operations. However, the growing sportswear market in China and the spreads of the athelasure trend among Chinese consumers may bring opportunity to the brand. With the Chinese government support for sports industry, as well as positive outlook for e-commerce market and strategic initiatives by the company might benefit its operations.

• Competitors’ brand image is more recognizable by Chinese consumers. • Competitors with similar products at lower prices. • Counterfeit products.

LULULEMON ATHLETICA

SECONDARY RESEARCH CHINA PESTEL ANALYSIS

In order for Lululemon to take full advantages when entering new market, it is also important to know the business environment in China. Thus, the PESTEL analysis will help the company to learn about the political, economical and culture factors that may influence the business environment in China.

KEY FACTS ABOUT CHINA

Secondary Research

The Peopleâ&#x20AC;&#x2122;s Republic of China has about 1.37 billion populations, and the capital city is Beijing. The president is Xi Jinping and the Premier is Li Keqiang. The currency is Renminbi.(Rate with US dollars: 1 US dollars = 6.8 RMB) The majority ethnic group is Han, and the major religions is Buddhist. The country area accounts over 9 million sq. km which ranked the fourth biggest countries in the world.

SECONDARY RESEARCH

LULULEMON ATHLETICA

CHINA PESTEL ANALYSIS

Political China has been under the leadership of the Communist party of China(CPC) which is the largest political party in the world for more than 60 years, and the party has been able to impose its decisions without going through the grind of democratic deliberations and negotiations. The steady political system and social environment increase the social mobility, and expanded the scope of personal freedom. In this case, it provides a substantially great freedom of travel, employment opportunity, educational and cultural pursuits, job and housing choices. The stable political and social environment has contributed to a healthy economic growth within the country. China continues to forge ties with most countries, and there are reports that many developing nations such as Nigeria keep the Chinese yuan as a reserve currency which highlights the importance of China in the global economy. The steady political environment, healthy state’s foreign policy, the fast growing economy and the steady social system is benefit for the market health growth and have good influence on Lululemon’s business in China. Moreover, according to the Euromonitor China sportswear report, the Chinese government plans to accelerate development of the sports industry and boost sport-related consumption over the forecast period as forecast by the State General Administration of Sports, the scale of the sports industry will reach more than CNY3,000 billion and account for 1% of GPD in 2020 and the scale of the sports industry will exceed CNY5,000 billion in 2025 with the significant potential benefit from hosting the 2022 Winter Olympic Games and other future major sporting events. This is a good news for foreign enterprises such as Lululemon to expand businesses in China.

Economy China has very strong economic fundamentals with the the country registering strong economic growth over the past three decades. According to National Bureau of Statistics, China has a strong external position that the country has substantive foreign exchange reserve which is about $3.19 trillion by the end of August 2016. China as the member of World Trade Organization helps to maintain the healthy economic environment. According to Economist data, China’s per capital GDP is growing. In 2015, the per capital GDP of China was $8,027 thousand compared with $7,077 thousand. In 2016, the per capital GDP of China reached $12,880 with a 7.4% growth compared with 2015. According to the United Nations Conference on Trade and Development(UNCTAD), China was on of the largest recipients of foreign direct investment(FDI) in 2015 and attracted FDI inflows worth $135.6 billion up from $40.71 billion in 2000. China is an emerging economy that offers a lot of market opportunities for foreign investments. The country has a huge potential for economic growth offering access to a large market and considerable savings in labor costs, and huge market demands. According to the passport report, since the country has opening to the outside world and joining the WTO, China’s economy had become the second largest in the world after the United States when measured on a purchasing power parity(PPT) bases since 2005 (World Bank, 2015). The Chinese government has a goal of quadrupling the gross domestic product(GDP) by 2020 and more than doubling the per capita GDP. The increasing technological advancement as well as the huge foreign direct investment and productivity increases has boost the rapid industrial development. 23

LULULEMON ATHLETICA

Economy of Beijing Beijing is the cultural and political center of China. According to China Perspective report, Beijing has population of 19,61 million and 10.3% growth of GDP. According to Government data statics, Beijing’s nominal GDP reached 1.37 trillion RMB, and the per capita GDP was 78,194 RMB. In 2009, Beijing’s nominal GDP was 1.19 trillion RMB (US$174 billion), a growth of 10.1% over the previous year. Its GDP per capita was 68,788 RMB (US$10,070), an increase of 6.2% over 2008. The utilized FDI in Beijing accounts $6.4 billion and the imports of 246 billion US$ as well as 55.5 billion US$ exports.(See Appendix) Beijing is also the home to over 100 of China’s largest companies, alongside Shanghai, Beijing attracts multinational companies to base China or Asia Pacific headquarters. Many banks have its head office in central Beijing such as Bank of China, Industrial and Commercial Bank of China and the Agricultural Bank of China. Other financial institutions in the city include major insurance companies, credit cooperatives, securities firms, and investment companies. Wholesale and retail commerce also play a major role in Beijing’s economy. Beijing’s service sector accounted for 79.8% of the city’s GDP in 2015. Financial services, wholesale trade and retail trade, information technology services were the three biggest sectors, comprising 17.1%, 10.5%, and 10.3% of the GDP respectively. The scientific research & technical services sector recorded fast growth in recent years and accounted for 7.9% of the GDP in 2015, up from 4.5% in 2004. According to China Daily report, Beijing employees earn more on average than others around the country. The average salary of urban employees in Beijing’s public sector is 102,268 RMB ($16,475) annually, as much as 1.9 times more than those in the private sector. According to National Bureau of Statistics(NBS), with 55 percent of residents in Beijing are classified as middle class, and having the highest median income at RMB 256,016 per year. In terms of per capita disposable income of urban residents, Beijing reached RMB52,859 in 2015 (up 8.9%) which strengthen Beijing’s purchasing power. Huge consumption demand from both the local residents and tourists has made Beijing one of the biggest consumer markets in China. The strong ability of purchasing power and higher disposal income rate provide a good economy environment for Lululemon to run business in China.

LULULEMON ATHLETICA

Social According to MarketLine, China has the most population in the world with 1.38 billion people as of 2015. However, the growth rate of population is declining at a steady pace due to the one-child policy made in late 20th century to control the population in the country. As a result, the goal of reduce rate was achieved, while the nation is now faced with a fast ageing population. Due to the one-child police, more people in the nation could benefit with the education system monitored by the Ministry of Education. The young generation has the chance to get better education and higher income in their future job. However, in the same time, the stress of achieving higher goals has been a common phenomenon among young people especially in urban area. Meanwhile, the one-child police changed the family structure that usually a young couple have four parents and one child in their family. The fact is that young couples who are the supporter of the family faced with higher pressure compared with elder generations with at least five people to support in the family. As a result, they pursue different ways to release pressure and fitness is one of the ways for them to enjoy “me time”. Many young people have lived a better life compared to their parents, and the quality of life has been improved. According to the Statisca, the consumer confidence of China is much higher than in United States and United Kingdom that over 55 percent of people who strongly agree or agree that “my household income will significantly increase in the next 5 years” compared to around 30 percent in both United States and United Kingdom. The social environment in China has provide a chance for Lululemon to reach their target consumer and set up the community with consumers who share similar values and support their business in China.

