Could Fulfillment and Distribution Save Lululemon's Slumping Sales?

Published : June 19, 2014

businesswoman-in-a-sales-slumpBest known among the circles of yoga enthusiasts, the clothier Lululemon is famous for its line of highly priced yoga pants. Yet even as the yoga bubble continues to expand globally, Lululemon is finding it difficult to stay ahead of the curve. According to the Wall Street Journal, competition, a lackluster expansion effort, and see-through material has left Lululemon in the lurch.

Could this luxury brand be saved by changes in fulfillment and distribution?

The See-through Scandal

One of the first signs of concern for Lululemon was the public outcry in March 2013 and subsequent lawsuit in July 2013 over the use of sheer material in Lululemon's Luon line of yoga pants.

As noted in a CNN Money piece at the time, Lululemon executives failed to disclose “quality defects in the Luon yoga pants… [which] resulted in part from Lululemon's efforts to cut costs in order to raise profit margins to the detriment of product quality and brand reputation.”

Approximately 17 percent of the pants sold by Lululemon in stores were described as being “overly translucent.” This major wardrobe malfunction led to the resignation of chief product officer Sheree Waters, as well as a total cost of up to $17 million dollars as stock fell 13 percent in 2013.

Supply Chain Issues

In terms of fulfillment and distribution, Lululemon is currently suffering from slow sales thanks to the PR disaster that followed the defective yoga pants episode. Fox Business reported that the company experienced explosive growth, including 30 percent growth of same-store sales, up until the Luon pants debacle in March 2013.

Lululemon saw an instant reversal in the supply and demand of its product, not to mention the loss of 17 percent of product directly due to the product recall. Add on delivery problems to stores to create the perfect storm for a logistics nightmare for the athletic-wear company.

As a result, at the start of 2014, Lululemon saw its first quarterly decline since 2009.

Comeback Company

Flash forward to April 2014 when the lawsuit brought against Lululemon by shareholders was dismissed. In this dismissal, the court ruled that the company was not liable for the $2 billion lost by shareholders. This is a step in the right direction for Lululemon, offering the company an opportunity to reclaim its public image as a leading luxury brand for fitness-related apparel.

Plans for Expansion

At the top of its game, Lululemon was part of a faddish demand for designer yoga apparel and accessories. Now, as a result of the downward slide started by the defective Luon line, Lululemon has been forced to contend with declining sales and loss of customer loyalty.

In order to rehabilitate its image and begin to move product again, the company has plans to refocus its supply chain.

Lululemon chief executive Laurent Potdevin, former president of TOMS Shoes, states the goal of the company is to tap into the global market and expand product lines—including the introduction a new men's line and the Ivivva Lululemon line for young girls which are expected to bring more than $1.5 billion dollars.

But, with the Luon debacle still fresh in the minds of consumers, Lululemon’s manufacturers and fulfillment teams will have to work especially hard to deliver an exceptional customer experience.

The Bottom Line

Lululemon has, so far, been taking the blow in stride, making positive changes to help the company regain market confidence with fulfillment and distribution of newly restructured lines.

John Curry, chief financial officer of Lululemon, noted in January 2014 that “while we realize that it will require continued investment and time to get to best-in-class status, with our new leadership in place we are very focused on building on this stronger foundation to execute our long-term growth strategies.”

Topics: Supply Chain Logistics

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