Apple, the creator of the iPhone, and Lululemon, a yoga-pants retailer, might appear to have little in common. But there are striking similarities between the two companies that could prove to be a blessing and a curse for Lululemon.
Lululemon’s latest earnings highlighted its exceptional growth, profitability and valuation – three elements that have defined Apple for the past decade. Its sales surged 25% to $650 million in its first quarter, and it remains on track to generate over $4 billion in revenue in 2020. Its operating margin was 16% - significantly better than Nike and Adidas. And its valuation has swelled from $1.2 billion when it went public in 2007 to north of $17 billion today.
Both Apple and Lululemon inspire cult-like devotion among their customers and employees and foster communities around their brands. Apple fans camp outside its stores to get their hands on the latest iPhone; more than 40 people stripped naked to secure a free Lululemon outfit when the company opened its second store in Vancouver. Apple hires ‘specialists’ and ‘Geniuses’ while Lululemon employs ‘educators’ to serve its ‘guests’. Apple encourages people to handle and play with its products in stores, while Lululemon hosts yoga classes and organises fun runs.
Both companies share another feature - controversial founders who were ousted from the company. When iPhone 4 owners complained of poor reception when they held the phone a certain way, Steve Jobs tersely replied, “Just avoid holding it that way." Similarly, when Lululemon recalled about 17% of its women’s bottoms in 2013 for being too sheer, founder Chip Wilson said, “They don’t work for certain women’s bodies.” Moreover, Jobs was infamously pushed out of Apple in 1985 – although he retook the reins in 1997 – while Wilson resigned as chairman of Lululemon’s board in late 2013 following his gaffe.
Apple and Lululemon also differentiate themselves through innovation. Apple has revolutionised consumer technology time and again with products such as the iPod, iPhone, iPad and iMac. Lululemon has pioneered stores that double as health-and-fitness hubs for local communities, woven silver into clothing to combat the smell of sweat, and tagged all of its products with RFID chips that allow staff to digitally track inventory and avoid visiting the stockroom. The pair have also galvanised growth by repeatedly entering new markets: Apple’s recent ventures include music streaming, smart speakers and producing TV shows, while Lululemon has diversified from yoga into running, swimming and gym apparel, expanded its men’s range and stepped into footwear.
Strong growth, healthy margins, innovative products and devoted customers and employees are valuable assets for any company. However, the adoration of customers and the press can go to executives’ heads, resulting in arrogance, obstinance and inertia. Developing compelling new products and exciting obsessed customers is also a constant challenge. Lululemon’s similarities to Apple may be responsible for its phenomenal success, but like Apple, it faces increasingly fierce competition and immense pressure to perform. The next few years will determine how far Lululemon falls from the Apple tree.