On May 5, lululemon Trading (Shanghai) Co., Ltd., an affiliated company of lululemon, was fined 814200 yuan by Xicheng District market supervision and administration of Beijing Municipality for violating Article 50 of the product quality law (adulterating and adulterating products, passing fake products as real ones, shoddy products as good ones, or passing unqualified products as qualified products).

According to the decision on administrative punishment, from October 1, 2021, Lulu lemong will use some of the above products (59 pieces in total) for sale in its 9 stores in Beijing, with a price of 1380 yuan / piece. As of November 3, 2021, 51 pieces have been sold, with a total sales volume of 67205.34 yuan. The sold products cannot be recovered. Luluolemong made a profit of 23431.05 yuan, with a total value of 81420 yuan.

Xicheng District market supervision and Administration Bureau of Beijing issued a fine of 81420 yuan and confiscated 23431.05 yuan of illegal income and illegal property. This information quickly boarded the microblog hot search after being exposed by the media.

Under the pressure of public opinion, lululemon apologized on the official microblog and admitted that the filling amount of navigation men's down vest sold by lululemon was inconsistent with the national standard. They also said that after finding the problem, the company immediately took off the shelves of relevant batches of products, and conducted internal verification and rectification.

Lululemon is known as "LV in yoga industry", and a pair of Yoga Pants costs thousands of yuan. However, it has quickly captured a large number of female users with its close fitting, comfortable, fashionable and stylish characteristics and accurate online marketing.

In 2007, lulemon's market capitalization was $1.6 billion; In November 2021, the total market value once exceeded US $62 billion.

In the development history of lululemon, it has overturned many times due to quality problems, and the supply chain behind it is the key bug.

It is worth noting that as lululemon expands into a variety of categories such as sports shoes and clothing, it will face greater supply chain challenges.

It's not the first time that the car overturned due to quality problems

This is just one of lululemon's many quality problems.

Read the comment area of lululemon's official website and China's social networks, and users' roast about its quality problems can be seen everywhere.

In the black cat complaints, consumers' complaints about lululemon quality problems include the pilling of shorts worn for less than three months; The trousers will be worn twice; Yoga mat has plastic smell; Clothes hook silk, etc. These issues have not yet been addressed.

Historically, lululemon has repeatedly overturned the car and suffered losses due to quality problems.

At the beginning of 2013, a batch of black luon Yoga Pants produced by lululemon received a large number of complaints because the cloth was too thin and transparent, which was easy to cause women to go naked.

Lululemon recycled the yoga pants off the shelves. A few months later, they launched a new improved product, but customers still pointed out that they were too thin and transparent.

According to the article of Orient Securities Research Institute, the recall indirectly caused the delayed delivery of new products in the autumn of 2013, with an estimated revenue loss of about $67 million.

This quality problem has brought more than economic losses to lululemon.

The recall made Sheree Watson, then the company's chief product officer, immediately take the blame and resign. A few months later, Christine day, lululemon's CEO, also announced his resignation, which once triggered a sharp drop in share prices.

At the end of 2013, Wilson, the founder of lululemon, triggered a crisis of public opinion due to improper remarks. He said that the material of the recalled yoga pants is thin because they can't help the friction of fat consumers' thighs, and their bodies are not suitable for wearing lululemon clothes.

As soon as this statement was made, there was an uproar in public opinion, which made lululemon's recall more complicated. Wilson not only publicly apologized for his improper remarks, but also was forced to resign as chairman of the company in December 2013 and retain only the position of director.

In 2015, lululemon was exposed to have potential safety problems with the 20 hooded jackets and tops it sold, because the lace of the top and hat made of elastic material caused seven facial and eye injuries.

Lululemon again carried out large-scale recall processing, and recovered 133000 and 185000 jackets in the United States and Canada respectively. After that, they also changed the lace up to an inelastic material. In the fast-growing market, lululemon's reputation and performance continued to decline due to quality problems.

In terms of net profit, from 2013 to 2017, lululemon's net profit growth slowed down, and even showed negative growth in net profit in fiscal years 2014 and 2017, with a year-on-year decline of 14.6% and 14.5% respectively.

Long term supply chain risk

The average price of a lululemon yoga pants is 1050 yuan, which is about twice that of similar Nike products.

Lululemon, why?

If you summarize the selling points of its products in one sentence: it has achieved an excellent balance in functionality, comfort and fashion.

This is due to the fact that lululemon's design and development team adopts technologically advanced fabrics and continues to seek innovation in product design and production technology.

Lululemon itself does not produce raw materials and products, but purchases fabrics from third parties and outsources the production process to third-party manufacturers.

They cooperate with fabric suppliers to develop exclusive fabrics, including everlux, which focuses on fast drying, nulu and nulux, which focus on soft. Lululemon also cooperates with an independent third party to conduct a variety of tests on fabrics, including pilling, shrinkage, wear resistance, color fastness and other dimensions.

