Alexander Wang

Next lululemon, keep up

In the past few years, industry dark horse lululemon has become a nightmare for Nike and Adidas.


By selling yoga pants for thousands of yuan, the Canadian yoga apparel brand lululemon’s market value has almost doubled to $43 billion in the past year, compared to only $25 billion a year ago, attracting industry attention, while the former third place Under Armour has a market value of only $5.7 billion.


The once dominant American brand Under Armour began to decline from its peak in 2015, and just as sports giants Nike and Adidas secretly felt fortunate to have pushed back the aggressive third place, lululemon emerged from nowhere, putting the two giants who had not yet returned to their senses in an instant.


Nike and Adidas never imagined that lululemon would threaten their dominant position in just two years. In recent years, both giants have had a difficult time. Firstly, Adidas, who relied on a pair of small white shoes to turn over, gradually pressured Nike. Then, there was a huge personnel upheaval within Nike, and the company’s neglect of women triggered a collective condemnation. Subsequently, Nike struggled to survive the crisis, and its stock price surged after the epidemic. However, Adidas, who was making great strides, entered a period of fatigue with insufficient momentum.


The internal friction of large enterprises and the competition between giants are extremely labor-intensive, causing neither Nike nor Adidas to initially defend against Lululemon. It will be quite challenging for Nike to compete for Lululemon’s loyal female market accumulated through yoga pants now, as first impressions or first cause effects are common knowledge in marketing.


Before 2018, lululemon’s performance in the capital market was mediocre. This brand, founded in 1998, went public in the United States and Canada in 2007, focusing on the yoga apparel segment. But by 2018, the development of things began to be surprising, as Lululemon’s stock price not only skyrocketed, but discussions on social media also began to heat up.


If at that time, analysts from major institutions had just attempted to discuss lululemon together with Nike and adidas, then now it has become a reality for lululemon to become the third largest sports brand. It can be certain that young lululemon spent less time reaching the heights of giants. As a reference, adidas was founded in 1949, while Nike was founded in 1964.

Behind this is the power of capital and the Internet. It can create madness in a short period of time, allowing everyone to get to know the brand overnight, and enabling it to achieve expansion that was only possible in the past few decades. Like Tesla, the characteristic of these companies is to directly strike traditional brands with innovative changes.


Their approach completely deviates from the path of the traditional sports industry, and such unpredictability is the most imaginative and scares traditional giants the most. For example, Lululemon’s first acquisition turned out to be a company selling mirrors. By infiltrating user lifestyles, consumer brands hope to blur the boundaries with technology companies.


Of course, no one can guarantee that lululemon will remain as evergreen as traditional sports giants like Adidas and Nike, while Under Armour, founded at a similar time, has experienced the same ups and downs.


But what really keeps Nike and Adidas awake is that there will always be the next lululemon appearing, and it is inevitable that the next lululemon will keep up.


Based on Lululemon’s experience, any potential small brand can grow rapidly, but it is already too late to target these emerging brands when capital has grown and broken through them.


People smell a similar aura to lululemon on the emerging environmental sports brand Allbirds.


According to Fashion Business News, Allbirds completed a $100 million Series E financing led by American investment firm Franklin Templeton last month, with the latest valuation reaching $1.7 billion. In 2018, Allbirds announced the completion of a $50 million Series C financing, with a valuation of $1.4 billion at the time.


Allbirds started with the crowdfunding website Kickstarter and grew into a unicorn enterprise in just four years. According to Axios, the brand’s revenue in 2018 was approximately $150 million. Rakuten Intelligence estimates that Allbirds’ revenue increased by 48% between 2018 and 2019, with an average of 1.7 items purchased by its consumers in 2019, which means Allbirds may reach $222 million in revenue in 2019. This is on par with Lululemon’s revenue of $149 million in the fiscal year before its listing in 2007.


Like Lululemon’s star product Align yoga pants, Allbirds gained fame with a pair of woolen shoes.


Founder Tim Brown is a former member of the New Zealand national football team. New Zealand is rich in wool, but no one has ever applied wool material to sports shoes. He brought in another founder, Joey Zwillinger, who is an expert in renewable materials. The two have targeted a niche field, although the competition in sports shoe technology is very close, there are not many brands currently increasing their research and development efforts in casual shoes.

In terms of material innovation, American casual shoe consumers who focus on lifestyle are currently most concerned about whether materials are environmentally friendly. According to the brand, the Allbirds wool series saves 60% of energy compared to using synthetic materials, while the eucalyptus series saves 95% of water resources and cuts carbon emissions in half. The sole material of SweetFoamTM is processed from Brazilian sugarcane, and even the shoelaces are made from recycled plastic bottles.


The comfort created by wool and the sustainable development concept favored by middle-class consumers have made Wool Runners hit the extremely picky Silicon Valley circle in the United States, including Google co-founder Larry Page and Apple CEO Cook Timothy Cook. Many technology leaders have personally promoted Allbirds on social media platforms such as Snapchat and Twitter. Actor Leonardo DiCaprio and NBA star Andrei Igodara became brand investors directly.


Behind this is the rise of emerging technology enterprises, leading to the integration of work and life scenarios, changes in consumer dress habits, and an increase in the pursuit of comfort and product adaptability to multiple scenarios. More importantly, unlike the group of consumers who pursue fashionable styles, these people are often highly fascinated by the material revolution.


