lululemon athletica (LULU 2.64%) raked in $1.6 billion in net revenue last year, and it accomplished this without an exorbitant marketing budget or fancy analytics software. Unlike rival sports-apparel makers Nike (NKE -0.36%) and Under Armour (UAA 0.74%), Lululemon doesn't spend tens of millions on celebrity endorsements or Super Bowl ads. The yoga-gear retailer instead relies on grass-roots marketing and community outreach to sell its products. In addition to generating sales through its traditional retail channel, Lululemon is capturing sales in other more subtle ways today.
Inside lululemon athletica's strategic sales unit
Aside from merchandise sold through its 263 stores, Lulu is driving sales growth through three strategic sales programs: athletic-team sales, wholesale, and its yoga and hard goods program for gyms. While the company doesn't disclose what percentage of revenue comes from these segments, it's nonetheless encouraging to see Lululemon diversifying its sales channels. Here's how it works.
Source: Lululemon Athletica.
Lululemon's athletic-team sales program enables local sports teams to order uniforms or sports gear in bulk. "Through the team sales program, we develop relationships with athletic teams, yoga studios and fitness facilities that are elevating their communities by being a stand for health and fitness," according to the company.
In addition to driving bulk order sales, this retail channel means scores of athletic teams around the country act as unofficial ambassadors for the Lululemon brand. Last year, Lululemon supplied all of the shorts and shirts for the fifth-annual Wall Street Decathlon, as well as uniforms for the 2012 Olympic men's beach volleyball team, according to Bloomberg.
Playing in the little leagues
Having an athletic-team sales division is undoubtedly important for creating brand awareness around Lululemon apparel. However, the company is still light-years behind both Nike and Under Armour when it comes to sales to college and professional athletic teams.
Source: Nike.
Nike dominates the college football scene, outfitting 46 of the 65 power conference schools this season. Meanwhile, Under Armour comes in with 12% of the college football market, or eight of the 65 power conference schools, according to Louisville Sports. Nike is also the top dog when it comes to the NFL. In fact, a reported $1.1 billion deal means Nike will be the sole uniform manufacturer for the National Football League through 2016.
Given the tough competition from Nike and Under Armour in the athletic-teams space, it is a good thing that Lululemon has two other strategic sales channels in play.
Wholesale, yoga, and hard goods
Lululemon fuels sales within its wholesale program through partnerships that put its products into gyms, fitness centers, and yoga studios in various markets. Lululemon today is working with a limited number of partners in Canada, the U.S., Australia, New Zealand, Hong Kong, and the U.K., according to the company. Through these strategic partnerships, Lululemon gets personal trainers and yoga instructors from leading fitness facilities around the world to wear and promote its products.
Source: lululemon athletica.
Similarly, Lululemon provides local yoga studios in various markets with lulu-branded equipment, including yoga blocks and mats. Many of these studios even sell Lululemon gear to their members. Lululemon wouldn't say what it charges for these supplies, but it is probably similar to the company's arrangement with so-called brand ambassadors.
As of March, Lululemon had roughly 900 brand ambassadors in North America alone. These are fitness leaders including Olympians, gym owners, fitness coaches, and yoga instructors who teach classes and train exclusively in Lululemon gear. In return, they get 15% off all Lulu merchandise.
Foolish takeaway
These strategic sales channels do much more than boost sales for Lululemon. They create throngs of loyal customers and turn sports aficionados into Lulu fans. Sure, Lululemon doesn't come close to Nike's dominance in the professional sports arena, but it may not need to. The company is finding new life in so-called "athleisure wear" these days, and has innovative products rushing to market at an impressive pace. This, together with Lulu's three under-the-radar sales channels, should drive growth for the company in the quarters ahead. Shares of Lululemon are down more than 40% so far this year, but the company finally looks positioned for a turnaround.
