Focusing on regional shopping centres in Toronto, Aritzia and lululemon are considered as notable tenants24. This means that the two brands have become a fashion success as females today are bound to walk into either of those stores to make purchases. As Aritzia is branching into yoga wear, this leads to a new line of apparel titled - New Revolutionary Green. This new brand label, a subsidiary of Aritzia, focuses on yoga wear for women, competing with only one direct authentic yoga brand competitor, lululemon. Our biggest competitor has a current market value of 35.36, which remains on a steady increase from time to time. Our goal is to successfully enter this market, create value in our brand, and portray our apparel to be at par with lululemon, if not better.
3.0 Environmental Analysis
The biggest trend in North America has been going “Green”. Companies are taking initiative to go “Green” and are encouraged by government to do so. As a result, “Green” clothing has emerged from brands such as lululemon. This is a trend that has a grasp on a global perspective. Companies like Nike have set plans to have 100% of their clothing in 2011 to have at least some “Green” material1. Canadians value a healthy lifestyle with the need to be physically and mentally active2. The mentality of Canadians is to pursue a healthy living lifestyle while conserving the environment at the same time. These are considered as value-added to many companies that try to follow suit and provide consumers with what they are asking for. These two trends - both social and cultural - affect all businesses and are reinforced by marketers and by the government. It is a trend that tries to protect the environment and to aid oneself. Lululemon is the most notable in the clothing industry to fulfill the need by promoting yoga athletic clothing while being environmentally friendly. “Tweens” crave for what is trendy and in the business market, the promotion of healthy active living and environmental friendliness is the most dominant.
Technology plays a major role in the development of our product and how to sell it. Lululemon is focused on presenting new technology. They created the Luon technology and partnered with Descente Ltd to constantly create new technology for clothing3. Technology is used to assist in advancing “Green” clothing and saving energy within retail stores. Usage of Radio Frequency Identification (RFID) chips have been increasing within the retail industry in which tracking items can be done in an instant. By being able to track every single item, the chips have the ability to provide protection for retail companies and give great customer service on their items4. Going forward, RFID chips will soon be part of almost all retail industries in the next decade. To remain competitive, companies must invest in RFID technology to not only reduce costs but also to increase sales by providing quick and accurate service.
4.0 Competitive Analysis
Within the yoga community, the one major retailer for yoga apparel is lululemon Athletica. It started in 1998 in Vancouver, British Columbia and has opened over 100 stores in Canada, expanding their retail stores into large urban markets5. Although there are only 15 lululemon stores in Toronto6, through their unique marketing and advertising strategies, they have managed to capture a large portion of men and women who practice yoga. While there are a few retailers that sell yoga apparel and related accessories in Toronto, (for example: Roots Yoga, Margarita Active-wear, Naturals Apparel) these brands operate on a much smaller scale compared to lululemon and have been unsuccessful in securing market share or gaining brand awareness. Due to the market niche that lululemon has been able to fulfill, it is without a doubt that lululemon is the only major competitor.
Lululemon’s method of promoting their image and creating brand awareness is very unique. Absolutely no money is spent on advertising7. Instead, lululemon has programs where true athletes are Ambassadors that share the same philosophy and culture that lululemon embodies: “to live longer, healthier and more fun lives”. First, lululemon enlists local athletes and fitness instructors as Ambassadors who provide feedback to lululemon on the fit, function, fabric, design and quality of their apparel. In return, lululemon sends staff and customers to help these instructors build their own businesses. By partnering up with fitness studios, this helps lululemon build a communicative spirit among athletes. Each store has a co-ordinator that organizes yoga or fitness classes (for example, running clubs) which helps promote brand awareness. Furthermore, lululemon searches for local athletes to work within their stores6. These athletes can provide personal testimonials on how great the product is when customers have questions about the performance of the athletic apparel.
All of lululemon’s business strategies have been aligned with the idea of encouraging people to lead healthy active lives. Their manifestos of motivational quotes listed on their environmentally friendly reusable bags help promote their image6. Lululemon’s positioning is for the upper middle class who practice yoga. Lululemon’s clothing is athletic wear that is comfortable and form fitting and the product’s key differentiation is the unique fabrics used to manufacture the products.
