Gap (GPS), Nike (NKE), and Nordstrom (JWN) appear to have something in common: Lululemon envy. Seeking to lure shoppers willing to spend $98 on stretchy yoga pants, these retailers are mimicking the strategy of Lululemon Athletica (LULU), the 13-year-old Vancouver (B.C.) sports apparel company known for its pricey yoga gear. Nike’s Salvation chain of athletic-wear stores is selling $64 training capris and features a yoga-studio format and logo similar to that of Lululemon. Gap’s Athleta stores sell $60 women’s yoga tops and offer free yoga classes—another innovation popularized by Lululemon. Nordstrom’s Zella line, dedicated to yoga attire, even hired a Lululemon alum to launch the effort.
By adding yoga gear to their mix, the three big retailers are positioning themselves to grab a larger share of women’s athletic apparel sales. Despite the lingering effects of the recession, U.S. sales of women’s athletic clothing rose 2.6 percent last year, to $30.5 billion, says market researcher NPD Group. Lululemon’s revenue grew 57 percent, to about $712 million. “This trend is 100 percent driven by Lululemon,” says analyst Andrew Burns of equity research firm D.A. Davidson.
While yoga has been around for millennia, Lululemon “helped turn it into a social thing for women by making them feel like they looked good while doing it,” says Jill Miller, a Los Angeles yoga instructor. The company was founded by entrepreneur Chip Wilson in 1998 after he took a yoga class and found clothing then available wasn’t ideal for yoga. With a canny blend of fashion and lifetyle marketing—besides the free yoga classes, it spotlights local “ambassadors” who “embody the Lululemon lifestyle”—the retailer has built a cult-like following.
Rivals appear to be undercutting Lululemon on price. While Lululemon sells yoga pants for $98, Gap’s Athleta brand sells a comparable pair for $59. “I think we differentiate ourselves from other brands because of our wider selection of merchandise,” says Scott Key, a senior vice-president at Gap’s Athleta unit who denies borrowing from Lululemon. “It’s more accessible, more affordable.” A jacket in Nordstrom’s Zella line goes for $98, $20 less than a Lululemon version.
Nike and Gap also are following Lululemon’s practice of tapping into yoga’s spiritual ethos, an effort to make customers feel that they’re part of a community. Athleta’s website features a blog on how to stay “Chi” as well as a series of “Zen webinars.” Nordstrom poached Lululemon product manager Libby Vance to design the Zella line. Before her departure in 2009, she introduced Lululemon-esque looks for Nordstrom shoppers, including reversible jackets with two-looks-in-one and spandex pants that won’t ride up while doing the Downward-Facing Dog. Nordstrom and Nike declined to comment for this story.
The big question for Lululemon and its rivals is whether yoga still has room to grow. Lulemon’s revenue logged a compound annual growth rate of 52.3 percent from 2005 to 2009. Sales growth at Lululemon stores open more than 12 months have slowed this year and the company is boosting online sales, hoping they will hit 8 percent of total revenues by next year. That’s a tougher goal as new rivals emerge.
Moreover, women are starting to spend more on dressy clothing for work and special occasions, says Janney Capital Markets analyst Adrienne Tennant, leaving less cash to spend on yoga togs. “There is a high level of fashion risk tied to this trend,” says Burns. “As consumers have less discretionary funds, or preferences change, the whole trend could fall apart.”