| Canadian Apparel Federation | Exploratory Research Assignment |

Owner
June 2, 2012 |

Introduction

The Canadian Apparel Federation is facing numerous challenges as the apparel industry is very competitive and consumer tastes and preferences are constantly changing. Our study will present some of the major trends developing in the apparel industry and what companies can do to capitalize on the market and distinguish themselves from the competitors.
Research Objectives

The purpose of study is to identify what a company must do to separate themselves from their competition and how to best retain and attract customers. We will examine what actions are required by companies to become successful in the market. We will compare what qualities and traits successful companies possessed which provided them with a competitive advantage in the marketplace and kept their customers satisfied. We will compare three companies; Lululemon, American Apparel, and Roots Canada and report on what separates them from their competition and mistakes they have made in the past.
Research Method

Our research consisted primarily of exploratory research which will focus on the industry’s background to help us determine key industry trends, customer preferences and keys for success. We will collect background information from articles, industry data, companies internal data, competitors data and consumers opinions which will be gathered from online social media. Secondary data will be our main source of data along with social media sites that allow consumers to directly voice their opinions and feelings.
Study Findings

Lululemon
Lululemon was created in 1998 by Chip Wilson after taking a yoga class and seeing that there wasn’t a lot of clothing available that would be ideal for yoga (Dreier). Since its start, the company has experienced tremendous growth as the yoga culture started gaining popularity. Lululemon focuses its marketing strategy by keeping its prices high and supply low in order to constantly keep consumers excited about their clothing and make them feel like they are part of the Lululemon culture. (Carlyle). Another really important part of Lululemon’s success has been that they have offered free yoga classes and use local “ambassadors” who embody the Lululemon lifestyle and who promote the brand. A blogger has described the ambassador program as:
“A Lululemon ambassador is described as someone who “embodies the lululemon lifestyle and lives the culture.” These people range from local yoga instructors to Olympic athletes. It’s interesting to see how the ambassadors and Lululemon benefit from this program especially when their ambassadors are on a national television show. None of the ambassadors are payed to wear Lululemon clothing, rather they are supported with free product and anything else within reason they may request (Ritchie).”
Since the craze of Lululemon had taken off many rival companies such as gap, nike, Nordstorm and others have tried to capitalize on the yoga market. Rival companies have priced their clothing less then Lululemon, however they have not been able to outperform or take loyal customers away from Lululemon.
Lululemon has been rated as Top U.S Apparel Companies by Profit Margin and the Fastest Growing Companies from 2008 to 2011 (Business and Company Resource). Lululemon has had one warehouse sale but does not have plans to for anymore in the near future. The company believes that too much supply could also lead to markdowns, discounts and the creation of more outlet stores. The CEO claims that Lululemon tries to avoid those issues. Lululemon believes that its premium pricing is that attracts customers to the store

American Apparel
American Apparel was started by at a Montreal born Canadian, Dov Charney in 1989 through selling of basic t-shirt and underwear. By 2000 he was designing and making his clothing in downtown LA with focus on quality and expanded its clothing line to sell various items for both men and women. American Apparel had focused its marketing platform on the fact that their clothing made in America and used sexual advertisements attract customers. These advertisements had created a lot of controversy for the company but have also been praised by consumers for their openness and honestly in the industry. Dov Charney has been an enormous voice for the company and has claims to have some of the highest paid workers in the apparel industry. He also is a big advocate for the environment, pro gay rights and created pro-immigration rallies (Wikipedia).
In 2004 the company experienced 74% sales growth in 2004, 25% in 2005, and only 7% in 2006. Sales had hit a peek in 2009 and have declined since (Business and Company Resource Centre). In 2010 and 2011 the company had a negative net income and have been since experiencing financial hardship. Dov Charney has control of the company but feels he may have to sell additional shares in the near future to help with cash flow problems (Annual Report 2011). Part of American Apparel’s early success can be attributed to its successful vertical integration of its manufacturing, wholesale, resale and advertising. The company performs all operations themselves without having to outsource any divisions.
In 2005 a lawsuit had been filed against American Apparel and Dov Charney for sexual assault in the workplace. In 2008 additional lawsuits had also followed. These lawsuits had stirred up controversy for the company greater attention being placed on the company’s advertising strategies. It seems as though numerous consumers had turned away from the company after the lawsuits.
On the gender-focus.com blog, consumers had shed light that the company is hypocritical since it focuses its company principles on non-exploitation and social responsibility of workers’ rights, but it then shows women being featured in provocative poses in their advertisements and is very exploitive of women. Some consumers feel that some of the companies advertisements are border line pornography and would not want to ever associate themselves with such a company (Cain).
However, on the other side of the debate are the customers that are very loyal to American Apparel because of their Made in America clothing and they feel that their advertisements are trendy. Many people still have an attitude that sex sells and enjoy the unique advertisements displayed by American Apparel (Cain).
Roots Canada
Roots Canada is a privately owned company which was founded in 1973 by Michael Budman and Don Green. It was inspired by the founders experiences at a summer camp at Algonquin Park in Ontario. The company started by selling shoes and had since expanded its merchandise to jackets, bags, watches, sweatshirts and others. Part of the companies big success and growth came when the companies was the official clothing maker for members of the Canadian Olympic team from 1998 to 2004. They also clothed the United Sates teams in 2002 and 2004 (Roots). This had created widespread publicity for the company and the company had since expanded to its own line of bedding products. Since the company is a private company many financial information about the company is not known. It is estimated that the company has over $183 million dollars of sales and 2000 employees (Business and Company Resource Centre).
A great part of Roots success is that many of its products are made in Canada where the company started. They have also become very popular for their made in Canada purchases and leather goods. One of its bags had been featured in the movie The Hangover after which it was rated as one of the Springs Hottest Bags on a fashion website.