Technology According to MarketLine, China has 1.38 billion mobile subscriptions with the rate of 94.86 per 100 people in 2015. China has totaled 667.78 million internet-connected population at the end of 2014 with 48.86% of the population using the internet. China has a large nimber of R&D institution as it will lead to ease in good quality production. Chinese online retail giants are successful and dominate. The Chinese online markets such as Tmall and JD.com has transformed the traditional retail channels especially effects the apparel and footwear industry.

Legal In China, there are some of the general lows that the foreign investors should conduct with. They are Company Law of the People’s Republic of China , Law of the People’s Republic of China On Sino-Foreign Equity Joint-Ventures , Law of the People’s Republic of China on Sino-Foreign Contractual Joint Venture, Law of the people’s Republic of China on Wholly Foreign owned Enterprise, Law of the People's Republic of China for Countering Unfair Competition, Law of the People’s Republic of China on the Protection of Consumer Rights, and Law of the People's Republic of China on Promotion of Small and Medium-sized Enterprises. Retailers should clearly state the quantity of products for timed panic buying. Promoted products should have the same after-sale service and return policies as regular products. Maximal fine is ¥30,000. Direct selling enterprise should have a deposit of no less than 20 million yuan. For foreign investors, it must have been involved in the direct selling business for at least three years outside China. Direct selling enterprise must pay the distributor by month. Payment should be calculated only based on individual sales, and may not exceed 30% of the sales. Direct selling enterprise should not hire government employees, teachers, doctor, soldiers, full time students, foreigner, and lawyers as distributors. Laws and regulations will become clearer and more specific. To open up the store in China should follow the steps as register the enterprise’s name first, get the approval certification, get the organization code, then get the business license, charter the moment, register the statistics, register to the customs, and get the foreign exchange registration, tax registration, then open the bank account and capital certificate registration.

LULULEMON ATHLETICA

Environment

China PESTEL analysis conclusion

Environmental protection has been a basic national policy since the 1980s. In order to balance the pressure on natural resources caused by fast economic growth, development and urbanization, the state has implemented a "green strategyâ&#x20AC;?. This includes increasing efficiency around resource usage, developing clean production techniques, reducing pollution costs in production processes and developing green consumption. The strategy requires total control over all production links, from production design, choice of energy resources, and raw materials to technology, equipment maintenance, and waste recycling. This will in turn reduce pollution and promote resource recycling. According to the MarketLine report, China makes a quarter of the worlds clothing. The processes employed to manufacture textiles is often dangerous to humans and the environment. Water pollution is one of the greatest environmental challenges in China, which causes 75 percent of diseases in China estimates by the World Health Organization. Another challenge is the over use of Energy. According to World Economic Forum on East Asia, China uses three times more energy than the global average. In general, textile processing has a very high consumption of water and energy, and a large amount of wastewater discharge. In this case, the apparel and textile firms should pay more attention on their supply chain management and provide a more environmental friendly strategy in the process of manufacturing in China.

Conducting business in China may be difficult due many differences in the economic, political, and cultural environment, but also many opportunities The Chinese prefer doing business with companies they know, so it is important to promote the companies and increase the brand awareness among Chinese before entering the market in the mean time, it is very important to be patient as it takes a considerable amount of time to build business relationship which is also bound with enormous government bureaucracy. Meanwhile, the Chinese see foreigners as representatives of their company rather tan as individuals. In this case, it is very important for Lululemon to build individual relationship in order to boost the personal relationship and better collaborations with Chinese. The Chinese prefer face-to-face meetings rather than written or telephone communication. The social etiquette is also important rules to follow when conducting business with Chinese. China as the worldâ&#x20AC;&#x2122;s third largest trading nation after United states and Germany, has a growing market potential with rapid industrial development and economic growth. In order for Lululemon to take full advantages when entering new market, Lululemon e must understand the differences in the economic, political, and cultural environment of the country as these can be difficult to manage and may influence the business development.

SECONDARY RESEARCH

LULULEMON ATHLETICA

MARKET OVERVIEW WELLNESS INDUSTRY - GLOBALLY Definition According to the Global Wellness Institute, their definition of wellness is “Consistent with the World Health Organization’s definition of ‘health’… the 2013 Global Wellness Tourism Economy report defines wellness as a “state of complete physical, mental, and social well-being” (Wellbeing International, 2016). According to the Wellbeing International Organization, wellbeing is “expressed on a continuum that extends from reactive to proactive approaches to health; while wellness falls firmly on the proactive side, incorporating attitudes and activities that prevent disease, improve health, enhance quality of life, and bring a person to increasingly optimum levels of well-being” (Wellbeing International, 2016).

What is the trend in the Wellness Industry? In 2016, analysts reported that the global wellness economy reached $3.7 trillion and growth is expected to accelerate by 17% in the next five years (author/title). In this case, as can be predicted for the forecast period from 2017 to 2022, there will be a huge profitability potential for wellbeing markets globally since the consumers are more focused on their health needs. As the next trillion-dollar global industry, the Health & Wellness market space is dominated mostly by beauty and anti-aging product sales at $679 billion, followed by fitness, mind and body exercise ($390 billion), health eating, nutrition and weight loss sales ($277 billion). It is clear that the fitness has become much more important and the second highest business within wellness industry in the world.

Overview According to the latest report of Global Wellness Institute in 2017, “Wellness is multi-dimensional, holistic, changes over time and along a continuum, and is most importantly individual, but also influenced by the environment and community” ( Global Wellness Institute, 2017). Meanwhile, according to a Euromonitor health and wellness report from 2015, growth in health and wellness (HW) sales has continued in 2015, showing that personal health and wellness goals are still some of the first goals to be met. Global HW has reach US$732 billion, which is a 7% rise in 2015 compared to 2014, and the main growers fall in emerging markets. Chinese and Malaysian HW brands have the fastest rising markets compared to the other emerging markets.

LULULEMON ATHLETICA

FITNESS INDUSTRY - GLOBALLY

Why do sports or fitness matter? Fitness is very important as it can bring consumers many benefits such as helping to control weight, preventing disease and illness, improving mood, boosting energy and promoting better sleep. In this case, fitness is one of the most effective ways to keep healthy as the two elements are directly related.

What is the motivation behind the phenomenon? According to the Global Wellness Institute, the world’s 3.2 billion workers are increasingly unwell. The workers globally are growing older and less healthy, and about 76% are struggling or suffering in their physical wellbeing. In this case, many people are trying to find ways to release their pressure and seek paths to live healthier. As a consequence, fitness undoubtedly has become popular for those people to keep healthy and fit. In addition, according to the Euromonitor, the research shows that there is a tendency for women to get higher education in order to gain professional employment, and the movement has helped women to gain more power in the economy than ever. Meanwhile, this tendency to spend more money on fitness boosts the health concerns among women. Studies shows that stress, depression, anxiety and mental fatigue are becoming increasingly common among young women as they struggle to cope with the ever faster pace of modern lifestyles. These factors lead to the issue that in order to hold a professional position, women are having difficulty in achieving a satisfying work-life balance, leading to higher stress levels. In this case, women cope with stress in various ways, turning to alcohol, tobacco, yoga classes or even medication to help them relax, or visiting spas or beauty salons for some “me time.” Fitness in this case has become one of the most important things in many people’s daily life, and has gained much more “followers” than ever before.

