Lululemon certainly made a breakthrough innovation years ago when it introduced yoga-themed athletic wear to the world, but the reason our panellists felt strongly that the global chain deserves to remain on the list is its culture of constant innovation. This culture is rooted in Lululemon’s unique community-focused approach to franchise retail, where each store is expected to become a community hub for its customers. And that means flexibility.

Lululemon relies on each manager operating their store as if it were their own small business rather than a mall-outlet clone, with the power to arrange floor plans and window displays, for example. That autonomy is matched with responsibility through an entrepreneurial pay structure for store managers, which mimics the risk-and-reward world of a small-business owner. A monthly feedback mechanism between managers and the design departments ensures that ideas from the shop floor get a chance to influence the next generation of products.

“Unlike any retailer I have ever seen, they are highly decentralized,” says one of our panellists, “as opposed to typical retail, which is all about tactics and control and tends to stifle innovation.”
And this model has proven itself in the bottom line: 2008 profits from the 113 Lululemon stores totalled $39.3 million, and 2009 profits are up another five per cent.