Lululemon 2014 Annual Report Download - page 7

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Table of Contents
We perform ongoing evaluations of our portfolio of corporate-owned store locations. In fiscal 2014 we closed one of our corporate-owned
stores. As we continue our evaluation we may in future periods close additional corporate-owned store locations.
We believe that our innovative retail concept and guest experience contribute to the success of our stores. During fiscal 2014 our
corporate-owned stores open at least one year, which average approximately 2,950 square feet, averaged sales of $1,678 per square foot.
Direct to Consumer
Direct to consumer is an increasingly substantial part of our business, representing approximately 17.9% of our net revenue in fiscal 2014
,
compared to 16.5% of our net revenue in fiscal 2013 and 14.4% of our net revenue in fiscal 2012 . We believe that a direct to consumer channel
is convenient for our core customer and enhances the image of our brand. Our direct to consumer channel makes our product accessible to more
markets than our corporate-owned store channel alone. We believe this channel is effective in building brand awareness, especially in new
markets.
Other Channels
Other net revenue accounted for 7.1% of total net revenue in fiscal 2014 compared to 6.2% in fiscal 2013 and 6.0% of total net
revenue in fiscal 2012 . Other net revenue includes sales made through the following channels:
Community-Based Marketing
We utilize a community-based approach to building brand awareness and customer loyalty. We pursue a multi-faceted strategy which
leverages our local ambassadors, social media, in-store community boards and a variety of grassroots initiatives.
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.
As we strive to continue to provide our guests with technically advanced fabrics, our design team works closely with our suppliers to
incorporate innovative fabrics that bring particular specifications to our products. We partner with independent inspection, verification, and
testing companies, who conduct a variety of tests on our fabrics, testing 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.
Sourcing and Manufacturing
We do not own or operate any manufacturing facilities. We rely on a limited number of suppliers to provide fabrics for and to produce our
products. We work with a group of approximately 57 suppliers to provide the fabrics for our products. We use a wide variety of fabrics in our
products, including our Luon fabric. We obtain substantially all of our Luon fabric, which represents approximately 30% of the fabric we use in
our products, from two suppliers. We work with a group of approximately 30 suppliers that manufacture our products, five of which produced
approximately 63% of our products in fiscal 2014 . During fiscal 2014
, no single manufacturer produced more than 30% of our product offering.
During fiscal 2014 , approximately 59%
3
• Wholesale - Our wholesale accounts include premium yoga studios, health clubs and fitness centers. We believe these premium wholesale
locations offer an alternative distribution channel that is convenient for our core consumer and enhances the image of our brand. We do not
intend wholesale to be a significant contributor to overall sales. Instead, we intend to use the channel to build brand awareness, especially
in new markets, including those outside of North America.
• Outlets and warehouse sales - We utilize outlets as well as warehouse sales, which are typically held one or more times a year, to sell slow
moving inventory and inventory from prior seasons to retail customers at discounted prices.
• Showrooms - Our showrooms are typically small locations that we open from time to time when we enter new markets and feature a
limited selection of our product offering.
• Temporary locations - Our temporary locations are typically opened for a short period of time in markets in which we may not already
have a presence.