Lululemon Maintains a Focused RVP in Downturn

Our guest speaker yesterday, Bruce Reid, said something simple but that holds added truth today more than ever – “There are two directions in retail; forward and backward.” The retail environment is, and has always been, an extremely dynamic industry. However, the current economic recession has challenged customers to rethink their purchasing habits, and has challenged retailers to hone in on what they do best, and how they can use that to capture and keep their most valuable shoppers. This task is much easier for retailers who have a clear understanding of what their RVP is, but more importantly, what it is not.

Now, we sit in class and analyze companies’ RVPs twice a week, and we don’t struggle too hard with it. But think about when someone asks you to describe yourself with specific words. Not so easy? This type of identification for retailers can also be easily lost. GM is a great example of this. They believed a significant portion of their RVP was selection, but GM was unable to keep this focus and adapt it to move forward, ultimately leading to their downfall.

Now I’m not suggesting a retailer completely alienate their established RVP in the face of a crisis – quite the opposite actually. It is important for a retailer to really identify what their strong suit is, and move forward with that given what is going on around them. This direction ultimately encourages loyal shoppers to stay with you, and support your business. Remaining comfortable and stagnant, especially in a time of change for consumers, is really a step backward.

Lululemon - a company that has been analyzed to death in our class, is yet again a stirring example. After recently reading an article in The Globe and Mail, I was impressed with Lulu’s ability to really hone in on their strengths, and RVP to their consumers. I previously challenged the ability of companies to accurately identify their RVP, especially in a crisis-situation. However, as an outsider looking in, Lululemon was not only able to correctly identify what their RVP is, but also what it is not.

The key here is that Lululemon was not only able to pinpoint its RVP, but has used this as a starting block to creatively rethink certain areas of business that are not their overall focus. Instead of sitting on their market leadership and hoping it will carry them through the recession, Lululemon is taking the economic downturn as a challenge to find new opportunities within their RVP, and avoid getting lost in options outside their focus.

In the Globe and Mail article, Christine Day, current Lululemon CEO, identified the following as the actions that would be taken to cut unnecessary expenses, and focus on what differentiates them from their competitors in terms of their RVP.

1. Reining in the pace of new store growth
Considering convenience isn’t a strong element of Lulu’s RVP this is a prime example of remaining focused to what is important to the business, and the customers while cutting costs. Having a Lulu store at every mall is not what customers value, therefore store expansion can be put on the back burner while the more important areas of the RVP are exploited.

2. Offering twice as many free yoga classes
Not only does this type of customer appreciation move enhance the customer experience, it instills loyalty. Customer loyalty is crucial in times of economic strife, when a reported “68% of wealthy consumers say they have reduced their overall spending in the economic downturn.”

3. Invitation-only shopping nights
Allows Lululemon to target and reward their best customers, once again instilling further customer loyalty among the most important customer base.

4. Organic cotton clothing expansion, as well as other new items lacking in current assortment
Since selection is an important element of Lulu’s RVP, continuing to focus expanded efforts on this area keeps the RVP consistent, but progressive.

5. Keeping prices the same
Lululemon is aware that they do not compete or focus on price. At a time when many companies are willing to cut prices now for short-term gains, Lulu has remained true to their competitive advantage. I believe this maintains their brand image, and keeps them in check with their long-term strategy.

Overall, it is understandable that retailers may get lost in the their own customer offering. Trying to distinguish between who you are perceived as, who you think you are, and who you want to be, is very difficult. However, it will be the retailers that can not only recognize who they are, but what they are not, that will prevail. I believe this is even more important in the face of a crisis. Lulu provides an eminent example of a retailer that has this focus, and has used it to continually progress even in an extremely difficult economic time. Lululemon is definitely moving in a focused forward direction.

Source:
http://business.theglobeandmail.com/servlet/story/RTGAM.20090327.wrday28/BNStory/Business/home