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YOGA MARKET - GLOBALLY

FITNESS INDUSTRY - GLOBALLY

The overview of Fitness Industry Globally According to Euromonitor, the estimated market size of the global sports industry has reached US$1.5 trillion in 2015. In addition, about 47.14% of the consumers worldwide think fitness is important for their personal health and well being in 2015. According to the database Statistica, there are over 180,000 fitness clubs, estimated to have earned $84 billion from their 145 million members globally. What is the trend in Fitness industry globally? People globally are using fitness apps and wearables, with a market volume of US$1,466m in 2017. The global fitness industry has shown its varieties in its future trends. In this case, celebrities and the media are a driving influence on young womenâ&#x20AC;&#x2122;s attitudes towards health and fitness. The internet is even creating its own celebrities from inspirational fitness fanatics, and some of the famous yoga instructors have more than one million followers on Instagram and Facebook. The research shows that social media is the only highly adopted technology trend these years. The fitness industry, however, has just started its steps to embrace technology to improve the productivity, efficiency, and customer experiences. In the future, the industry will better adopt the technology as a main trend, and the benefits that the technologies bring to the fitness industry will show its importance in many aspects such as online registration and reservations for programs, selling memberships, virtual training, club mobile application and so on.

Yoga market Overview Yoga has become a big business throughout the world, and yoga has showed its importance to modern society. Yoga can bring many benefits to the consumers both mentally and physically such as release stress and reduce anxiety, lower back pain and diabetes. This has spawned a lucrative market for yoga gear. Statisca shows that over 18% of consumers worldwide think yoga is important for their personal health and well being. According to the latest statistics provided by the Yoga International Institution, yoga participants increased 29% from 2008 to 2012, and there will be 4.8% anticipated average annual increase in industry revenue through 2017. As compared to other similar forms of exercises, yoga is the only activity with a steady growth. In consequence, many studios, apparel and nutritional companies present benefits of the $27-billion-dollar industry. According to Google trends, yoga gains the most interest by consumers worldwide compared to Pilates, tai chi, trx and kettlebell, and about 75% of consumers are interested in yoga by 2015.

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MARKET OVERVIEW - CHINA WELLNESS INDUSTRY - CHINA Wellness Industry in China As more Chinese consumers have a growing household income and start to focus on healthy issues, HW continued to gain a double-digit current value growth in 2015. According to recent market research conducted in 2014, the Chinese are the most health-conscious people in the world. what is the trend in Wellness industry in China? Health and wellness products are expected to continue their growth and are driven by increasing health consciousness and purchasing power. In this case, there are many opportunities in the health and wellness marketplace, especially for premium offerings. Also, internet retailing has changed the dynamics of distribution, offering more opportunities for low-cost manufacturers. What is the motivation behind the phenomenon in China? The lifestyle of Chinese men and women is becoming busier and busier. Chinese people have many things to do, but not enough time to do them all. Hence growth is being driven by a rising demand for the energy-boosting and general wellbeing benefits offered by health and wellbeing products.

FITNESS INDUSTRY - CHINA The overview of Fitness Industry in China Not only a popular global fitness trend, the Chinese fitness industry has also shown its popularity among Chinese consumers. The industry is set to generate $ 5.81 billion in 2016, with annualized growth of 11.8% from 2011 to 2016. In regards to the rate of regular participation in individual sports, China ranked far higher than any other country. According to research in Euromonitor, about 86% of women say they undertake these activities at least once a month, and 33% almost every day. According to China Daily newspaper, the fitness industry is growing quickly with sales of 127.2 billion Yuan in 2014, an 84% increase over 2009. Reports by Bloomberg show that there were 3,650 fitness clubs in 2014, up from 2,930 in 2009. Meanwhile, the larger market for amateur recreational sports will grow from the current 1.2 trillion Yuan to 3.5 trillion Yuan over that period, with a 12% compound annual growth rate each year. Also, sport-related app downloads are expected to reach 248 million, including health analysis (activity tracker), competition with friends, and sharing sports pictures. Nearly 60% of consumers usually post pictures on different social media platforms when they work out or play other sports. Fuelled by social media and the influence of celebrities, the athleisure wear trend is not only for people who want to get to the gym after work, but also a fashion trend, especially among Chinese millennials. The motivation behind the growth in China More women than ever are taking up fitness activities, inspired by social media posts, energetic celebrities, the proliferation of fitness devices and apps, and government and sports companiesâ&#x20AC;&#x2122; efforts to engage women. In addition, since fitness has become a key trend among Chinese consumers, more people started to do fitness not only for keeping healthy, but also for keeping up with the trends, especially in urban areas of China. According to Euromonitor, the fitness trend boomed since 2014 among Chinese consumers and is growing fast as more than 67% of people responded to the survey that they exercise in their daily life. Meanwhile, the General Administration of Sport of China has the goal of creating an industry worth 3 trillion Yuan, which could contribute around 1 per cent of the national gross domestic product by 2020, compared to 0.7% in 2015. Whatâ&#x20AC;&#x2122;s more, a number of reality shows themed around athletic or outdoor sports, such as Survivor Games in October 2015 and Running Man Season 1 in October 2014 and Running Man Season 2 in April 2015, won considerable attention among Chinese consumers and also inspired them to take some form of exercise.

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What is the trend in fitness industry in China? As Chinese women gain economic and social status, also thanks partly to a desire for personal empowerment, they are trying out new activities, such as running, yoga, tai chi, dancing, swimming and golf. Chinese women are most likely to say that they prefer to participate in stress-reduction activities such as yoga at least occasionally, and only 12% say they never do so. Intensive physical activities, such as yoga, dance classes, workouts or Pilates, are also popular among young women. Running is becoming increasingly popular in China, as the number of participants in marathons and running related events show a tremendous growth. The fitness apps and wearable fitness technology gained popularity among Chinese consumers. According to Statisca, with a market volume of US$1,466m in 2017, China has the second highest revenue which is US$ 1,401.8m compared to the most revenue generated by United States, which is US$1,465.6m. According to Statisca, yoga ranked the second most popular activiity among Chinese high-net-worth individuals who responded to the survey as of 2015. In addition, according to Statisca, of the most popular sports among Chinese millionaires as of 2016, about 56% of the respondents favored doing running, and about 23% of the respondents favored Yoga as a sport activity (See Appendix). In addition, Statisca shows that within the most popular sports among male Chinese millionaires as of 2015, about two percent of male respondents favored doing Yoga as a sport activity.

