Lululemon's Lucrative Layout Strategy
According to Wall Street Journal, March 21st issue in 2012, the Canadian retailer Lululemon has higher sales per square foot than Neiman Marcus, while its price to earning ratio is 48. It’s shocking that this yoga gear retail store does profoundly better than other retailers, when having fewer stores than them. So, what’s the marketing magic to Lululemon’s success? The answer points to staying in close contact with its customers and using scarcity to their advantage by having quick life cycles. Instead of following the typical layout strategy other retailers employ such as creating many new stores, offering large discounts and using software to collect customer information, Lulu uses completely different marketing tactics. Lulu stores are relatively small size and focus on fast-moving, short-live styles. Lulu’s layout strategy is to not keep items on the shelves for long. With this in mind, their goal is to sell their merchandise at full price and condition their customers to buy immediately when they see an item, rather than wait or put it on hold. Lululemon is able to keep the store “fresh” by having short week cycles and their aim is to get the product right and keep it scarce. So, is this working? Yes. In December 2012 their hot-pink color “Paris Pink” was launched and was meant to have a two-month life cycle, but rather sold out in its first week. Lulu stores also use a different strategy in creating customer relationships. They spend hours each week observing how their customers shop, while listening to their complaints in order to compile feedback to spruce up the stores and products. On top of this, Lulu trains their employees to listen in on their customers conversations. In order to do this they use strategic placement of their clothes-folding tables by placing them on the sales floor near the fitting rooms rather than in a back room. By doing this, they optimize their ability to react to their customers’ needs. Lululemon’s lucrative layout strategy has proven to be a winning combination for them.
