People love to get deals, and we love to feel like we’re part of a special club. That’s why Fabletics, a sort of Columbia House for sports bras, is apparently succeeding in its expansion into real-life retail, and plans to open as many as 100 new stores.
The business model makes sense the more that you think about it. Imagine if Netflix opened a movie theater where you could watch their original movies and documentaries, and it sold tickets that were similarly priced to regular movie theaters… but those tickets were discounted or free if you bought a Netflix subscription on the spot. That’s how Fabletics sells workout clothes.
Forbes cites the example of a pair of $80 exercise leggings that costs $50 with that $50/month membership. Selling one item to a casual shopper isn’t the point: the goal is to convince shoppers to buy memberships.
“We do very, very well when we’re located near a Lululemon or Athleta,” co-CEO Adam Goldenberg explained to Forbes’ Clare O’Connor. Putting their stores near similarly priced competitors does the job of anchoring for them: if a shopper comes in with an $80 price tag for pants in her head (or his head–there is a Fabletics line for men) then $50 will seem like a bargain. All the shopper has to do is remember to log in every month and say they don’t want to buy anything.
The brand’s co-founder, Kate Hudson, has three and a half million Instagram followers to whom she promotes the brand and its products with photos and videos of her being beautiful and fit and aspirational.
There’s nothing wrong with the business model of using mall stores to sign up new members, as long as shoppers know exactly what they’re signing up for.