The future outlook of Fitness industry in China As forecast by the State General Administration of Sports, the scale of the sports industry will reach more than CNY3,000 billion and account for 1% of GPD in 2020, and the scale of the sports industry will exceed CNY5,000 billion in 2025 with the significant potential benefit from hosting the 2022 Winter Olympic Games and other future major sporting events. The booming sports industry is expected to accelerate trading up by consumers and lead to further category segmentation, driving demand for functionality over the forecast period. This is expected to see average unit prices rise. As one can summarize that the fitness industry is growing fast and has huge potential in making benefit in the future, there are some trends that also boost the industry. The gym, health and fitness clubs’ industry in China has bee developing rapidly in recent years in China due to increasing disposable incomes and health awareness among Chinese consumer. Meanwhile, the internet has changed people’s view of fitness, greatly promoting the development of the fitness industry. With the increasing demand, China’s fitness industry will be valued at more than $28 billion in 2020. The internet has a great effect on the promotion of fitness among young people in China. For instance, icons sharing the photos of their exercising on Weibo will draw a lot of attention. Since 2015, the social media have enhanced this tendency with the share of people’s result after their exercise on “wechat” or “weibo”, both helping to show a healthy lifestyle and memorize fitness records. Meanwhile, with working time limit, young people in big cities often prefer fitness with flexible time and less site limitation. As it may be time costing as well as expensive to go to gym, many young Chinese tend to exercise with apps like “keep”. “Keep” is also one of the most popular fitness apps in China, which provides people with free online courses from different fitness level and record the physical data which greatly encourage people to exercise. In the future, according to the statistics, in 2015, China’s sports and fitness industry is expecting to account for 0.7% of the GDP of China, which is still small compared with western countries. In 2016, the output value of China’s fitness and leisure industry is about 150-200 billion dollars, accounting for about 0.15%-0.205 of domestic GDP. According to the annual GDP growth rate at 7%, by 2020, the output value of Chinese fitness and leisure industry will exceed $27 billion. While actually a 0.7% of GDP is very little, consumer’s demand combined with the Chinese government effort, in 2020, the Chinese fitness market value is suggested to exceed $271 billion Yuan.

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MARKET OVERVIEW - GLOBALLY SPORTSWEAR INDUSTRY - GLOBALLY

ATHLEISURE MARKET - GLOBALLY

The overview of sportswear industry globally

Why athlesure? On of the reasons behind the popularity of athleisure trend is that it filled a gap in the marketplace between fashion clothing and functional clothing. The athleisure wears can be worn to the gym as well as everywhere else. Furthermore, as per a Harris poll, 72% of millennial prefer to spend their money on experiences, rather than material things. As the athleisure apparels are more for an experience and outdoor experience such as running and yoga, they are more likely to spend money on it.

Women’s increased interest in sports and fitness activities, combined with a fashion for wearing athletic gear on an everyday basis, has significantly boosted the market for women’s sportswear. According to Statista, the sportswear market worldwide accounts to 320.79 billion US dollors in 2016, and it is expecting a 348.51 billion US dollars in 2017. (see appendix) The growing of women participates in sports from running to yoga boosts the growing needs for sportswear and footwear. According to the Euromonitor research, North America was the largest revenue-generating region in the global sports apparel market in 2014 by regions. However, Asia-Pacific would be the leading revenue-generating region by 2020 as forecasted, due to the increasing income and awareness related to health issues, as well as the improving life standards in emerging countries such as China. What is the trend in sportswear industry? There are many key players in the global sportswear market include Nike, Inc., Ralph Lauren Corporation, Umbro, Ltd., Fila, Inc., Lululemon Athletica Incorporation, New Balance Athletic Shoe, Inc. and Columbia Sportswear Company. They generate their business through different channels and strategies to capture the market share and increase their customer base. Launch new products, partner with designers and celebrities are the main growth strategies applied by these companies to maintain their competitive position in the market. According to the Forbes, Activewear or the ‘Athleisure’ trend has become so popular, as it opened a niche for itself in the clothing industry, and has won an entry into the Merriam-Webster dictionary, which defines it as “casual clothing meant to be worn both for exercising and for general use.”(Forbes, 2017)

Athlesure market globally The athlesure market has an estimated market size of $44 billion in the US alone, according to research firm NPD Group. As athelasure has become the top trend among sportswear industry, many brands have captured the opportunities to entering the athlesure market. At the lower end of the market, fashion retailers such as H&M and the UK’s Topshop are also entering the “athleisure” market by partner with designers and celebrities to launch exclusive collections. However, questions such as whether it will be saturated in the marketplace are also raised along with the booming markets. The average prices of tights and capris dropped 9% in the first quarter of 2016, from a year prior, according to data from research firm SportsOneSource. This has also forced a 6% decline in the sales of these items, in dollar terms, in the first quarter.

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MARKET OVERVIEW - CHINA SPORTSWEAR INDUSTRY - CHINA As the athelisure trend is cooling down globally, to the contrary, the trend starts to warm up in China. Increasing consumer participation in sporting activities has warmed up the sports wear market in China. Government promotion of sport ahead of the 2022 Winter Olympics in Beijing and increased awareness of health and wellbeing among consumers has boosted local and international sportswear brands. Sportswear projects healthy 11% current retail value growth in 2015, reaching CNY165 billion($23.5) in China. According to the latest reseach on Euromonitor that within the all categories of sportswear, the sportswear projects the highest sales value of 165 CNY bn($23.5) follows with the sports apparel which accounts 87.1 CNY bn($11.1)sales value.(See Appendix) What is the trend in sportswear industry in China Sporty fashion has emerged as a key trend among Chinese young people. This leads to the sports brands pay more attention on targeting Chinese consumers with messages regarding independence, self-challenging, self-expression and above all, fun. With a retail value share of 21% in 2015, Nike (China) Inc retains the leading position. Other sportswear brands ranked by market share in China are Adidas which account for 12.69% following by Lining, Nike360, Anta, Kappa, Converse, Jordon, 361 Degree and Tread. (See Appendix) Internet retailing is of increasing importance to the growth of the sportswear industry.

The motivation behind the Growth of sportswear industry in China As the government release new policies to encourage Chinese consumers to participate in exercises and fitness, along with the increasing awareness among Chinese as regards to the healthy lifestyle, the movements continued to drive overall market demand and push the market growth. Demand for activewear and athleisure clothing has been boosted by the rapidly increasing disposable incomes of Chinese consumers â&#x20AC;&#x201C; a McKinsey projection recently suggested that over half of households in the country will be internationally classed as middle-income families, with over US $16,000 a year to spend by 2020. The future outlook of Sportswear Industry in China Nike (China) Inc led sportswear in China in 2015, with a retail value share of 21%. Nike continued to build its presence by investing in a series of social media and marketing campaigns to consolidate its leading position over the review period. Sportswear is predicted to record a heathy value CAGR of 8% at constant 2015 prices over the forecast period, to reach $35 billion in 2020.

