So Lululemon has a problem with its yoga pants. It is of the I-see-England-I-see-France variety (Lululemon Yoga Pants Pulled From Stores for ‘Sheerness’, Wall Street Journal, March 19).
The yoga-apparel retailer’s shares tumbled late Monday after saying it has pulled some of its popular pants from stores, after a mistake by a supplier left the pants too see-through. …
“The ingredients, weight and longevity qualities of the pants remain the same but the coverage does not, resulting in a level of sheerness in some of our women’s black Luon bottoms that falls short of our very high standards,” Lululemon said in a release.
Lululemon said Monday it has used the same manufacturing supplier on key fabrics since 2004 and is working to understand what happened.
There are a couple of interesting angles here. First, there is the question of their exposure to a single supplier. The supplier in question is Eclat Textile, which is based in Taiwan but produces all over the place. At some level, this is reminiscent of automakers exposure to tertiary suppliers damaged by the Japanese earthquake. Here, a problem at one supplier has led Lululemon to pull 17% of the pants it has in its store. The extent of the dependency is such that Lululemon has discussed its narrow supply chain in its annual report:
“We may experience a significant disruption in the supply of fabrics or raw materials from current sources or, in the event of a disruption, we may be unable to locate alternative materials suppliers of comparable quality at an acceptable price, or at all,” the company said in the filing.
Now, to be fair, we should note that Eclat Textile insists that there is no problem (from a second WSJ article Taiwan Supplier: Lululemon Clothes Not ‘Problematic’, Mar 19).
“All shipments to Lululemon went through a certification process which Lululemon had approved. All the pants were manufactured according to the requirements set out in the contract with Lululemon,” Eclat Chief Financial Officer Roger Lo said. …
“Throughout the whole process, Lululemon hasn’t raised any questions or concerns,” he added.
This is may be a certain amount of sour grapes from having a major customer throw you under the bus, but it raises interesting questions of how a firm works with a supplier to determine appropriate quality standards and enforces them over time. For example, in this instance is the sheerness issue a matter of the material or the design of the product? If it is the former, then it suggests that somewhere, someone has let their production process go out of control. If it is the latter, then what is it about whatever tweak there is to the current style that exposes (so to speak) the problem.
The second angle here relates to how Lululemon manages its stores. As we have written about before, they are known for understocking to a certain extent in order to motivate people to by at full price (and people do). However, they just dropped their pants by 17%. That’s going to leave a lot of bare shelves until they can this resolved.
Also, how they discovered this problem is interesting. Business Insider reports that word came from store managers who brought it up in meetings with corporate. Regular feedback from stores is part of how Lululemon keeps on top of what customers want and what they find problematic with current designs. It’s fairly remarkable that it only took about two weeks from the pants hitting the stores to corporate being willing to withdraw the product.