October 1, 2012
Retail Customer Experience: Three Examples of Radical Differentiation at Lululemon
Through a special arrangement, presented here for discussion is a summary of a current article from Retail Customer Experience, a daily news portal devoted to helping retailers differentiate the shopping experience.
Earlier this year, a Wall Street Journal article discussed the "secret sauce"
to Lululemon’s strategy, which has propelled it to become a $1 billion retailer in less than 15 years. It’s clear Lululemon practices what designer Marty Neumeier preaches in his book, Zag: The #1 Strategy of High-Performance Brands.
Mr. Neumeier explains, "Differentiation, the art of standing out from the competition, is not front-page news. What is front-page news, in a world of extreme clutter, is that you need more than differentiation. You need radical differentiation… When everybody zigs, zag."
Here are three ways Lululemon zags:
1. It doesn’t do formal market research or customer relationship management.
"Instead," the WSJ piece reports, "[CEO Christine Day] spends hours each week in Lulu stores observing how customers shop, listening to their complaints, and then using the feedback to tweak product and stores."
It also trains its employees to be customer advocates. Sales people eavesdrop on customers as they fold clothes near the fitting rooms, so they can overhear complaints and pass them along. And customers themselves are invited to give input to the company by writing suggestions on a chalkboard that are sent back to headquarters.
Of course, research and CRM are valuable tools for most companies but sometimes there is no better way to understand your customers than to simply listen.
2. It uses scarcity instead of discounts to generate demand.
The WSJ reports, "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 Ms. Day."
The WSJ reports that the chain sells 95 percent of its gear at full price and it never puts its core items on sale. Scarcity is a much more sustainable and brand-building approach to stimulating purchase conversion.
3. It doesn’t offer top-notch customer service.
The piece quotes Ms. Day as saying, "We aren’t Nordstrom. We aren’t your personal shopper." Lululemon’s return policy is "very strict": no products accepted after 14 days, and all must be unwashed and unworn, with original tags.
This is not to say that the company isn’t friendly or doesn’t care about its customers. A quick spin through its blog, tweets, and Facebook page and visits to its stores prove otherwise. But it’s clear Lululemon is not trying to be something it isn’t.
BrainTrust
Recent Discussions
Discussion Questions
What do you think of the more “radical” approaches mentioned in the article that help Lululemon stand out from the competition? Which of the approaches do you think are worth emulating?
Poll
The broader concept of radical differentiation is provocative and likely to be very transferable to other retailers in other channels. Some of the specific tactics I would be wary about, in terms of adapting and expecting the same results as Lululemon is experiencing.
One thing is certain. When you have a CEO who emphasizes and practices good basic customer service, it becomes the culture. Unless you are operating in the pure price end of the market, other retailers should heed and follow.
The first two “radical differences” appear to be taken from the Apple playbook. Steve Jobs was famous for developing and launching products before customers knew they wanted them, thus creating a demand that didn’t exist before. (And he was famously skeptical about market research vs. gut instinct.) And Apple continues to play the “scarcity” game as a way to drive long-term desire and demand for its new products.
However, the 2-3 week delay in iPhone 5 availability and well-reported “apology” for the Maps fiasco provide evidence that even Apple can stumble. There is nothing wrong with Lululemon’s unconventional approach (based on its results and growth) but there is also nothing wrong with a strategic evolution toward more consumer-friendly best practices as the company’s growth inevitably plateaus.
According to the WJS article, Lululemon is successful because it listens to customers and makes adjustments accordingly, practices good inventory control, so it does not have a discount mentality, and clearly states its return policy. What’s so radical about that? It’s good business. This is what every retailer should be doing.
Lululemon is fortunate to have an almost cult-like following. While it’s great to sell most everything at full price, having a “we aren’t your personal shopper” attitude combined with a strict return policy is concerning for a chain that relies on getting shoppers in to pay full price for merchandise they don’t have to have. It can be a rapid fall from the top in fashion, and providing so-so customer service plus a strict return policy could eventually push them in that direction.
I love it! Too bad there’s nothing for me to buy there. I figured that Lululemon was just another clone of every other high-end/new-age retailer, but this is a great way to stand out from the crowd. Will it be effective in the long run? Hard to say. But it’s terrific to see someone zagging when everyone else is zigging.
If I had to pick an approach that’s worth emulating, it would be getting out and listening to customers. There are no registers or customers in the home office, so it’s good that the CEO is out seeing and hearing things first hand.
Selling stuff at full price is always nice as well, but they seem to be in a unique position where the customer sees the scarcity as a good thing, vs lack of selection.