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ATHLEISURE MARKET - CHINA

ATHLEISURE MARKET - CHINA Athlesure market overview in China As the “athleisure” has been under through a doubt of whether it will lose its status as a top global fashion trend, it seems that there’s no slowing down in China when it comes to brands capitalizing on Chinese consumers’ hunger for fitness-inspired fashion. This healthy lifestyle trend alongside with the global athleisure fashion trend has rapidly adopted by Chinese consumers both females and males, especially the young generation aged between 15 and 35 years old. “Athleisure products can be a way to connect with China’s next generation”. (Euromonitor, 2017) As the sportswear industry growing fast in China, consumer’s demand of different kinds of sportswear increased in recent years as well. According to the research, there are three categories of sports apparel were shown in the chart which are performance apparel, outdoor apparel and sports-inspired apparel. The sports-inspired apparel, or to stay, the athleisure category has ranked the highest in the sales value among the three categories. The athleisure apparel accounts $6.3 billion of the total $12.4 billion of sports apparel, while the performance apparel accounts for $4 billion and outdoor apparel accounts for $2.1 billion. In the future, the athleisure apparel will account for 48% of the total sports apparel sales value, compared with the performance apparel accounts for 34% and outdoor apparel accounts for only 18% by 2020. The athleisure market has the highest sales potential in the sportswear industry within the forecast period which is a good sign for Lululemon as a athleisure brand.

Why athlesure in China? According to a January report by ICBC analyst Jianpeng Yu, the Chinese sports industry is still underdeveloped. Sports are 3 percent of GDP in the U.S. but accounted for just 0.7 percent of China’s GDP last year, or 474 billion yuan ($72 billion). Meanwhile, the Chinese government invests massively on the domestic sports market and is encouraging the healthy trend, hoping to raise more interest in sports before Beijing hosts the Winter Olympics in 2022.

Athlesure market trends in China While the well-known brands such as Nike, Adidas, and New Balance are recognized by the consumers as the label of sportswear market, and have a huge influence on fashion tastes in athletic gear, other brands such as Puma and UA are still in the early stages of growth, writes the South China Morning Post. However, Puma, as tagged with a label of boring brand mainly because of its design, has successfully repositioned itself and become very popular among the young Chinese generation since collaboration with Rihanna. Puma recently launched the autumn/winter 2016 Fenty Puma by Rihanna line with a focus on ink and painting style, inspired by Japanese street culture. The campaign, heavily promoted on Weibo and popular online fashion magazines like Elle China and 1626, was a great success. In the mean time, UA chose the award-winning fashion designer Tim Coppens from Adidas to craft a new collection called UAS (Under Armour Sport) to be launched in China this autumn. “UAS will bring a young, fresh and modern voice to sportswear and reflects the insights we’ve gained as a performance brand now applied to the everyday wardrobe,” said the CEO of UA. Consumers expect the product not only functional, but also with fashion aesthetic that fit their bodies.

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ATHLEISURE MARKET - CHINA

CONSUMER TRENDS IN CHINA

The future outlook

Euromonitor International’s Global Consumer Trends survey found that under 30s females are more likely than average to take part in regular physical exercise, with 63% exercising at least once a week, versus 59% of all respondents.

Euromonitor reports that the sportswear sector is projected to generate double-digit growth each year to reach US$43.10bn by 2020, compared with luxury’s single digit growth to US$29.5bn over the same period. The Chinese sportswear market is expected to experience buoyant growth over the forecast period, thanks to increasing female participation in sporting and fitness activities, combined with a trend towards incorporating athletic wear into the daily wardrobe. The boost participants in yoga and running has push the large demand for running shoes, performance tops, sports bras, athletic tights, and other related apparel. Casual outdoor wear is favored by an increasing number of domestic consumers in China as daily apparel on informal occasions compared to previously.  Meanwhile, the report also indicated that the government would encourage foreign capital to invest in the domestic sports industry and more qualifying sports-related enterprises to become listed companies. The Chinese government would also provide some of the sports enterprises with more favorable tax treatment. Favorable policies and measures will promote the entire sports industry and provide people more outdoor activity space that will result in consumers increasing their expenditure on sports goods. The sportswear market in China will undoubtedly benefit from these initiatives. In this case, Lululemon can take the advantages when entering the Chinese Market.

Why wellness? Why sports? Why yoga? What does consumer want from sports industry? What do they need? As incomes rise for Chinese consumers, the “good life” is becoming about much more than just being able to afford material objects, according to the results of a new McKinsey survey(see Appendix). The consulting firm’s newly released report “The Modernization of the Chinese Consumer” finds that confidence in future income growth is shrinking, but those who are seeing rising income are investing more in their health and leisure time with family(See Appendix) While many wouldn’t have dreamed of wearing yoga leggings as pants before, now it’s a lot more common as working out becomes a crucial part of a workday. Young Chinese women are also reported to be taking an increasing interest in fashionable active wear, with the richest prepared to spend significant sums on gear, classes, coaching and athletic events. What does consumer want from sportswear industry? What do they need? Why athlesure? The E-commerce and retail store preferences. Sports goods stores and department stores remained the major retail channels for sportswear during the reviewed period, representing a marginally declining but still dominant combined retail value share of 66% in 2015. Meanwhile, consumers purchasing behavior has transformed from the traditional brick-and-mortar stores to the social networks such as E-commerce and mobile applications. Meanwhile, the sportswear distributions reveal a trend for consumers shifting to more convenient and lower-priced internet retailing over the review period. while the rising rents has placed a huge cost pressure on brick-and-mortar stores. As the E-Commerce has become part of Chinese consumers’ daily life, both domestic and International sportswear brands have opened up stores on Tmall which is the most widely accepted E-commerce by Chinese consumers. According to the Statista, the highest mouonthly sales share of international sportswear brand on Tmall in China as of 2014 are New Balance, following with Nike and Adidas.(See Appendix) The price range sales online are between 250 Yuan(about 36 US dollars) to 700 Yuan(about 105 US dollars)(See Appendix)

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COMPETITOR ANALYSIS - GLOBALLY

Number of stores Worldwide Number of stores in China Product Catagories

1045 168 Athletic footwear and apparel,sport equipments and other athletic and recreational products

Price Range(Based on all products) Annual sales in 2016

Number of stores Worldwide Number of stores in China Product Catagories

Over 2500 84 Footwear, sportswear, sport equipments, toiletries $8-$500

$ 32 Billion

Price Range(Based on all products) Annual sales in 2016

Over 100

Number of stores in China

Running shoes

Athletic footwear &Fitness Apparel

Shoes, Clothing & accessories

Product Catagories

$12-$799

Over 200 25 Clothing, shoes & accessories, Equipment

Number of stores Worldwide

$ 18 Billion

Over 200 125 Clothing, footwear, sports Equipment &accessories

$15-$729 $ 225 Million

$7.99-$1500 $ 3.9 Billion 48

60 None Activewear

Price Range(Based on all products) Annual sales in 2016

$7-$250 $ 3.5 Billion

$12-$189 $ 62 Million

540 29 Shoes, Clothing & sportswear

$10-$300 $ 3.7 Billion 49

Over 300

$2.99-$399.99

$35-$200

$ 3 Billion

$ 9 Billion

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COMPETITOR ANALYSIS -DIRECT COMPETITOR IN CHINA

COMPETITOR ANALYSIS - DOMESTIC CHINA

Number of stores Worldwide

Number of stores in China

Product Catagories

$ 90 - $ 120

Price Range(Based on all products) Annual sales in 2016

$ 1.7 Billion

Number of stores Worldwide

Number of stores in China Product Catagories Price Range(Based on all products) Annual sales in 2016

