Business Level Strategy: Fitness Apparel Industry Olivia Hager, Grayson Wright, Lila Weinstein, Emily Dann Emily

Cost Leadership Strategy Focus Cost Leadership Strategy Agenda Industry Overview Matrix Activity Cost Leadership Strategy Focus Cost Leadership Strategy Differentiation Strategy Focus Differentiation Strategy Integrated Cost Leadership/Differentiation Strategy Questions Emily We chose 5 competitive fitness apparel companies who we believe best exemplify successful implementation of the five different strategies to compete in the same industry Answer the why

Industry Overview The fitness apparel industry includes companies who manufacture clothing worn during workouts or any physical exercise to provide the wearer comfort and style. The industry makes up 16% of entire apparel industry. The industry is highly fragmented and highly competitive. Competitive advantage is achieved through low costs and differentiation. Steady projected growth in the industry Liv

Matrix Activity Consider these 5 companies: Fabletics, Lululemon, Athleta, Champion, and FILA X-Axis: Value of (V-C) achieved through low-cost or differentiation Y-Axis: The size- broad or narrow- of the market in which a firm chooses to compete Athleta offers women's yoga clothing, swimwear, running clothing and athletic clothing for fitness, golf & tennis. lululemon makes technical athletic clothes for yoga, running, working out, and most other sweaty pursuits. Champion offers fitness apparel with a broad appeal at affordable prices. Fabletics offers affordable and stylish workout clothes for women. Shop yoga pants, leggings, joggers, tops, tees and more for any fitness. FILA manufactures sportswear for men, women, kids and athletes and often sells in retail stores such as Kohl’s and Sears. . Grayson

Cost Leadership Defined Goal: Keep costs low while offering acceptable value. Lila

Cost leadership strategy: Champion Champion is a company in the fitness apparel industry that has a broad appeal with products sold at a low cost. Cost Leadership Strategies: Champion website offers a “sale” tab on the website whereas companies such as Lululemon does not C9 products offered at Target; Sneakers sold $15-20 Workout leggings sold for approximately $30-40 Lila

Cost Leadership Strategy (cont.) Broad Target Examples: Appeals to both men and women Appeals to all age demographics (i.e. kids and adults) Does not offer specific features such as yoga gear, but instead simply offers tops and bottoms along with other basic fitness essentials Lila

Focus cost leadership strategy: Fabletics Fabletics is an online subscription retailer that sells women’s sportswear and accessories. Cost Leadership Strategies: Each outfit is valued around $100 For $49.95 you get a 2-3 piece outfit (top, leggings, jacket) First purchase is $25 Quality is similar to Target or Gap fitness wear Liv launched Fabletics with Kate Hudson after they saw a gap in the activewear marketplace: there were plenty of luxury brands, but none that offered stylish and high quality gear at an accessible price point. branch of the $1 billion company, JustFab. Offers members the ability to take surveys which leads them to personalized outfits based on their lifestyle and fashion preferences.

Focus cost leadership strategy (Cont.) Focused Target Examples: Caters specifically to young, active women Lifestyle survey narrows down their variety to something specific for you Because it is sold through an online subscription, their audience is more narrow and unique Liv The catch of not signing in on the 1st or 5th of the month, “skip this month”, getting charged

Differentiation Defined Goal: Create economic value (V-C) that is greater than that of competitors. Grayson

Differentiation Strategy: Lululemon Athletica Lululemon Athletica is an athletic apparel company that has conducted its business like no other company in the industry. Differentiation Strategies: Does not use traditional market research to form customer relationships Discounts are nonexistent is their business strategy Customer service is not top-notch Has had extraordinary success since implementing this system Grayson

Differentiation Strategy (cont.) Broad Target Examples: Has both men and women departments Appeals to all age demographics Patented signature fabric Grayson

