Sheer Brilliance

Retail continues to lead the Canadian news this week, and not because Target is opening 17 more stores

Lululemon Athletica announced that a product defect in its signature black women’s yoga pant will result in sizable hit to its sales this quarter. The fabric is too sheer and is see-through in certain conditions. Investors reacted quickly, causing an initial five-per-cent drop in share price, and industry watchers are quick to question the ability of Lululemon to scale.

Being a very high profile, globally focused publicly traded company has its downsides. However, as I told CBC yesterday, Lululemon is making lemondade with its proactive, quality-first, customer-friendly handling of the situation.

So, at worst it plants a small seed of doubt in the loyal fan’s mind about the ability to be “right for me” as the chain grows and grows. Yet it demonstrates that Lululemon stands by quality, in a transparent and proactive manner (compared with recent food system recalls… This is just clothing, folks!). And consumers are talking about a more risque version of the iconic pant.

If handled well, customers will forgive, as Lulu can use its “credits” accumulated over years of running a values-based operation that places the customer (the guest) at the centre. However, this means making changes to mitigate the risk of this happening in future.

This does not mean the markets are pleased. This led to a $7M-$17M reduction in estimated short-term sales. This seems excessive at the higher end. There have been some insinuations that the opportunity was taken to cushion some slowing of growth in other areas. Longer term, there are concerns that supply challenges will continue to impact quality, which has been a cornerstone to success to date. There have been other, lesser quality hiccups. While complex global supply brings inherent risk, quality checks must be in place to catch problems early.

Mistakes are to be expected as part of the global growth curve. However, some hubris may be involved as well. Lululemon has created a tight culture and internal brand in part by holding firm the idea “we do things differently here,” the oft-quoted “Lululemon way.” Perhaps the time has come to be more eager to explore best practices from the outside world, particularly around quality, sourcing and logistics.

Finally, a particular mommy-blogger has suggested this is all a marketing tactic, to generate interest and PR. This should be thoroughly discredited. There are financial market legalities at play here, not to mention overall market trust. The company simply would not stage this. I hope the media refrain from giving that angle any airtime.

What I do hope for is an inspired and cheeky humour campaign down the road, the kind for which Lululemon has become known. Once the dust settles of course.

David Ian Gray is the owner and principal of DIG360 Consulting Ltd., a Vancouver-based retail consulting firm.