Athletic footwear

Athletic shoes

$ 2.35 - $ 58.67 $ 842 Million

Over 100 26

Shoes,apparels and accessories, badminton equipments $ 3 - $ 297.99 $ 1.1 Billion

20 Athletic shoes,apparel, sports equipments, accessories

20 Footwear, sportswear, sports goods, fashion accessories

$ 24 - $ 150

$ 3.6 - $ 60.12

$ 709 Million

$ 177 Million

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COMPETITOR ANALYSIS -CONCEPTUAL MAP

Primary Research

PRIMARY RESEARCH

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RESEARCH GOALS As the Secondary research has summarized the industry’s current situation and future outlook as well as the competitors in the Chinese market, it is also important to involves primary research in the form of surveys to better understand the consumer insights about Lululemon as a brand. The primary research will provide more consumer insights about the exercising behavior, social media use, purchase preferences and so on.

RESEARCH DESIGN In order to decide the information that needed to design the survey, the secondary research has provided the information about the Chinese market, country culture, consumer behaviors. To ensure detailed and realistic da of consumer insights, he survey focused on Chinese luxury consumers who live in Beijing. The survey included one-choice questions, multiple-choice questions and an open-ended question for a total of 10 questions with an expectation of at least 75 responses.

RESEARCH ANALYSIS The survey collected total 191 responses, 64% of them are female and 36% are males. 86.5% of the respondents received bachelor degrees and above. Though the company has opened up a store in Beijing, according to the survey, there are more than 74% percent of the respondents don’t know about the brand Lululemon, and only 25.5% percent of the respondents know the brands due to their personal study abroad and working abroad reasons. As the result shows, about 76% of the respondents likes to do exercises in their daily life, and they love running most, as 93 of the total responses loves running most. Along with running, yoga ranks the second which has 81 people doing it as their daily exercise. In addition, 70 respondents like to go to the fitness clubs and gym to use the facilities there to training muscles. These are all positive responses for Lululemon since the product of the brand meets consumers needs which are running, yoga, and training wears. What’s more, 69% of the respondents do exercise three times and above per week, and they prefer to wear the athletic wear when they are doing exercise rather than casual wears. This is a good news for Lululemon because consumers may purchase more athletic wears due to the vast regularly exercises. The comfort, design, and quality are the three most important elements for the consumers when choosing the athletic wear which is a good news for Lululemon because the brand concentrate on providing high quality, fashion inspired, comfort clothes to the consumers. 54

According to the response, price is not a big issue for consumers when choosing the athletic wear, however, they have a preferred price range that 41% of the responses preferred to spend 300 – 500 RMB ($44-$74), and 29% of them preferred to spend 500 – 800 RMB ($73 - $117) on athletic wear, and Lululemon should considered that when they set the prices in Chinese market. Social media and the websites are the main way for the consumers to get the information about athletic brands, about 30% of them view the brands through social media platforms and 28% of them get to know the brands through website. While there is still 20% of the respondents view the brands through TV campaigns, and 22% of them knowledge the brands from other channels such as billboards, sponsorships, and so on. Retail store is still the main way for consumers to purchase athletic wear which accounts about 39% of the responses, because they want to physically try the clothes and decide what to buy or whether to buy it. In addition, since E-commerce are very popular among Chinese consumers, about 30% of the respondents prefer to purchase athletic wear online since it is more convenient for choosing brands and comparing products from each brand. In this case, E-commerce will be one channel that Lululemon should concern as marketing strategy. Also, Lululemon may consider to create a comprehensible official website in Chinese for consumers to buy products since there are 25% of the respondents prefer to purchase on their official websites. Since there are many E-commerce in Chinese market, Lululemon should carefully makes their choice when choosing the E-commerce websites to sale their products. According to the responses, Taobao may be the first choice for Lululemon as about 40% of the respondents choose Taobao as their most preferred E-commerce website. In addition, JD.com may be another choice for Lululemon to cooperate with, as 24% of the respondents prefer JD.com. Amazon.cn and VIP.com may be considered, but compared with the previous two websites, there are fewer people choose Amazon.cn and VIP.com as their preferred E-commerce website. According to the second and primary research, one can observe that Lululemon has strong financial back up in entering the new market both internally and externally. Meanwhile,in order to entering the new market and making the appropriate marketing and promotion strategy, Lululemon should have a fully insight of the customers’ needs. According to the primary research, consumers in China prefers to do yoga in order to keep fit and pursue the fashion trends, in this case, to training the employee and have several storyteller becomes efficient for Lululemon in not only helping consumers to choose the right products, but also attracting and engaging guests via the floor and various digital medium by providing education and reporting experiences and events, as well as the upcoming fitness trends. What’s more, the internet is also very important as it change customers’ way of viewing the athleisure brands. In this case, lululemon should consider to use the weibo and wechat appropriately to attract consumers’ attention, while providing different channels for purchasing the products online for consumer’s convenience such as JD.com and Alibaba. Meanwhile, retail stores are also important since customers in China would like to try the products and feel the fabrics before they make the purchasing decisions. In addition, Lululemon should aware that customers want not only the fashion-inspired products, but also the products in good quality and comfortable.

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DEMOGRAPHIC SEGMENTATION So far, the report has illustrated the overall market and outlined the future trends which will help to give a better insights of the target market. The target consumers for Lululemon in China will be aged from 18 to 54 both male and female. They may be white-collar workers, editors, stylists, students, etc., and the annual income for the target consumers will be at least 204,000 CNY (30000 USD)

TARGET CONSUMER IDENTIFICATION IN CHINA

BEHAVIOR SEGMENTATION Chinese consumers using wechat a lot to sharing lifestyle and fashion trends with friends, including the products they bought and activities they did in daily time. Chinese consumers using social networking a lot to download the application, and coupous, and latch onto celebrities and brand on a social networking platform. Social media platforms are also extremely popular among Chinese consumer which they connect with friends, sharing experience, and get the recent news of their favored brands. Chinese consumers prefers to shop online due to the lower price compared to brick-andmotor stores and various options presented online. Indoor and Outdoor activities become new trend due to the changing of lifestyle and government encouragement among Chinese consumer.