Focus Differentiation Strategy: Athleta Athleta is a Gap Inc. brand dedicated to outfit and inspire female athletes with versatile and fashionable performance apparel for all scopes of life. Differentiation Strategies: Offers fitness events like interval training and running clubs Own patented fabric called Pilayo The Unstinkable technology with natural silver salts embedded in the fabric “The idea that women have the option to buy quality apparel that’s both stylish and functional is what differentiates our brand, and why we have such loyal customers. They not only believe in our products, but our philosophy around empowerment.” -Scott Key, Senior VP and General Manager Emily Athleta is looking for ways to appeal to women with beyond just yoga. Can differentiate itself even from Lululemon in its superior product design. (core competency which creates value) as Lululemon has had multiple recalls and complaints of shear material. 88% Supplex nylon and 12% Lycra spandex Is flexible comfortable and water resistant Casual and crossover wear The desire to look good while working out, or just dress as if you’re about to, comes from a deeper trend: Women really are exercising more, and yoga’s popularity is a big part of that. Athleta’s new “Unstinkable” technology, which the company says require less laundering due to natural silver salts embedded in the fabric, Byrnes says that the testers had to wear them for five workouts then wear them to the office as the “true test of confidence. The Unstinkable idea underscores the fact that a lot of what Athleta designs for is to make it so that women don’t notice their clothes as much, from smell to fit. Design with a PURPOSE of promoting CONFIDENCE What really sets this company apart is its focus on women

Focus Differentiation Strategy (cont.) Narrow Target Examples: “Power to the She” Offers clothing in “extended” sizes Appeals to affluent and hard working female consumers Emily 2012: She is fitness minded, but not necessarily working out. Promotes both performance and femininity Strong focus on limitless ability of women in sports and in life The campaign aims to create a movement that not only encourages women to be their best feminine and athletic selves, but create communities where they can encourage one another to strive for excellence regardless of their personal pursuits. “It’s about having products that flatter your body and help you feel confident,” Green, the brand president, says. “Women will tell us that if she feels good in product, whether it’s workout wear or not, it motivates her… She’s feeling confident.” Stresses to appeal to women with larger body types who want to feel more confident unlike Lululemon Higher prices = more affluent consumer base

Integrated strategy: FILA FILA is one of the world's largest sportswear manufacturing companies. Cost Leadership Strategies: Establishes strategic partnerships and reorganization Prices are comparatively much lower Sells through retailers such as Kohl’s, Macy’s, and Sears at cheaper prices Emily Cost Leadership In order to enhance the capability to meet local market needs, Fila has recently announced a strategic partnership with Proline, a subsidiary of Mint Apparel, in the United Kingdom. Proline has assumed sales and operations responsibilities for the Fila brand in the UK and will assist in product design, development and sourcing. Also leads to differentiation Retail leggings sell for $55 as opposed to competitors who sell for upwards of $100 Retailers such as Kohl's / Sears sell for $30 FEE-LA!

Integrated strategy (cont.) Differentiation Strategies: Company’s history and success 70’s and 80’s vintage wear (bucket hats, sweats) in Spring/Summer of 2015 Meeting local market needs with multiple regional headquarters Jon Epstein, CEO of Sport Brands International Ltd (SBI), the new owners of Fila USA Yoon-Soo Yoon, Chairman and CEO in Korea People buy into the story. The Fila brothers opened shop in 1911 in Italy. They sought to produce fabrics that combined luxury, art and utility, drawing inspiration from their homeland to create product as exquisitely textured and evocative as the Italian landscape. Fila uses premium fabrics designed to radiate the sophistication of Italian craftsmanship, while allowing maximum flexibility and performance. paying tribute to the brand’s longstanding tennis roots from the ‘70s and ‘80s. Bucket hats, overalls and sweats are all included in the drop New line in Spring/Summer of 2015 of vintage workout clothing Created regional centers of excellence around the world in product design, development, sourcing and marketing. The Regional operating headquarters are based in Sparks (MD, USA), Milan (Italy) and Seoul (Korea). Lowest cost at origin, however, often did not result in the lowest total supply chain cost. Problems such as delays and inaccuracy in customer orders created cost on the destination side. Lack of visibility was also a problem, with information often unavailable until close to final customer delivery dates. Additional: BNP Paribas Open Recently signed sponsorship agreement with tennis star Sam Querrey Fila USA Inc. imports footwear, apparel, and fashion accessories through wholly owned sourcing centers located in Asia, with production spread across the continent.

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