Lululemon also relies on LUON patented fabrics and Slivere scene odor prevention technology to achieve a soft, comfortable, and comfortable user experience that feels like it hasn’t been worn. That is to say, although the lululemon effect more or less contains the identity foam of the middle class, this addictive wearing experience is also the key to success.


The celebrity effect leverages a niche audience to continue the influence of Allbirds from small opinion leaders to the general public. The brand adopts DTC’s direct consumer oriented business model, gradually expanding from online to offline, interacting with consumers through user data collection and feedback, and being enthusiastic about operating social media platforms and consumer communities.


Therefore, within the first two years of the brand’s establishment, Allbirds, who was just starting out, sold over one million pairs of shoes without spending much money on celebrity endorsements.


This situation is equally familiar. Unlike traditional sports brands like Nike and Adidas that invest heavily in advertising, lululemon also relies on community operations as a low-cost way to establish a loyal consumer base and compete with giants.


Lululemon founder Chip Wilson has been choosing to collaborate with yoga or fitness coaches from around the world since an early stage, inviting them to serve as brand ambassadors. With this innovative promotion model and sponsoring community yoga courses, lululemon has accumulated a large number of fans over the years, and this tradition has continued to this day.

After becoming popular in the mass market, the development paths of Allbirds and lululemon are very similar, both focusing on expanding their categories.


Lululemon started to focus on the men’s market based on the women’s market, and last year launched the first men’s fashion brand, Lululemon x Robert Geller. At the same time, Lululemon is exploring higher prices and launching the luxury brand Lab. The design of Lab is mainly minimalist, including men’s and women’s clothing collections, as well as a few unisex clothing, with a more loose and simple cut than Lululemon.


The brand’s first personal care product series launched earlier also performed well, all of which were used in daily sports scenarios. Some analysts believe that the launch of this series may further increase Lululemon’s overall gross profit margin, as the beauty industry typically has a higher gross profit margin than clothing.


Allbirds is also unwilling to just create a casual shoe brand.


At the beginning of this year, Allbirds began selling functional underwear. In May, Allbirds just launched its first functional running shoe Dasher series, marking the official layout of this casual shoe brand in the fiercely competitive professional sports market, and may want to share a share with giants such as Nike. Industry insiders have previously pointed out that the price of Allbirds wool sneakers is $95 per pair, which is in the same price range as Nike, adidas and other brand sneakers in the United States, so there is competition between them.


The latest news is that Allbirds has officially entered the clothing industry, and its first clothing was officially launched on October 20th, including four clothing options: T-shirts, wool pullovers, wool cardigans, and wool windproof jackets. Like sports shoe products, this series named “New Green Technology” also highlights high-tech sustainable materials, especially one T-shirt made of crab shell that has attracted social media attention.

Hedge fund manager and Weibo opinion leader with 200000 followers, Zhang Xiaoyu, wrote on his personal Weibo account @ VicodinXYZ, “Allbirds has finally released clothes, making up for Lululemon’s lack of black T-shirt meaning. Now there are ten identical items in the wardrobe. In addition, there is crab shell ingredient in this clothing (actually called crab T-shirt in Chinese).” “I think clothing brands that love materials science are all good brands, including lululemon, Patagonia, and Uniqlo.”


Allbirds entered the Chinese market last year, opening its brand official website and WeChat mini program store. It also entered Tmall and, and opened four stores in Beijing, Shanghai, Guangzhou, and Chengdu. Besides, there was not much advertising promotion.


It can be seen that Allbirds is also following the path of spontaneous diffusion through “super users” in China, helping brands to cold start. Zhang Xiaoyu has a high fan stickiness, and his online and offline communities of “Proud and Forgetting” are spread across major cities, with countless members.


Although some analysts believe that the popular sustainable lifestyle in the United States is still slightly ahead of the Chinese market. But Tim Brown believes in an interview that Shanghai’s consumption habits and behavior are already quite similar to New York’s. When such a group of people already appear in China, Allbirds is optimistic about the Chinese market.


Tim Brown said, “Our goal is not just a wool sports shoe company.” The founders, who had no direct connection to the footwear industry before, set Allbirds on a path that is not necessarily a traditional sports brand. That’s also why Allbirds is considered the Tesla of shoes, and Tesla is not just a car company. As Uniqlo’s Masao Yanai said, “Uniqlo is not fundamentally a clothing manufacturing company, but a technology company, and its only competitor is Apple, not Gap.”


Nowadays, the consumer market is no longer strictly differentiated by category, but rather a competition between technology companies that use technology as a barrier. Capital pays for their ideals, quickly trial and error, and achieves the process from 0 to 1 to 100. What traditional brands need to guard against is not just N lululemon, but also the market trends behind them.


The strength of Nike after the epidemic comes from this. Since the beginning of this year, Nike’s stock price has risen nearly 30% against the trend. The Chinese version of Barron Weekly believes that the market’s valuation of Nike is no longer based on the valuation logic of traditional consumer goods companies or sports brands, but is seen as a digital platform company that is still accelerating its transformation after Nike implements a direct consumer strategy, DTC’s strategic transformation.


According to a semi annual survey of American teenagers released by investment bank Piper Sandler, Nike has been the number one clothing brand for ten consecutive years, even expanding its leading position against competitors, with a market share surge of 27%, a 4 percentage point increase from the same period last year.


Among the respondents’ favorite retailers, Amazon ranks first and Nike ranks third. It is clear at a glance who the real competitors of traditional sports brands are.


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