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TARGET CONSUMER PROFILE

LIFESTYLE SEGMENTATION The target consumer of the brand is a sophisticated and educated woman who understands the importance of an active, healthy lifestyle. She is increasingly tasked with the dual responsibilities of career and family and is constantly challenged to balance her work, life and health. We believe she pursues exercise to achieve physical fitness and inner peace. Busy urban living is now subjecting Chinese people to increasing amounts of pressure, and e orts to stay healthy are becoming more prevalent than ever. As women achieve greater economic independence, many of them can afford to find new ways to keep in shape. More women are participating in traditional sports such as badminton and table tennis as well as exercise regimens such Zumba, spin classes, yoga and pole dancing. They are fashion-oriented and like to keep up with latest fashion. They prefer fashionable to practical. They like to try new brands and new products. Also the Chinese consumers are impulsive, affective and sociable, enjoy expressing their feeling in activities. In the mean time, the increasing awareness about healthy lifestyles among a growing middle and upper class has become new trend.  Consumers have begun “spending for health” and are now regarding healthy living as a fashionable lifestyle, and sporty lifestyle is becoming mainstream, the majority of consumers are looking out for their own health and not just catching up to a fashionable trend.  Exercise and sports has become a large part of Chinese consumer’s social lives, with 60% saying that they enjoy posting pictures, stats or achievements about their sporting activities on social media. Wechat and Weibo are the key platforms for sharing the information with friends among Chinese consumers. Women spend more money on health care and tend to concentrate on their own life conditions. A new national sense of confidence and a stronger economy is driving more Chinese to seek a more balanced and healthier lifestyle.  Many people in China believe good health is the key to achieving their personal goals. In line with China’s ongoing battle with pollution, there has been a trend of people opting to stay indoors to exercise such as Yoga and Zumba dancing. 58

Persona A Name: Sichun Ma Age: 23 Gender: Female Location: Beijing Occupation: White-collar worker in FG500 Income: 200,000 CNY (28,000 USD) She is a white-collar worker in one of the FG500 Companies in Beijing, and this is her second year of working. The growing competition between the colleagues boosts her pressure, and she finds out running is a very effective way for her to not only keep fit, but also release the stress from the work. She likes to running around the community she lives in, and go to the yoga classes with her friends in the fitness club near her company. She likes to shopping online because it is very convenient for her to choose products and check out through Tmall.

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Persona B

Persona C

Name: Mi Yang

Name: Yuanyuan Gao

Age: 29

Age: 34

Gender: Female

Location: Beijing

Occupation: Designer

Occupation: Senior Editor in Fashion Magazine

Income: 350,000 CNY (50,000 USD)

Income: 540,000 CNY (77,000 USD)

She is an independent designer in Beijing, and she got her own online boutique on Tmall.com. In addition, she is the model for her own designs and this is one of the reasons she would like to doing yoga and training herself in the fitness club. Meanwhile, yoga is a way for her to think independently with her designs, and gives her inspirations. She likes to shopping at the retail stores so that she can get the full knowledge of the brandâ&#x20AC;&#x2122;s philosophy, aesthetic, and feels the fabrics by her own hands.

She is a senior editor in Elle China, and she pursues to have a work/life balanced life. She prefers to eat healthier food, and doing yoga in a fitness club nearby her company. She uses social medias a lot to get information about the current trend as well as post information about the latest fashion trends on their magazineâ&#x20AC;&#x2122;s official website. She also likes to spend her leisure time in doing yoga and sharing the results of her exercises on wechat with her friends.

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MARKETING STRATEGY

Marketing strategy and objectives

MARKETING STRATEGY

Lululemon aims to convey a healthy, fun life attitude to the Chinese consumer while enhancing their brand awareness. According to its competitors, and taking into account consumers’ preferences for using social media technology as well as shopping both online and off-line, Lululemon Athletica will open a new retail store in Joy City Plaza and create a new community hub through the store as well as the social media platforms. The objective is not only introducing the brand to the consumers who like to do yoga and other exercise, but also to attract more potential customers, educate the customers on yoga and a healthy lifestyle, create a new community hub, and translate the brand awareness into the final goal: increase the profitability of Lululemon. The increasing fitness participation among Chinese consumers is a positive opportunity for Lululemon to open a new store in Beijing. Beijing is the capital of China, and consumers prefer to keep up with the latest trends such as doing yoga and other types of exercises. They have higher needs and demands for athletic wear for not only comfort, but also trends. The athleisure trends have been very popular among the young people as well as the workers in Beijing, so it offers good opportunities for Lululemon to open new stores in Beijing.

Placement Beijing is the capital of the People’s Republic of China and the world’s third most populous city proper. It is also one of the world’s most populous capital cities. Xidan (dan) is a commercial district of Beijing’s Xicheng district. Xidan, as named for “young people shopping paradise,” is a main commercial area in Beijing famous for fashion and shopping and which attracts young people and visitors to leisure and shopping. Xidan combines the functions of shopping, dining, leisure, entertainment, fitness, culture, office, and tourism together in one commercial center area and provides a more convenient consumption experience for consumers. Xidan, with a wealth of consumer choice and convenient transportation conditions, has become consumer’s first choice for shopping in Beijing.

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Joy City Plaza In addition, the Xidan commercial district consists of 17 boutique buildings including Xidan Shopping Center, Warwick Building, South China Building, Xidan Culture Square, Bank of China Tower and Capital Times Square. The commercial buildings include Zhongyou Department Store, Xitexite, Pacific Building, and different malls from high-street to high-end shopping malls. Also, Xidan is the closest rest area (which is one bus stop) from the most famous place of interest—the Forbidden City—and attracts many visitors for its shopping and eating. The area is also surrounded by many hotels including the famous five-star hotels such as Continent Hotel, Minzu Hotel, Westin Hotel and Riz Calton Hotel which allow visitors to stay close to the shopping center and increase the potential footfall for Lululemon. In addition, the financial district is only one block away from Xidan which allows many white-collar workers to spend their off-working time in Xidan for shopping and relaxing. Xidan is also surrounded by several bank headquarters that potentially attract more target consumers and which are convenient for customers who need to withdraw cash while shopping. The area has attracted different kinds of customers from students, while-collar workers to visitors which is a potential benefit for Lululemon to create word-of-mouth.

The Lululemon full-line retail store is planning to open in the Joy City plaza which is one of the three most famous shopping plazas in Xidan. Each plaza has multiple floors for the store. Compared to the other two stores, Joy City plaza has more attractions and more footfall than Hanguang mall and Xidan department store. Joy City plaza, as a fashion-oriented shopping store, has more than 300 brands and retail stores including H&M, Zara, Muji, Uniqlo, etc. Joy City plaza has two buildings: building A consists of shopping center, food quarter, cinema, entertainment, and fitness club, and building B consists of an office area and hotel. The two buildings are connected which offers convenience to hotel guests and workers to spend their leisure time in Building A. Lululemon will plan to be located on the fifth floor where the theme is “Sporty”, surrounded by several sportswear brands such as Nike, Adidas, Puma, Lining, North Face, etc.

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store layout

Magic Mirror

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Service: Product & Price:

Wi-fi service The wi-fi service will be available in the store in order for customers to use internet in searching the products via the digital catalog in store but also for online payments. Payment Method In addition, customers can use different payment methods including cash, Visa, Mastercard, Apple Pay, Wechat Pay, and Ali Pay. Working Hours The Lululemon Joy City store opens from Monday to Sunday from 10 am to 9:30 pm. Customer Wants and Needs Based on the secondary and primary research, customers have several preferences in purchasing behavior. Customers concentrate on the quality of the product, as well as the design. They like to shop both in retail stores and online. They want to know more knowledge about Yoga. They would like to pay not only by cash and cards, but also Wechat pay, Apple pay, and Ali pay.