Lululemon’s products are distinctive in the types of fabrics that they use. The materials used to manufacture the clothing have many technical features; the brand has prided itself on a type of fabric that is moisture wicking. Furthermore, lululemon sells clothing that uses silver yarn that eliminates bacteria, so the clothes stay odourless6. These practical features compete with NRG’s technology of using friction to generate electricity while practicing yoga. This competes directly with lululemon’s products as this feature within clothing is exclusive to NRG, just as the special fabrics are exclusive to lululemon (Refer to Exhibit F).
The use of these special fabrics by lululemon is very practical and useful for athletes. Clearly, it brings great value to their customers. Lululemon uses a value-based pricing method, which focuses on the overall value the product delivers7. The clothing features are unrivalled in the active wear category and thus, by using the improvement value method, it is evident that consumers would be willing to pay much more for their products relative to other comparable products.
Based on data from Statistics Canada, in the 2009, lululemon had approximately 0.105% of all retail market shares in Canada9. However, this ratio is not truly reflective of lululemon’s true market share as lululemon’s retail stores specifically sell yoga athletic wear. Using data from other major athletic clothing brands in Ontario, lululemon captures approximately 1.04% of the market share selling athletic apparel (Total athletic apparel market share in Ontario found by summing the sales of Nike, Reebok, Adidas, Under Armour, Puma, Columbia Sportswear, New Balance, Lululemon (private companies: Roots and Ice Gear were not included as there were no sales numbers publicly available)). Lululemon is a market niche that specializes in selling yoga attire and accessories, therefore, a reasonable estimate of 35% of athletes who practice yoga are loyal to the lululemon brand. Clearly, through lululemon’s unique promotional strategies, the exclusive Ambassadors club have gained popularity through yoga and fitness communities.
As a new competitor to lululemon, NRG offers similar fitness classes free of charge and designs athletic clothing with a very unique benefit to its customers, this leads lululemon to start offering more or different benefits for customer retention. For example, lululemon may start offering a loyalty program to maintain its large market share within the Toronto area. However, due to lululemon’s strong connection and relationships within the yoga and fitness communities developed through their Ambassadors program, customer loyalty may not be an issue. However, due to advanced technology that NRG’s clothing has to offer, lululemon may have to start investing in research and development to expand the features of their current fabrics.7 It is without a doubt that NRG will enter the market as a strong competitor towards lululemon.
5.0 Segmentation Analysis and Consumer Buying Behaviour
5.1 Objectives
New Revolution Green (NRG) is built as a subsidiary of Aritzia, a Canadian clothing company for women. Its mission is to provide customers with high-quality, environmentally-friendly athletic wear. At the same time, it offers clothing that is casual and comfortable and yet stylish. We do this by providing customers with clothing which follows the latest fashion trends.
Our marketing strategy is to attract visibility quickly by pricing our products at par and slightly above our major competitor- lululemon athletica; this allows us to create perceived value in our consumers’ minds. NRG will embed a technology called Piezoelectricity which will help promote our eco- friendly store.
5.2 Target Market
New Revolution Green will be located in downtown Toronto where the central business district of Toronto is located at. This district contains the headquarters of many Canadian companies as well as a large residential population. Lots of high-rise condominiums are also located nearby.
NRG athletic apparel has one key market segment. This target market is female only, 23- 35 years of age, who are high-income individuals having an annual income of $50,000 or more, according to Statistics Canada.
5.3 Why this Target Segment?
We have targeted our sales towards this specific market segment as our store is located in an up-scale shopping district where it is also a financial district. There are all sorts of designer fashion and upscale stores located in this area, since it is also a financial district; the majority of customers to these stores will generally have high income and will be able to afford the premium priced apparel we have. Young consumers, aged 23-35, tend to have more disposable income than the older generation, they are willing to spend more money on clothing and are more conscious of the fashion trends. According to the Women’s Clothing Stores article, women between the ages of 17 and 24 increased spending on clothing by 1 percent, whereas purchases by women between the ages of 35 and 44 fell by 10 percent, and purchases by women over the age of 55 dropped off 13 percent.
