LULULEMON REPUTATION AUDIT Carla Reinhard, REI13379907 BA (Hons) Fashion Public Relations Crisis and Reputation Management
Lulu Lemon Reputation Audit In this Reputation Audit, the aim is to analyse a crisis that has struck a fashion brand during the last two years, to give an overview about how the brand dealt with the crisis and to provide an analysis on how effective their reaction was. The analysis will be carried out through the example of the brand Lululemon. 1. Brand Background Lululemon is a Canadian sportswear brand founded in Vancouver BC in 1998. The brand produces clothes and accessories for activities such as running, dancing but is best known for their yoga apparel (Lululemon, 2014). Lululemon products are sold in 270 locations worldwide with annual sales of 1.6 billion dollars (Business Insider, 2014). They operate shops and showrooms in Northern America, Europe, Australia, New Zealand and Asia and therefore have a wide market. 1.1. Chip Wilson The brand was founded by Chip Wilson, who acted as Lululemon’s CEO until 2005. In this year, he sold 48% of the company’s stakes to Advent International and Highland Capital Partners, two American private equity firms (Chip Wilson, 2014). He was then chairman of the company until 2013 when he stepped down from this role. 2. Crises Lululemon has faced several crises since being founded in 1998. The brand’s reputation suffered when in March 2011 a Lululemon employee brutally killed a coworker in one of their stores in Maryland (Daily Mail, 2011). Promoting a positive work environment and describing the store workers as ‘educators’ rather than just ‘employees’, the store murder did not fit into this brand image. In early 2012, Lululemon faced criticism because their bright colours were bleeding when getting wet, for example when people were sweating (Lulumom, 2012). Shortly after the bleeding problem, Lululemon came under fire for selling swimwear that became see-through when wet (Lululemonstory, 2012). Additionally, the brand was criticised for a “subset of light coloured pants” in the same year (The Wall Street Journal, 2013). Through all those product problems the brand’s reputation suffered, mainly because Lululemon customers pay more money for their products than they would for other brand’s comparable workout wear and therefore expect better quality. 2.1. Sheer Luon Pants All the above previous crises of the brand peaked in one major crisis, when in early 2013 complaints about the sheerness of Lululemon’s black Luon pants were starting to circulate. On March 18th, 2013 Lululemon reacted to the problem by calling back all the affected black pants made with their signature luon fabric (Business Insider, 2013). The brand announced the measure by publishing a press release on their website stating “We have determined that certain shipments of product received from our factories and available in store from March 1, 2013 do not meet our technical specifications” (Lululemon, 2013), implying it was the suppliers’ mistake. The affected Luon pants made up around 17 percent of Lululemon women’s pants in their stores. On the next day, March 18th, the responsible supplier, Eclat Textile Co. based in Taiwan promptly clarified that it was not their mistake, as Lululemon had approved
the see-through pants before they were delivered to the stores (The Wall Street Journal, 2013). The Wall Street Journal stated in the same article that Lululemon would not comment on its “supervision of suppliers”. On April 3rd, two weeks later, Lululemon released a new statement on their website, explaining what had gone wrong that had caused the affected pants to be sheer. The press release stated: “While the fabric involved may have met testing standards, it was on the low end of lululemon's tolerance scale and we have found that our testing protocols were incomplete for some of the variables in fabric characteristics. When combined with subtle style changes in pattern, the resulting end product had an unacceptable level of sheerness” (Lululemon, 2013). Furthermore, they explained how they planned to improve their procedures to make sure that this problem does not occur again. On the same day, Lululemon published a second press release, announcing that their product officer Sheeree Wilson was leaving on the 15th of April (Lululemon, 2013). In June, CEO Christine Day announced that she was leaving her position as soon a replacement has been found (Business Insider, 2013). In October 2013, new complaints started circulating about yoga pants that were pilling (Huffington Post, 2013). On the 30th of October, Lululemon released a statement announcing that Tara Poseley will take over the Chief Product Officer role, which was open since Sheeree Wilson left in April after the Luon pants recall (Lululemon, 2013). The crisis peaked when Chip Wilson, then chairman of the company, went onto Bloomberg TV on the 5th of November to speak to Trish Regan about a new app that he has developed with his wife. Interviewer Trish Regan also wanted to speak about the sheer pants problem in March. Chip Wilson stated live on