Decathlon, which turned against the brand, doesn’t want to be Lululemon

Decathlon has always been a low-price brand, but now it has raised its prices. What is going on? Read this article to find out.

Decathlon has increased its prices.

This nearly 50-year-old French sports brand has always adhered to the strategy of low prices for half a century. However, since last year, Decathlon's price increase has been accelerating, and many items have increased by 50% to 100%: white pure cotton short-sleeved T-shirts have doubled from 19.9 yuan to 39.9 yuan; backpacks that cost 49.9 yuan have soared to 89.9 yuan; and jackets that originally cost 199 yuan have also risen to 249 yuan. In Decathlon stores, the presence of blue products, which symbolize low prices, has also weakened a lot.

Not only that, Decathlon also launched a new brand strategy "Polaris" in one go, and simultaneously launched a matching logo and a new slogan: "Ready to play?" Generally speaking, when a brand releases a new strategy, the first answer is "transformation."

Image source: Decathlon

Celine Del Genes, Decathlon's global chief customer officer, said implicitly: "Our strategy is to build a multi-field professional sports brand." According to foreign media reports, Decathlon's rebranding is to leverage its status as the official sponsor of the 2024 Paris Olympics to enhance brand awareness.

In addition to price increases, in order to adapt to the more expensive brand tone, Decathlon also played with the representative of the bourgeoisie - coffee.

On April 15, Decathlon China's first coffee corner, COFFEE HOUSE, opened in the form of a store within the Decathlon Wujiaochang store in Shanghai. In addition to regular coffee shop products such as coffee and baking, Decathlon also incorporates special drinks with sports attributes, such as New Skin Protein Shake and Burning Sparkling Water containing 1500mg of Decathlon L-Carnitine powder per serving, which is obviously to capture the characteristics of brand users who love sports and further explore their demands in "sports + diet".

Image source: Xiaohongshu @桂花落满地香

Will Decathlon's price increase strategy work? Or will it backfire? How difficult is it for a brand known for its affordable prices to truly move upmarket? In today's post, let's predict the future of Decathlon.

1. Affordability is no longer comfortable

Decathlon’s business model easily reminds people of Costco, which is a warehouse-style store strategy.

At Decathlon, big stores are the foundation. The stores, which are thousands of square meters in size, have a large number of private brands, covering more than 80 kinds of sports that you can think of. And in each product line, there are always a few blue products with the best cost-effectiveness and the most popular ones, which are called the magic bags and magic shoes by the majority of netizens.

Just like Costco's free tasting, Decathlon also offers free trials. Decathlon has set aside a certain area in its stores for consumers to play roller skating, table tennis, archery or fitness. Coupled with generous parking benefits, Decathlon has become a paradise for some people to take their kids out for a walk. It can be said that Decathlon has long provided consumers with a one-stop experience of socializing, fitness, shopping, etc.

Affordability is something that is usually welcomed by both brands and consumers at the beginning of operations.

In Decathlon's profit system, the most important strategy is to do full-category substitute business and use cheap and large bowls to win small profits and quick turnover. But over time, the disadvantages of parity will slowly surface.

In order to earn hard-earned money, Decathlon never dares to raise prices arbitrarily, but tries its best to reduce costs. However, there is obviously a lower limit to cost reduction, and the contribution of such cost control to profits will also decrease marginally.

Decathlon has been the top sports brand in the world for many years. However, the elephant also has its own troubles.

In fiscal year 2023, the company's sales growth rate was only 1.15%; net profit only increased by 0.9%. This is the second year after 2022 that Decathlon's revenue growth rate has slowed down significantly. In 2022, Decathlon's sales growth rate dropped sharply from 21.3% in 2021 to 12%; the net profit margin in 2022 was 5.9%, which is less than half of Nike's (11.8%).

This means that low prices are no longer Decathlon’s comfort zone.

In addition, the business models of Decathlon and Costco are still highly similar, but the two parties are in different tracks.

Costco's products cover most aspects of food, clothing, housing and transportation, especially food and daily necessities, which are necessities in everyone's life. It is not surprising that most members drive to Costco every week.

But Decathlon only covers sports. In other words, even those who love sports will not visit a sporting goods store once a week. Therefore, it is obvious which one has a higher purchase frequency between Decathlon and Costco.

Decathlon felt the crisis. How to increase profits within a limited number of purchases? The first way this old French brand thought of was to raise prices.

Photo by New Retail Business Review

In fact, price increases for outdoor products have become the norm in recent years. According to Tmall sales data, the price of jackets alone has increased by 2.8% to 58.9%, including Arc'teryx, North Face, Columbia, and Banana. The cheaper the domestic brands, the greater the increase. In addition, Uniqlo has also had a more obvious price increase trend in recent years.

"Everyone else is raising their prices, so if I don't, won't I be losing money?" Decathlon's price increase strategy is somewhat influenced by a herd mentality.

In January 2024, Zhang Xiaoyan, former head of lululemon's brand in China, jumped to Decathlon and served as CMO (Chief Marketing Officer) in China. Before joining Decathlon, Zhang Xiaoyan worked for lululemon and luxury sports fashion brand Bogner, and expensive marketing became Zhang Xiaoyan's personal label. It is precisely this point that gives Decathlon hope of breaking out of the circle.

After Zhang Xiaoyan joined, Decathlon fans calculated that something was wrong. Was this going to push Decathlon in the same direction as Lululemon? Sure enough, Decathlon quickly launched a series of actions to reduce prices. After the price increase, the next question is how many consumers are willing to pay for it?

