“The number of stages in the value chain in a product’s or service’s value chain in which a particular firm engages defines that firm’s level of vertical integration” (Barney 272).   Lululemon has a strong vertical integration strategy acting as “an entity that controls everything from manufacturing to the store experience” (http://nymag.com/shopping/features/58082/index2.html).

By selling products direct to consumers only at Lululemon branded stores or through the website (contrast this with the ability to purchase other brands, such as Nike, Adidas and Lucy at a variety of retailers), Lululemon leverages forward vertical integration (https://sites.google.com/site/mngt255tina/organization-planning/strategies).  Similarly, the use of only designated factories and ingrained global distribution strategies yield strong backward integration for the brand.

Lululemon is able to demand a higher price than some of its competitors by leveraging the quality differential.  However, its vertical integration styles may help balance some of the costs it incurs on the firm level.

In Lululemon’s latest 10-K, it’s vertical integration strategy is cited SIX TIMES, further proving the firm’s perception of the value of it to the company as a whole.

“We believe our vertical retail strategy allows us to interact more directly with, and gain feedback from, our customers, whom we call guests, while providing us with greater control of our brand.”

http://investor.lululemon.com/secfiling.cfm?filingID=1397187-14-21