Lululemon expands test loyalty program with $128 annual fee

Gary Hershorn | Corbis News | Getty Images

A woman leaves the Lulilemon store at the Woodbury Common Premium Outlets Mall in Central Valley, NY. 

Lululemon has been testing a loyalty program that charges members $128 a year for curated experiences and free shipping, among other benefits, the company announced Thursday.

The retailer told analysts on its third-quarter earnings call that its pilot program was so successful, it plans to expand the it to other test markets. Reviews from its Edmonton test market, the first region for the experiment, indicate customers would pay more — so the price might rise, executives said. Currently, the annual fee pays for a pair of pants or shorts, the ability to attend curated events, workout classes and free expedited shipping.

Its expansion into a loyalty program comes as retailers are looking to make shopping “experiential” in order to keep customers coming back. Brick-and-mortar stores have been looking beyond the products on their racks to make shopping in-store worth a trip to the mall.

“Guests are seeing value beyond just the product,” Lululemon’s COO Stuart Haselden said on the company’s quarterly conference call about early reviews of the program.

Lululemon is also facing greater competition in the athleisure market as it becomes more evident that the popularity of leggings is no fad.

Free shipping is one way retailers are looking to breed customer loyalty. Retail giants like Walmart and Target have been lowering their thresholds for free shipping to compete with Amazon, pushing smaller brands like Lululemon to do the same.

CEO Calvin McDonald said on the conference call that the program has so far received strong initial reviews from Edmonton members. He did not say where it plans to expand the program to.

Shares of the athleisure retailer dipped 3 percent in aftermarket trading after providing its outlook for the fourth quarter that disappointed investors. It beat on the top and bottom lines, however, posting adjusted earnings of 75 cents per share and $748 million in revenue.