2. Lululemon’s ambition

Although netizens believe that Decathlon wants to make money from lululemon users, after all, although they are both sports brands, there are huge differences between the two in terms of price, style, target population and business model. It can be said that they are different in every way.

The popularity of lululemon is somewhat unexpected. At the 2022 Beijing Winter Olympics, the uniform red down jackets of the Canadian delegation amazed the Chinese audience in front of the TV. Since then, this brand that started out as yoga wear has begun to jump into the vision of Chinese consumers. In addition to the great assist of the Beijing Olympics, lululemon's success in breaking out of the circle is more importantly due to the superposition of the two crazes of "female consumerism + the rise of yoga fitness".

Many female consumers who practice yoga often suffer from the difficulty of finding a perfect pair of yoga pants. A pair of yoga pants must be beautiful, shape the body, avoid embarrassment, etc. Although it does not require any particularly difficult black technology, when lululemon was a rare commodity, its timely appearance filled this gap in women's consumer demand and became the standard for middle-class women.

It can be said that Decathlon occupies the market with all categories, while lululemon has made a breakthrough with yoga pants, a single product. Since 2019, China has led the expansion of lululemon's stores worldwide, and even more than 60% of the new stores opened in 2021 are from China. Nowadays, lululemon has long been "fed up" with the instability of relying solely on yoga pants, a single popular SKU, and wants to become a high-end sports brand with a full range of products.

For lululemon, the current task is more about expanding from female consumers to male consumers.

To this end, lululemon has stepped up its efforts in both marketing and product development. From the marketing perspective, lululemon invited Zhou Guanyu, the first Chinese F1 driver, as its spokesperson. With his racing driver attributes and sunny and handsome appearance, Zhou Guanyu can be said to be popular with both men and women.

From the product development perspective, in November 2023, lululemon established the first men's clothing pop-up space in China in Shanghai; at the end of January this year, the company opened its first independent men's clothing store in Beijing Yiti Park, which is also its first independent men's clothing store in the Asia-Pacific region.

Lululemon men's flash pop-up space, source: Lululemon official Weibo

Is the business of men's sportswear easy to do? Of course not. Compared with the rise of female consumerism, male consumerism has a long history, and men's clothing is also recognized as a red ocean field. With Nike, Adidas, Decathlon and other long-standing leaders in the front, it goes without saying that Lululemon's road to men's clothing is difficult.

3. It is difficult to go from frugality to luxury

Lululemon's transformation path is not easy, but for Decathlon, it seems to be more difficult to expand its brand than lululemon.

What’s interesting is that lululemon doesn’t want to be “exclusive for hot girls”, and Decathlon doesn’t want to be a “paradise for straight men”.

In the final analysis, neither party wants to be limited to a single customer group, but rather wants to achieve a diversified product line. We assume that the current domestic total consumption is still insufficient, and it is not easy to tap into incremental consumer groups. Then, the way to make the pie bigger is to radiate to people beyond the original target customers with more product lines of different dimensions.

But the difference is that Lululemon is expanding horizontally, from female consumers to a balanced consumer group of both men and women, while Decathlon is expanding vertically, from affordable prices to a full-price strategy that combines high and low prices.

Decathlon does not want to be lululemon. After all, lululemon's target audience is still the middle class. Decathlon's ambition is to capture both the middle class and the civilian population and become an evolved version of Decathlon.

Fabien Brosse, Decathlon's global chief product brand officer, admitted in an interview with Jiemian News that Decathlon does intend to develop high-end brands, but this does not mean that Decathlon will completely lose its advantage in price. "Enabling everyone to participate in sports will still be Decathlon's first priority. This is what we have always emphasized and will not change. But at the same time, we hope that Decathlon will also have a certain share in the professional market."

In the high-end market, consumers will make more demands, make stricter comparisons, and have lower tolerance. When high-end brands make affordable products, they may lose their identity, but few consumers question their ability. Because in the minds of consumers, affordable products can actually be made by everyone, it's just a matter of willingness. But when the story is reversed and it becomes an affordable brand making high-end products, consumers' thoughts will become much more complicated.

How high will the price go? Most likely it will be neither high nor low. The tone required by the middle class cannot be met, and the cost-effectiveness required by the lower class is also lost. New customers may not be captured, but old customers may defect. For Decathlon, whose sales volume 75% comes from members and the repurchase rate of old customers is as high as 60%, raising prices is undoubtedly a risky move. As long as the price is raised, there is no guarantee that members will turn around and go to Anta.

In order to fill the gap left by the possible loss of old customers, Decathlon must snatch food from the tiger's mouth.

If you have two yoga pants of similar price, both of good quality and good-looking, would you choose Lululemon or Decathlon? I believe that most consumers will choose the former. In order to grab the cake of others, what Decathlon has to do is to raise prices while improving the cost-effectiveness of high-end products - it has to be better-looking, better-quality and cheaper than others.

However, thinking from another perspective, this seemingly demanding "this and more", once truly realized, Decathlon's moat will undoubtedly be much more solid than the single "cheap" in the past.

The famous actress Song Dandan once had a classic "Eggplant Theory". She said: "After you play an eggplant, the purple ones will come to you, but tomatoes and cucumbers will not."

This is the case with people, things or brands. We have deep-rooted stereotypes. This also means that Decathlon's price increase is a "thankless" task in the short term. However, the improvement of brand tone cannot be achieved overnight, let alone overnight.

Fortunately, after the price increase, Decathlon still has a lot of affordable products to offer. It can gradually grow on the long and arduous road of high-end development in a more balanced and stable way. Whether Decathlon can win the game of high-end development will take time and the market to show the result.

Author: Koala is a Deer

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