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Stretching Demand Could Test Lulu’s Limits

A recent story about the successful yoga and workout apparel lululemon had me thinking about just how flexible consumers can be, and how far a merchant can stretch its growth without relying on data.

One of the chain’s winning strategies, according to a story in the Wall Street Journal, is systematic scarcity. In other words, it limits supply in both color and style so that its devoted customers feel they should purchase the item now or risk never owning it. The tactic creates a sense of urgency and the results are hard to argue – 95 percent of lululemon’s apparel sells at full price.

As the WSJ story put it: “While a large part of lulu’s strategy is getting the product right, an equally important part is keeping it scarce. The goal is to sell gear at full price and to condition customers to buy when they see an item rather than wait. ‘Our guest knows that there’s a limited supply, and it creates these fanatical shoppers,’ says (CEO Christine) Day.”

This is an intriguing strategy, especially when combined with lululemon’s shoe-leather approach to CRM: watching how its customers shop in the aisle, eavesdropping on conversations and using encouraged feedback to modify its merchandise and stores.

The chain relies on these tactics instead of consumer purchase tracking because, as Day explained, “big data” gives merchants a false sense of security.

Data certainly could do this, but I don’t see that as a reason to avoid using what can be our best asset for understanding what our most important customers are buying. Especially when your intentionally scarce products sell out much faster than expected, as has occurred with lululemon.

And especially when your specialty business has expanded into an international, billion-dollar corporation. It is one thing to know who your best shoppers are in your back yard, but how about in Tulsa, Okla., or Providence, RI? If you don’t know just what and how much your most desired customers are purchasing, you run the risk of alienating them when you are unable to get those high-demand colors or styles fast enough. Scarcity is one thing, but shoppers shouldn’t feel that their efforts are futile – that only leads to frustration.

We can learn a few things from lululemon’s approach to customer experience. But if the me-too’s come close to reproducing its experience or product lines, the chain may need data to help manage its scarcity.

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What do you think?