5.4 Target Market Profile: FashForward Greenies – Refer to Exhibit D
Gender: Female
Age: 23- 35
Education: University Degree Holders
Income: $50,000+
Type: fashion forward, trend followers, environmentally friendly, healthy lifestyle
New Revolution Green focuses its business with individuals who earn an annual income of $50,000 or more, these individuals are high-income Canadians who account for 25% of total income in Canada, according to Statistics Canada. We grouped this market according to where they lived- Toronto, Canada, a larger urban area where 31% of the 5.5 million Canadians who earn $50,000+ annually live.
High Income Canadians: who they are / where they live (according to Statistics Canada)
(1) 5.5 million Canadians earn $50,000+ annually; (2) 46% of this 5.5 million Canadians live in Ontario; (3) 31% of this 5.5 million Canadians live in larger urban centres, i.e. Toronto; (4) 25% of this 5.5 million Canadians are women; (5) 58 % of all women aged 15 and over had jobs;
The predominant shopper in a yoga focused athletic apparel store is a typically 23 to 35 year-old female who has a wide range of disposable income and are trend followers. FashForward Greenies are individuals who are active, busy and independent. These individuals hold university degrees and a decent paying job, therefore, they are able to purchase our premium priced products. This year, sportswear becomes street-wear in spring 2010 according to research, individual trend followers who also lead a healthy lifestyle are also included in this target segment. Individuals in this segment lead a healthy, balanced, fun-filled lifestyle, who are also environmentally friendly and are willing to spend money on luxury athletic apparel. Lastly, FashForward Greenies are extremely fashion driven – shopping frequently, and want the newest style. They define value as: Fashion > Quality > Price.
5.5 Consumer Buying Behaviour
Our target market’s buying behaviour can be described as variety-seeking buy behaviour. They have low involvement but perceive the different athletic apparel brands differently. Customers in this segment are willing to try something new or different. They may have spent an amount of time and effort looking and evaluating the other available brands - lululemon, keylime athletic wear, tee-art. FashForward Greenies have had prior experience with athletic wear and their perceived risk is moderate.
6.0 Positioning Statement
New Revolutionary Green (NRG) is for young females concerned with the environment who are seeking comfortable apparel to express and enhance their physical and mental wellbeing. NRG strives to be an innovative and trendy line of athletic fashion established as its own independent retailer and brand that integrates technology into its products to deliver functionality in addition to style. Unlike lululemon athletica, NRG apparel can charge electronic devices effortlessly utilizing Piezoelectricity technology10 while offering comfort and style.
Please see Exhibit E for a perceptual map of where NRG hopes to establish its position in the market. In comparison with other competitors, NRG is priced in the upper right quadrant offering high quality at a high price – creating value for the customer.
7.0 Marketing Mix
New Revolutionary Green (NRG) is a new fashion line for women that focus on comfort and style. Developed and established under the parent company – Aritzia, NRG will have a strong position in the apparel market for women who seek trendy and comfortable clothing. NRG will be an independent retail store located in downtown Toronto, Ontario. The core competency revolves around advocacy and drive for the environment. The store and its line of products will fulfill the needs and wants of those who seek physical and mental wellbeing.
7.1 Product
NRG aims to provide potential customers a unique experience not limited to simply shopping. Aside from purchasing our quality products, we want to build a strong customer relationship through other innovative methods.
Our store and the new line of merchandise will exploit a technology called Piezoelectricity. Piezoelectricity relies on mechanical stress to generate an electric field, which can be utilized for functional purposes such as charging electronic devices (i.e. mobile phones, iPods)11. NRG will take advantage of this technology and embed it within our stores and products to promote a “Green” mindset.