Cost & Convenience

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Bus & Subways There are many buses around the area as well as three bus stops which near the Joy City Plaza. All buses are charged by distance. The minimum charge is CNY 2 (0.3 USD), and the maximum pay is CNY 5 (0.7 USD). Passengers paying by Beijing Transportation Smart Card enjoy 50% discount when taking buses in the city downtown. They can enjoy a 30% discount for taking some suburban buses. The prices of the subways are charged according to the distance, and the minimum charge is CNY3 (0.45 USD) while the maximum charge will be 12CNY (1.8 USD). A Transportation Smart Card can be used for paying. Parking There is a parking lot located on the B5-B2 inside the Joy City Plaza, and the parking fee is 6 CNY (0.9 USD) per hour; the maximum charge will be 6 USD during the daytime. There are many parking spaces alongside the road outside the plaza, and the parking fee is 15 CNY (2.2 USD) the first hour, and 10 CNY (1.5 USD) for every addition hour.

Retail store As the retail store is located in the shopping area, it is very convenient for customers to shop Lululemon and know more about Lululemon events. The area also has many attractions that are convenient for customers to spend leisure time as well as shop Lululemon. The retail store is a good site for selling products while educating customers with Lululemon’s brand essence. Also, customers can purchase products online in the store and have the items to be sent to their convenient addresses. Official Webiste Since the price of the product will be the same both online and offline, E-commerce would be a perfect choice for those customers who are willing to shop at home, or for those visitors who know the brand but are located in cities that don’t have retail stores. Also, customers can purchase products online, and choose to pick up their merchants in the store. E-Commerce Lululemon products will also be available on Tmall.com and JD.com for those customers who prefer to shop on E-commerce or who live in the areas where don’t have actual Lululemon retail stores.

In-store Storyteller

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Communication The Chinese customer will be able to know Lululemon’s brand essence and core value through the social media platforms with the link of the brand profile and website. Customers may also communicate with the brand on the discussion board through the official Wechat account. The QR code will be provided on the website as well as on social media platforms for consumers to scan and follow the Lululemon official account to get more insights about the brand. As the customers know about the brand, and start to become interested in Lululemon, their desire will lead to actual purchasing of products. Meanwhile, as Lululemon offers free yoga classes in a community scale, it is a good chance for customers to get a positive feeling about the brand as well as get in touch with the brand on a personal scale. Customers may be able to communicate with the brand not only as a brand, but also as a person to know the brand story about Lululemon as well as the excellent Lululemon products via the yoga instructors and fitness coaches. In addition, the employees in the store will be the storyteller of the brand and engage the customers with the brand.

What’s more, there will be a screen at the counter shows the lates events news as well as the barcode of Lululemon’s official wechat account. The Weibo account will also be listed on the screen that allows the customers to search Lululemon and become the follower of Lululemon on Weibo. The goal of the communication strategy is to actually reach the target consumer and know their needs, build the brand image among the target consumers, and provide the target consumers the services they need.

Storyteller’s Wechat Name card 72

MEDIA & PROMOTION STRATEGY

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PROMOTION GOALS AND OBJECTIVES The promotion strategy is to create a buzz among Chinese consumers. In order to introduce the brand to the Chinese consumers, tools such as social media platforms, opening ceremony, and billboards will be used to build the brand image among consumers and then to attract consumers. As the target consumers are attracted by the information, the social media, print ads on magazines, video, website, and events will help to raise interest among consumers to know more details about Lululemon; then, the storyteller, website, social media reports, and community events will help to drive the desire of purchasing Lululemon; also, the Event for Joy City Plaza VIP customers and the sponsorship events, social media, in-store give a ways and direct emailing will help to create discussion among the target consumers and to increase the participation in the Lululemon community hub. The goals of the promotion strategy

MEDIA AND PROMOTION STRATEGY

The goals of the promotion strategy are introducing Lululemon to the target consumers in China, increase the brand awareness among the consumers, including targeted and non-targeted consumers, increase the social media followers, increase the members participating in the Lululemonâ&#x20AC;&#x2122;s community hub, create buzz among target consumers, and introduce the new athleisure trends while building a healthy brand image among consumers in China.

Promotion strategy overview According to the primary research, target consumers prefer using social media and internet to know the information about the latest trends and sportswear information; thus, social media and Internet promotion will be one of the most important parts of the promotion strategy. In addition, since Lululemon Atheltica has been successful in creating a community hub and using the storyteller to influence the consumers around the physical store, the PR and Events will be the important part of the strategy as well. Strategy includes digital, PR &event, print ads, out-of-home ads, and direct emailing. Digital includes video, mobile application, and social media (weibo & wechat). PR events include the VIP (Joy City Plaza) party, opening ceremony, storyteller, and sponsorship in international Yoga day. Out-of-home includes billboard while print ads on Rayli, and Vogu magazine.

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Promotion Calendar

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WEIBO

Home page

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WEIBO OPENING PAGE COMMERCIAL

WEIBO ACCOUNT

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WECHAT

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WECHAT COMMERCIAL

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MOBILE APPLICATION

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MOBILE APPLICATION

VIP PARTY - INVITATION CARD

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VIP PARTY -CUSTOMIZED GIFT

VIP PARTY - DIGITAL INVITATION

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OPENING CEREMONY

OPENING CEREMONY - INVITATION CARD

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SPONSORSHIP - INTERNATIONAL YOGA DAY

GIVEAWAYS

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OUT-OF-HOME

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PRINT ADS

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CONCLUSION

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BUDGET Lululemon as a yoga-inspired technical athletic apparel brand, is identified as an “athleisure brand” in the market. Lululemon, as an athleisure brand, is in an unique position which fills the gap between athletic brands and fashion brands. Because it contains the same constructions and fashion-inspired products compared to those athletic apparel brands, in the mean time, Lululemon keeps the technique mindest within its products which those fashion brands somehow lack of. However, Lululemon is over-rely on its North-America market that over 70% of its revenue comes from the North-America region. As the sportswear market in Asia -Pacific area is growing very fast, especially in mainland China, Lululemon may consider to expand its business in mainland China to make more profit. Nowadays, in China, consumers are more health conscious than before, and are willing to better balance their work and life. The increasing participation in exercises has driven the huge demand in the sports apparel market. In this case, it is a good opportunity for Lululemon to expand its business in mainland China. In order to better communicate with Chinese consumer, the project uses the secondary and primary research to get the insight of the Chinese consumers. The positive result shows that consumers are willing to do exercises and to know more about Lululemon. These strategies create word of mouths and buzz to introduce Lululemon to the new Chinese market. By complete these strategies, it helps consumers to better understand Lululemon’s core value, and helps Lululemon not only increase the brand awareness amoung Chinese consumers, but also enhance the competitive position in the Chinese market, build a good relationship with consumers, and attract more potential customers in Chines market. Finally, customers may go to the Lululemon store for shopping, and help in increasing Lululemon’s sales in the future.

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