| | Lululemon | | American Apparel | | Roots | | | | | | | | | | | | | | | Annual Sales | 1,000,839,000 | | $533,000,000 | | $183,500,000 | | | | | | | | Employees | 5,807 | | 11,300 | | 2,000 | | | | | | | | Sales/Employees | 172,350.44 | | $47,168.00 | | $91,750.00 | | | | | | | | Net Income | 286,958,000 | | -23,293,000 | | n/a | | | | | | | | Gross Margin | 56.90% | | 53.90% | | n/a | | | | | | | | Strategy | High priced/ Ambassadors | | Made in America/ Sexual advertising | | Olympic Sponsor/ Made in Canada |

From Business and Company Resource Center & Mergent Online.
Study Implications and Recommendations

Some important findings that we have gathered from our study is that consumers want to support a company that has company policies or goals that differentiate themselves from other companies. Consumers want to support companies that pride themselves for made in America or made in Canada products like American Apparel and Roots.
Consumers are also willing to pay more for items if they feel that there is a special relationship or bond between them and the company. This is the case with Lululemon and the brand ambassador program they have which makes consumers feel connected to the store as they are able to participate and talk about various athletic events at the company sponsors or promotes.
It is also important to note that some negative publicity can really hurt a company. American Apparel has faced numerous challenges and sales declines after had sexual assault lawsuits filed against them. It also made consumers look at other aspects of the company in greater light to determine if they want to continue shopping at such a company or not.
Some ways that other companies can learn to take advantage of the industry trends would be to instill a sense of community and relationship between the company and its customers. Companies will also have to find ways to differentiate themselves from their competition by showing they are concerned with the concerns of the consumers. Recently a greater trend has been coming back to buying products made in Canada or America instead of China as greater economic problems develop around the globe.
Study limitations and directions for future research

Some limitations of the study are that only a limited number of conclusions can be reached through secondary data alone. Consumers feelings and opinions are very valuable to the industry analysis, however, more information is needed to be gathered from consumers. The future direction of the study should focus on more specific issues and problems of the industry, and surveys or focus groups should be conducted with consumers to get more primary data.

References
American Apparel Inc. (2011). Annual Report.
American Apparel Warns of Bankruptcy. (2011). The New York Times. Retrieved from: http://dealbook.nytimes.com/2011/04/01/american-apparel-warns-of-bankruptcy/ Cain, E.. Sexist Advertising from American Apparel. http://www.gender-focus.com/2010/05/04/american-apparel-ironic-%E2%80%93-don%E2%80%99t-you-think/

Carlyle, E. (2012). Lululemon And Spanx Did More Than Put Butts On the Line. Forbes.Com, 27.

Donahue. A. (2010). Spring's Hottest Bags http://www.29secrets.com/sections/style/springs-hottest-bags

Duff, M. (2002). Canadas beloved roots brand cashes in at winter olympics. Retailing Today, 41(5), 4-4,69 http://ezproxy.lib.ryerson.ca/login?url=http://search.proquest.com/docview/228515674?accountid=13631

Dreier, F. (2012). Lululemon Promises Plenty Of Yoga Pants. Forbes.Com, 22.

Kingston, A. (2011). Beaver be dammed. Maclean's, 124(44), 26-27.

Hyland, A. (2011, April 11). Chief Exec Denies American Apparel Is Ready to Fold. Los Angeles Business Journal. Retrieved from: http://www.labusinessjournal.com/news/2011/apr/11/chief-exec-denies-american-apparel-ready-fold/

Lululemon Athletica (2011). Annual Report

Lutz, A., & Ellis, J. E. (2011). In Search of Lululemon's Retailing Karma. Bloomberg Businessweek, (4245), 24-26.

Mergent, Inc. Mergent Online. Ryerson University Library, 1 Jun. 2012. Web. 1 Jun. 2012. http://www.mergentonline.com.ezproxy.lib.ryerson.ca/companyfinancials.php?pagetype=asreported&compnumber=112646&period=Annuals&dataarea=PL&range=10&currency=AsRep&scale=AsRep&Submit=Refresh Palmeri, C. (2005). Living on the Edge at American Apparel. Businessweek, (3939), 88-90.
LAPOWSKY, I. (2012). United By Blue's eco-friendly values sent costs soaring. Inc, 34(3), 99-101.

Ritchie, M. (2011). Lululemon Ambassadors. UBC Blogs, Web. Retrieved Jun. 1, 2012.

Roots.com