The store atmosphere will be a significant component in defining our brand and merchandise. We will be striving to promote environmentalism (i.e. Going “Green”)12 through day-to-day operations and our merchandise - advocating this broad philosophy as follows:
- Piezoelectricity technology infused with our high-end quality merchandise supports environmentalism; providing customers functional value as they perceive our trendy and comfortable products
- Lighting will be partially powered by Piezoelectric apparel worn by customer service representatives in the store
- Physical and mental discipline classes are offered at different times of the week allowing customers to get involved with our vision for overall wellbeing (Exhibit A)
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Emphasizing comfort and social harmony, range of apparel sizes will suit most, if not all, our customer base. If otherwise, custom orders can be arranged13.
- Store representatives will be trained to offer advice and advocate company values to customers regarding health, fitness, and the environment
Furthermore, the store layout and structure will act as a marketing strategy to capture market share. As our target segment (Section 5.4) is fitness-focused and environmentally conscious, the layout relies on natural lighting through sun roofs, large windows, and mirrors. Refer to Exhibit C for more details. Storefront ‘Display 1’ will have staff performing Yoga and other exercises to promote healthy living and mental wellbeing. The Fitness Centre will hold weekly classes that are free of charge in addition to personal training sessions, which require a fee. With organic plants and windows throughout the store, the thought of self-expression and comfort will expose customers to calmness and harmony. Under well-defined interior design and expressive marketing displays, NRG can capture market share within the target segment we set out to reach.
7.2 Price
NRG products will be priced competitively with our direct competitor – lululemon athletica. NRG will aim to price at a premium to reflect an image that sustains quality and prestige products and customer intimacy with our customers – adopting a “Price Lining” strategy. NRG will be customer-oriented to create value in our brand and its merchandise to position ourselves as a premium fashion line in the consumers’ minds. Using “Price Lining14” as our pricing tactic, top-of-the-line products are priced above the competition while pricing the majority of our products at par with our competitors – as shown in Exhibit B. This strategy creates perceived value in consumers’ minds because we forecast the majority of our sales to come from our standard line. For customers who purchase our main products, we deliver value such that they perceive to be buying quality, brand, and status due to other merchandise priced at such a high premium.
7.3 Place
NRG will be located in downtown Toronto, Ontario. Established as a Canadian brand, NRG’s retail store will provide customers a convenient location to shop and participate in our various functions held every week. NRG aims to deliver value through developing an efficient inventory system for the products in the store to be available for customers in the right quantities and at the right time. As our store only holds NRG merchandise, it is categorized as a specialty store – concentrating on Piezoelectricity-infused apparel.
Manufacturers will distribute indirectly to consumers as all products are to be sold in our NRG retail store. The key point is the location of our store. Stationed in downtown Toronto, NRG takes advantage of the busy streets and the vast amount of people in the area, including our target audience (refer to Section ____).
7.4 Promotion
Through selective Integrated Marketing Communication (IMC) tools, we hope to maintain a prestigious image in the consumers’ minds. Following the steps for an IMC campaign, we take into account the following:
- Target Audience has been identified (refer to Section 5.4)
- Objectives are aligned with our positioning statement – to be the preferred store for our target customers when they are seeking “Green” apparel for comfort, style, and functionality. Launch campaign hopes to inform target segment of the new store and its unique products.
- Budget has been forecasted (refer to Section 8.0)
- Key message directed to target audience: Our unique selling proposition can be viewed as “NRG...Green & More”. We want customers to think of NRG when they think of ‘Green’, healthy active living, and physical and mental wellbeing.
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Media and medium are limited to magazines to prevent negative word-of-mouth. Magazines selected are related to health, fitness, and mental wellbeing such as Fitness, Natural Health, Yoga Journal, and Women’s Health15.
- Communicating our message through the following IMC tools:
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Partnering with health charities (i.e. Change Foundation16) for mutual benefits relating to health and wellbeing, referring to cause-related marketing
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Sponsoring various health and fitness institutions (i.e. Yoga Sanctuary17) with equipment and fitness apparel (i.e. Yoga clothes and/or mats)
- Releasing annual reports to maintain a strong for potential investors
- Limited Sales Promotions – Grand Opening Sale, followed by exclusive sales for customers who actively visit our store
- Electronic Media – promoting our store through a corporate website, blogs, and social media (Facebook, MySpace, Twitter)
- Assess the impact of our campaign will allow us measure our progress and success for the launch of our new brand and store.
