Nuon Chheangeng - Lululemon - Encouraging A Healthier Lifestyle

Nuon Chheang Eng
TFBS, MA scholarship student

Case 10
Lululemon: Encouraging a Healthier Lifestyle
Lululemon Athletica is an athletic apparel company intended for individuals with active
lifestyles. Lululemon is based in Vancouver, British Columbia, Canada, and operates its clothing
stores in numerous countries throughout the world. The apparel store offers product lines that include
fitness pants, shorts, tops, and jackets for activities such as yoga, running, and other fitness programs.
As of 2015, the company operates 302 stores predominantly in the United States, Canada, Australia,
New Zealand, and Singapore. With more than 8,600 worldwide employees, Lululemon has grown
rapidly in the last 20 years and is expected to continue its growth strategy well into the foreseeable
future. The organization has seen continuous increases in revenue, with its 2014 annual revenue
nearing $1.8 billion. The organizational structure has seen changes with the hiring of a new CEO,
Laurent Potdevin, hoping to appoint a worthy and experienced industry professional.
Lululemon was founded by Denis “Chip” Wilson in 1998 in British Colombia, Canada. Prior
to Lululemon, Wilson had spent two decades in the surf, skate, and snowboard business. Lululemon
is a created word that has neither roots nor meaning. It is believed that Wilson selected this name
because he enjoys the sound of the 3 L’s when the word is spoken. The logo, which is actually a
stylized letter A, was a logo intended for the brand name Athletically Hip, which was not selected as
the company’s name. The first store opened in November 2000, in the beach area of Vancouver,
British Columbia.
From the beginning, Lululemon had a strong mission that embraced a healthy and active
lifestyle. Inspired by author and philosopher Ayn Rand, Chip Wilson modelled Lululemon with the
intent that involves “elevating the world from mediocrity to greatness.” The company adopted the
following mission statement: “Creating components for people to live longer, healthier, fun lives.”
Lululemon tries to reflect this in its corporate culture.
Lululemon stores today are focused heavily on community involvement and interaction with
local enthusiasts. Nearly all stores host in-house events on a nightly or weekly basis, with classes
ranging from beginner and advanced yoga to goal setting and self-defence workshops. Events and
workshops generally occur after store hours on the saleroom floor after racks and products have been
moved. Unlike many stores, Lululemon does not offer discounts, but sells approximately 95 percent
of its products at full price. It also sells its products at higher prices than its competitors, reflecting
the value of Lululemon’s products. Lululemon operates on the concept of scarcity to encourage
customers to buy immediately. Its store shelves often have fewer products than the shelves can hold,
and many products have quick life cycle times such as six-week life cycles. Customers are therefore
encouraged to purchase the product before it is gone, which is thought to be a major influence in
Lululemon’s continued popularity and success with customers. In fact, even second-hand clothes for
Lululemon sell for large amounts of money. Fans are willing to pay hundreds of dollars over the
original store price to acquire limited-edition Lululemon products on sites like eBay.
Answer the Questions
1. How has Lululemon handled various ethical issues that it has faced over the last few years?
Lululemon has handled various ethical issues with a very proactive mindset. In 2013 the
company faced with ethical problem when it released black Luon yoga pants that become sheer when
the wearer would bend over. Lululemon immediately released a statement saying that such conduct
was not company policy and that they would accept returns from customers with no questions asked.
After the recall of the too-sheer yoga pants, the company lost $2 billion in market value. The company
has also handled ethical issues by trying to anchor its mission statement by adopted seven core values:
quality, product, integrity, balance, entrepreneurship, fun, and greatness. These core values serve to
motivate employees and guide their decisions. Lululemon’s ability to act ethically will continue to
serve them well in the long run. Lululemon contributed the mission to help customers live a better
life continues. Lululemon defines having a better life as living healthier, leading to a longer and more
adequate life. Lululemon has developed a manifesto to describe its way of business and the manifesto
strives toward providing greatness to the people that use Lululemon products.
2. How has the ethical culture of Lululemon impacted its relationship with customers and
employees?
Lululemon recognizes that customer satisfaction is only as good as the employees that provide
it. The company strives to make its employees into ambassadors for the brand. Lululemon strives to
get its employees inspired. Employees must develop their personal goals, which are then hung in the
stores. To encourage healthy living and incentivize employees, the company offers staff free fitness
classes. It also tries to help employees find the right balance between family and work. Lululemon
frequently sends merchandising tips to sales employees and encourages them to take responsibility
and ownership of the store. Lululemon believes in hiring managers internally, which motivates lower-
level employees because they know they have a good chance of becoming a leader. Approximately
70 percent of Lululemon managers are internal hires. Employee satisfaction at Lululemon appears to
be high; 90 percent of employees claim they would recommend for their friends to work at
Lululemon. Lululemon sends employees to the Landmark Forum, a three-day self-improvement
program at a cost of approximately $500 per employee. Lululemon has also created the “Fund a Goal”
program for high-performing employees. Therefore, Lululemon’s approach maintains a strong ethical
environment among both employees and customers. Lululemon is known for having a close and open
relationship with customers by listening to customers as they shop in the store. Lululemon takes
customer complaints or concerns seriously and will attempt to make decisions based on this
information. Lululemon believes that customer relationships are not based on technology, but rather
on more basic marketing techniques like simply talking with the customer.
3. To avoid negative publicity and ethical challenges, what steps should Lululemon take to
improve its stakeholder relationships?
In the past Lululemon has struggled with controversial comments made by upper-level
management however, implementing and maintaining corporate governance will continue to point
them in the right direction. In order for Lululemon to improve its relationship with its customers they
should move towards collecting big data and shying away from having employees eavesdrop on
customers. The changes that Lululemon has implemented demonstrate that the organization is willing
to make difficult decisions to do the right thing. If Lululemon continues to put stakeholders first and
refuses to deviate from its values, it is likely to avoid similar ethical issues in the future. A strong
values-based corporate culture will help Lululemon remain a successful company with a reputation
for both ethical behaviour and quality products. In Lululemon takes its responsibilities to
communities seriously. It recognizes that community involvement will not only help gain new
customers, but will also promote its mission of creating a healthier lifestyle.

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Nuon Chheang Eng

TFBS, MA scholarship student

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