For Canadian athletic apparel retailer Lululemon Athletica, Christmas came early with the release of its third-quarter fiscal results.
A key component of the company’s recent success has been its premium loyalty program that launched in 2018 and continues to perform beyond expectations as it strategically rolls out in more cities.
Lululemon uses an innovative product that creates a loyal community of customers and drives high engagement.
Great Q3; More Expansion Planned for 2020
Consider some of Lululemon’s key fiscal results from the third quarter:
- Net revenue rose a staggering 23%, to $916.1 million.
- Direct-to-consumer net revenue increased 29%.
- There also was a 38% revenue increase in men’s during the quarter.
Lululemon’s premium loyalty program is one of the key reasons for the company’s noteworthy fiscal performance.
Lululemon expanded into Chicago during the quarter with one of its experiential stores, following initial forays in Edmonton, Denver, Austin, and New York City.
Company officials hit their numbers in the first four weeks in Chicago and continue to see very positive results across all metrics, including high engagement with its high-value guests and the number of new guests.
“What we learned in Chicago was just the connection to the experiential store and having the sweat studio in place just strengthens the engagement that the guests have,” Lululemon CEO Calvin McDonald said during the company’s third-quarter earnings call last week.”
On the heels of a phenomenal third quarter, McDonald has his eyes set on 2020 for further expansion of the program.
“As we look toward 2020, we are planning on a broader rollout for next year and we’ll share more of that in the coming months, but our intention is to take these learnings and develop the program and expand it into more cities next year,” he added.
Lululemon Builds Momentum As An Experiential Brand
Making the brand experiential-based is an ongoing commitment.
“We’re proud of the continued momentum in our business as we live into our vision to be an experiential brand,” McDonald explained.
McDonald noted that Lululemon’s experiential stores “really are the pinnacle expression of our vision of the guests living the sweat life. Second is, they create a positive impact across the market. There really is a halo impact.”
Lululemon’s unique approach to loyalty, McDonald says, starts with its stores.
“Then you factor in our ambassador community, then you layer in our membership, then you layer in our events, it really is creating a layered halo that’s impacting not just loyalty engagement, but our strength within these marketplaces,” he explained. “And these experiential stores are really helping to create a hub to drive that.”
Just how big a role could Lululemon’s experiential stores play in the future?
“I’ll reiterate what I said on Analyst Day which is that experiential stores could represent approximately 10% of our store base in the future,” he said. “We’re excited about the early indication. Experiential will play a key role in tier cities. And we’re going to test and learn and see, but they are performing well out of the gate.”
Metrics Exceed Expectations
Lululemon CFO Patrick Guido said the company’s loyalty program expansion has been deliberate, continually reaping impressive results along the way.
There isn’t any line in the sand, hurdle, or number “we need to hit,” Guido says, “before we decide to go or not go. I would tell you there isn’t a metric in the markets we’ve been in that hasn’t exceeded our expectations and showing a high engagement with the guest.”
He explained the company is being “responsibly cautious as we tweak the program and our ability to make sure that we delight the guest.”
Guido noted: “There are a lot of different types of membership loyalty programs out there and majority of them are very easy to operate and execute. And the reason I think the guest is responding so well to ours is it fits with who we are as a brand being experiential.”
Lululemon Focuses on Making a Direct and Authentic Connection
The premium loyalty program, which has a clear and engaging value proposition, also awards members curated events and workout classes.
While a free pair of pants and free expedited shipping on online orders is an enticing value proposition on its own, those experiences are more memorable and unique to Lululemon, satisfying an emotional desire for exclusivity.
Since the program rolled out last year, the accompanying numbers have been impressive along the way.
More expansion is planned for 2020 and Lululemon is building momentum as an experiential brand.
Lululemon is doing it right by not rushing things. The deliberately paced rollout of its premium loyalty program has produced huge results and the future looks bright.
“I believe that one of our greatest assets is the direct and authentic connection we have with our guests,” McDonald added. “This connection is created and nurtured by the educators in our stores, guest education centers, and our teams in our distribution and store support centers.”
With a focus on its best customers and a steady strategy around testing and optimization, Lululemon has nothing to sweat in 2020.