Lululemon 2010 Annual Report Download - page 13

Table of Contents
Product Design and Development
Our product design efforts are led by a team of designers based in Vancouver, British Columbia partnering with
international designers. Our team is comprised of dedicated athletes and users of our products who embody our
design philosophy and dedication to premium quality. Our design team identifies trends based on market intelligence
and research, proactively seeks the input of our guests and our ambassadors and broadly seeks inspiration consistent
with our goals of style, function and technical superiority. Our ambassadors have become an integral part of our
product design process as they test and evaluate our products, providing real-time feedback on performance and
functionality. Our design team also hosts meetings each year in many of our markets. In these meetings, local
athletes, trainers, yogis and members of the fitness industry discuss our products and provide us with additional
feedback and ideas. Members of our design team also regularly work at our stores, which gives them the opportunity
to interact with and receive direct feedback from guests. Our design team incorporates all of this input to adjust fit,
style, function and to detect new athletic trends and to identify desirable fabrics.
To ensure that we continue to provide our guests with functional fabrics, our design team works closely with our
suppliers to incorporate innovative fabrics that bring particular specifications to our products. These specifications
include characteristics such as stretch ability, capability to wick moisture, color fastness and durability, among
others. In addition, to ensure the quality of our fabric and its authenticity, we test our products using a leading testing
facility, as well as actual wear tests done on any potential fabric. We also partner with a leading independent
inspection, verification, testing and certification company, which conducts a battery of tests before each season on
our fabrics, testing for a variety of performance characteristics including pilling, shrinkage, abrasion resistance and
colorfastness. We collaborate with leading fabric suppliers to develop fabrics that we ultimately trademark for brand
recognition whenever possible.
We typically bring new products from design to market in approximately eight to 10 months; however, our
vertical retail structure enables us to bring select new products to market in as little as two months. We believe our
lead times are shorter than a typical apparel wholesaler due to our streamlined design and development process as
well as the real-time input we receive from our consumers and ambassadors through our corporate-owned store
locations. Our process does not involve edits by intermediaries, such as retail buyers or a sales force, and we believe
it incorporates a shorter sample process than typical apparel wholesalers. This rapid turnaround time allows us to
respond relatively quickly to trends or changing market conditions.
Sourcing and Manufacturing
We do not own or operate any manufacturing facilities, nor do we contract directly with third-party vendors for
fabrics and finished goods. The fabric used in our products is sourced by our manufacturers from a limited number of
pre-approved suppliers. We work with a group of approximately 45 manufacturers, four of which produced
approximately 65% of our products in fiscal 2010. During fiscal 2010, no single manufacturer produced more than
33% of our product offering. During fiscal 2010, approximately 60% of our products were produced in China,
approximately 26% in South/South East Asia, approximately 4% in Canada and the remainder in the United States,
Israel, Peru, Korea and Taiwan. Our North American manufacturers provide us with the speed to market necessary to
respond quickly to changing trends and increased demand. While we plan to support future growth through
manufacturers outside of North America, our intent is also to maintain production in Canada and the United States
whenever possible. We have developed long-standing relationships with a number of our vendors and take great care
to ensure that they share our commitment to quality and ethics. We do not, however, have any long-term agreements
requiring us to use any manufacturer, and no manufacturer is required to produce our products in the long-term. We
require that all of our manufacturers adhere to a code of conduct regarding quality of manufacturing, working
conditions and other social concerns. We currently also work with a leading inspection and verification firm to
closely monitor each supplier’s compliance with applicable law and our workplace code of conduct.
Distribution Facilities
We centrally distribute finished products in North America from distribution facilities in Vancouver, British
Columbia and Sumner, Washington. We operate the distribution facilities in Vancouver and Sumner, which are
leased and are approximately 102,000 and 82,000 square feet, respectively. We believe these modern facilities
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