TV that “some women’s bodies just actually don’t work” with their pants. He continued saying “it’s really about the rubbing through the thighs, how much pressure is there over a period of time and how much they use it” (Huffington Post, 2013). His statements caused outrage on social media with people sending off tweets such as “Maybe it is womens' problem that #lululemon pants fabric pill. It is also our problem if we spend money on Chip Wilson's products” (Huffington Post, 2013). Three days later, on November 8th, Lululemon posted a Youtube video to their Facebook page, in which Chip Wilson apologised for his statements on Bloomberg TV. The apology was not received well and sparked negative media reactions with ABC News saying it could be the worst apology ever released (ABC News, 2013). On the 10th of December the brand published a press release announcing that the new CEO, Lauren Potdevin, will start working for Lululemon in January 2014. On the same day it was announced that Chip Wilson would step down as a chairman with Michael Casey taking over his role. Casey was acting as director of Lululemon’s board for six years before taking over from Chip Wilson (Business Insider, 2013). One month after Chip Wilson’s controversial statements on live TV, Lululemon put up a poem in a window in one of their stores in Maryland, saying “Cups of chai, apple pies, rubbing thighs?”. A Twitter user photographed the storefront and posted the picture. Lululemon responded to the negative reactions with a tweet saying “We’re deeply sorry, the display is being taken down. We celebrate thighs rub together – ours do too” (Huffington Post, 2013).
3. Crisis Management Analysis Analysing Lululemon’s crisis management on the Luon pants example, it becomes clear that the brand reacted in the wrong way on many occasions. Their initial action, recalling all Luon pants, which caused them a loss of $67 million sales, earned positive feedback from the media (Forbes, 2013). It was seen as a transparent move, taking their customers complaints seriously after only posting an apology to their Facebook wall about their previous product problems mentioned above (Wall Street Journal, 2013). It was not the recall that caused the brand problems; it was their communication around the measure. When releasing the statement about the recall they blamed the fault on their suppliers instead of admitting that their supervision has not been good enough to detect the problem. Their try to cover up their mistake backlashed when the blamed supplier said it was not their fault (The Wall Street Journal, 2013). In a crisis, it is important that everyone involved communicates the same message, to prevent even more confusion for the customer. With their next step, releasing a second statement admitting their “incomplete testing protocols”, the brand tried to address this problem and improved the situation. After several product problems it was also a good decision to stop working with the then responsible product officer Sheeree Wilson, to regain the customers trust in their products, communicating that they are changing their structures to ensure that such mistakes do not happen again. The same can be said about their separation from their CEO Christine Day and the announcement of their new product officer in October. Addressing the problem by changing company structures seemed to improve the brand’s reputation again until Chip Wilson’s interview on Bloomberg TV. His statements were the worst possible comments he could possible say, again blaming the problem on others, after the company had taken great measures to gain back the customers trust. Instead of blaming it on their supplier, Chip Wilson blamed women’s bodies, addressing a very sensitive topic in today’s society. It becomes clear that Chip Wilson, still the face of the brand for many, has not been briefed on key messages to convey at all, which resulted in a disastrous interview. His apology posted to the brand’s Facebook wall three days later only made matters worse with Chip Wilson incomprehensibly only apologising to Lululemon employees, not customers who were outraged by his comments. His apology conveyed the message of not taking their reaction seriously and not caring about them. Announcing that Chip Wilson would step down as a chairman was the right decision but came too late, having already caused massive damage to the brand’s reputation. The fact that the brand themself brought the very controversial comments up again when putting up the poem into one of their stores showed that they have not learned from their mistakes and that they still did not realise how sensitive the topic is. All in all, this crisis was handled very badly with the problem carrying on longer than necessary and fuelling the crisis and media buzz with actions that were not thoughtthrough. Lululemon will now have to gain back the trust of their once loyal customer base by proving that they can rely on the brand’s quality when they invest such a high amount of money into their products.
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