8.0 Financial Analysis
NRG projected first year revenue is $1,249,887, selling 12,625 units, and will grow at a similar rate to the main competitor Lululemon (66% per year7). The first year revenue was obtained through segment profitability. NRG will target women in Canada who did Yoga within the past 12 months (1.3 million people6) who has an income of over $50,000 (22.7%18). The target market will primarily be living in Toronto, Ontario (14.26% of the total population). Through engaging in rigorous advertising campaigns, NRG projects to have a great reception to their magazine ads, getting approximately 75% of the readers to come into the store. NRG is very positive about the clothing line which have been prepared and will hope to obtain excellent consumer purchase results; NRG projects 40% of the customers who enter the store will buy a product. The high quality clothing line will be priced at $139 while the regular clothing line is priced at $95. NRG has decided at those prices through market research; to penetrate into the market, NRG priced the clothing line cheaper than Lululemon (main competitor). Refer to Exhibit H and I for the calculations on the segment profitability and first year revenue numbers.
NRG will start making a profit on the income statement in third year of operations. If the company can maintain an average 66% of growth per year and keep the cost of goods sold and variable expenses proportional from year to year, NRG is projected to earn an EBITDA of approximately $85,000 in the third year. The breakeven sales number is 39063 units; assuming the variable costs stay proportional with the increasing revenue. Refer to Exhibit I and J for the calculations of the profitability year and breakeven sales.
New Revolution Green arrived at the expense numbers through comparison with the primary competitor Lululemon. Since NRG’s business model is very similar to Lululemons, the selling and administrative expenses will be similar proportionally as well. After careful research, NRG has found a building for lease in downtown Toronto which they can renovate for their new store. The rent will be $10,00019 per month which will be treated as a fixed cost. NRG will also be promoting in Yoga Journal in addition to the word of mouth and product promotions. The company has researched it will cost them approximately $380,00020 for a full page colour advertisement in the magazine. NRG hopes to continue the magazine promotion on a yearly basis and will treat the magazine expense as a fixed cost.
9.0 Exhibits
9.1 Exhibit A – Weekly Schedule of Classes Offered at NRG
9.2 Exhibit B – Selective Product Comparison (in CAD)
*Note: NRG prices certain products at a premium to create perceived value for customers
9.3 Exhibit C – NRG Floor Plan
9.4 Exhibit D – Consumer Buying Behaviour Collage
9.5 Exhibit E – Perceptual Map of Competitors
9.6 Exhibit F – Bulls Eye Diagram
9.7 Exhibit G – Forecasted Income Statement
9.8 Exhibit H – Total Units Sold
Population of women who did Yoga 1,300,000
Income over $50,000 (Percentage) 22.7%
Living in Toronto, Ontario (Percentage) 14.26%
Positive Reaction to ads (Percentage) 75%
Customers who buy (Percentage) 40%
Total units sold 12625 units
9.9 Exhibit I – Revenue Calculations
Assuming consumers purchase 1 unit from the high quality clothing line per 10 purchases from the regular clothing line:
First year revenue:
10x + x = 12625
11x = 12625
x = 1148 high quality purchases
Therefore, 11477 purchases from the regular clothing line
1148 * $139 + 11477 * 95 = $1,249,887
9.10 Exhibit J – Break-Even Analysis
From the numbers based on the first year,
Cost of goods sold: 47% of revenue
Selling and Administrative Expenses: 31% of revenue
Average revenue per product: 1,249,887/12,625 = $99/unit
Average cost of goods sold: (1,249,887*0.47)/12,625 = $46.5/unit
Average Selling and Administrative Expenses: (1,249,887*0.31)/12,625 = $30.7/unit
Contributed Surplus: 99 – 46.5 – 30.7 = $12.8/unit
Fixed Costs: Rent + Advertising = $380000 + $120000 = $500000
Units to breakeven: $500,000/12.8 = 39063 units
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