Lululemon guarantees the exclusive use and market competitiveness of these fabrics through agreements, trademarks and trade secret protection.

However, so far, most of the patents applied by lululemon are process design patents, including dynamic bra fabric weaving method and bra design with storage bag, rather than fabric patents.

Lululemon has not signed a long-term contract with any manufacturer or raw material supplier; They compete with other companies in production, fabrics or raw materials. In the risk warning part of the financial report, the high dependence on the supply chain is the long-term risk faced by lululemon.

How high is the risk?

In July 2017, a news that Amazon wanted to recruit large sportswear suppliers to build its own sports brand made lululemon's share price fall by 4%, and some analysts also rated lululemon's stock as "sell-off".

Because it is said that lululemon's top supplier eclattextileco Will make clothing for Amazon. Previously, eclattextileco Has been developing its iconic luon fabric for lululemon. Market analysts believe that Amazon's new sports brand will carve up lululemon's market share and squeeze its profit margin.

Since 2017, lululemon has begun to diversify supply chain risks, including increasing the number of suppliers, reducing dependence on a single supplier, and distributing production and manufacturing in many places around the world.

Comparing the data of 2017 and 2021, it is found that the proportion of lululemon's top five fabric suppliers has decreased from 59% to 56%; The proportion of the top five manufacturers fell from 64% to 57%.

In the same period, the proportion of lululemon's largest single fabric supplier decreased from 35% to 27%; The proportion of the single largest manufacturer fell from 25% to 15%. Despite the efforts made for several years, lululemon's current supply chain risk is still not small.

In the 2021 financial report, lululemon disclosed a number of risks related to the supply chain.

Among them, many special fabrics used in the company's products are developed and produced by a third party, and can only be purchased through one or a limited number of channels in the short term.

If the supply chain is interrupted, various problems may be caused. The company cannot ensure to find additional fabric suppliers or raw material suppliers and manufacturers.

In 2021, China achieved remarkable results in epidemic control, but Euromonitor data showed that the market share of Nike and ADI in China fell to 40% in that year; In 2020, their market share was 43%.

Lululemon also cannot escape such risks. They wrote in the 2021 financial report that the whole garment industry, including us, is facing challenges in the supply chain. These challenges stem from the COVID-19, political instability, inflationary pressure, reduction of freight capacity, increase in costs, port congestion, factory downtime, labor shortage and other factors.

Lululemon has increased its use of air transport due to cargo disruption and port congestion, which has also led to increased costs. They expect that the company's costs in this regard will continue to increase throughout 2022.

Challenges of multi category expansion

From the perspective of the expansion path of giants such as Nike and Adi, it is not enough for lululemon to sell yoga pants and serve female users.

Many years ago, it has shown its ambition to expand to multiple scenes and categories.

In 2013, lululemon started its men's wear business and opened its first independent men's wear store in New York in 2014.

By 2017, the company has regarded men's wear business as one of the three business growth points.

In 2019, lululemon's executives revealed in an interview that the growth rate of the company's men's clothing business has been higher than that of women's clothing, and the scale of men's clothing may reach the level of women's clothing in the future.

In 2017, lululemon launched sneakers in cooperation with athletic propulsion labs, a sneaker manufacturer. However, this sneaker didn't succeed and finally got off the shelf silently.

On March 9 this year, lululemon released four footwear products and announced its official entry into the footwear market.

Among them, the first women's running shoe, blissfeel, was sold in Chinese Mainland, North America and the United Kingdom on March 23 at a price of 1180 yuan. Blissfeel is lululemon's first independent brand of sneakers for women.

For clothing brands, supply chain capability is one of the core competitiveness. Expanding to multiple categories will undoubtedly make lululemon, which is already highly dependent on the third-party supplier, face greater supply chain challenges.

From the perspective of supplier resources, lululemon still has a huge gap with Nike.

Nike's 2020 financial report shows that it has 122 shoe manufacturing plants in 12 countries, of which 4 shoe Suppliers account for more than 10%; They account for about 61% of Nike brand shoes.

At the same time, Nike has 329 clothing factories in 38 countries around the world, and the largest supplier accounts for about 11% of Nike brand clothing products.

This time, lululemon was exposed that its "shoddy" product was its men's down jacket.

In addition, sports shoes and men's wear are both huge markets, but the competition is also fierce. To enter these markets, lululemon needs to deal with the siege and interception from giants such as Nike, Adidas, Anta and Li Ning.

Rivals have been working in corresponding fields for decades, and it is not easy for lululemon to run fast in markets such as shoes and men's wear.

Facing more and more rational consumers, "poor quality" is a label that lululemon must remove.

As a "Yoga Lv", since the brand temperament has been enhanced to today's share, lululemon must first be able to afford its price if it wants to continue to win.