The one thing that peaks my curiosity is, why is the customer shopping there vs somewhere else? Better product? Customer service? What is it? The product doesn’t appear that unique, so is it the fashion label that sells?
Everyone talks about how important the customer experience is, but what do they do to measure it? You can’t improve what you don’t measure. I love the fact the CEO is in store listening to customers. It obviously can’t be her full-time job, so a practical approach is to use associates and 3rd party groups to help get a read on customer experience. A recent study we did for an apparel retailer showed that 80% of shoppers walked out without a purchase and only 64% were pleased with their in store experience. Sounds like Lululemon is performing better than this.
I love their second point. Scarcity is far better than discounts. I spoke with an executive at a major apparel retailer in the spring that said their shoppers are now conditioned to wait until sales are at 60% off or better. This kills the bottom line and only creates a downward spiral of heavier discounts to drive traffic. Finding a way to condition consumers like Lululemon and frankly, Costco (seasonal treasure hunt), is a great strategy if you are disciplined.
Ah … how tres radical!
Use store level input to drive executive decision making! Brilliant!
Don’t give away the farm! What a concept!
Pick your battles and fight them well! Well, I wrote an entire book about the wisdom of this strategy.
These aren’t radical concepts, they are the building blocks of great retailing.
We seem to be treating this like a potential “best practice,” as though “differentiating” is some mechanistic process that you can copy and get the same results. That is so 16th century.
If you can copy it…it isn’t differentiation.
I know zero about Lululemon, but if they are successful, it’s because of the whole picture, not one or two behaviors or policies. The secret sauce for ANY organization is in the alignment of its energies. It’s how things come together.
Items 1 and 2 in this list have been used with great success by the Spanish fashion retailer Zara for a number of years.
Add to that Zara’s world class supply chain which can design, manufacture and deliver a new cutting edge fashion line to the stores in a little over a week, and you have a winning formula.
There’s no substitute for walking around the store and observing. Lululemon’s policies are consistent and well-understood, always a plus when dealing with customers. Kudos to them for keeping it simple.
Listening to customers is not radical, but the way LuLulemon does it qualifies as such. This allows them to manage their inventory in a very real-world way. Having the CEO spend time and interact with customers in the stores sets a great example for the rest of the store associates. Of course, collecting all this insight at store level is no good unless headquarters listens, so put these together and you have radical differentiation worth emulation.
The other part of this radical differentiation is having the right type of employees — this article in Fortune earlier this year speaks to CEO Christine Day’s approach.
The Scarcity and non-Nordstrom approach are more a reflection of their business model with very short seasons and non-replenishable styles. It communicates uniqueness and impulse buying. Good Zagging.
Having a deep understanding of consumers is critical for success. Listening to consumers rather than relying on service is a far better way to understand consumers. Making the shopping experience interesting by having a constantly changing assortment rather tha finding the same items on every visit certainly has merit.
A 14 day return policy also promotes quick return visits. If you are too busy to return something in 14 days, you probably are not visiting the store often enough to find those new items. This is not a store for everyone, but certainly appears to be a preferred store for its loyal consumers.
What I loved reading here is that the sales people are ‘connected’ to the executive decision makers. Whether by a chalk board that actually gets sent in, or by a CEO who visits stores, this gives the employees that extra connection that says that they count and are important. Great strategy! Wish more retailers would find ways to do this also.
What is so amazing? Listen to your customers, observe them and see what they like! Is there anyone who SHOULDN’T be doing this? As for the return policy and the sales strategy, these are rather unique, but to some extent have been employed by others. Costco has used the treasure hunt; high-end brands with limited availability and ultra high prices have done this for years (Rolex, LV, Hermes) and try to return one of these brands — it ain’t gonna happen! Lululemon isn’t really doing anything new, but when people see something being done right, they think it’s new because so many get it wrong and wrong has become the norm!
Two quick questions:
1) How many CEOs do you know spend time each week in their stores? How about each month? Quarter?
2) How much better do you think their chains would perform if they relied less on financial reports and more on actual in-store experiences?
There’s much more to Lululemon’s success than a CEO who visits stores, but it’s hard to imagine anyone steering a ship without getting into the water every now and then.
Observing, listening to what your customers are saying and doing while they are actually shopping in your store is the best way to get valued insight. All too often, brands depend on expensive research and statistics rather than rolling up your sleeves and just watching and listening your shoppers in their ‘natural’ shopping behavior. You may not like what you observe and hear from both your employees and customers, but if you react to their point of view, the benefits to your brand and bottom line will flourish in the nanosecond communication world of the digitally empowered consumer.
We often try to complicate the obvious by implementing ‘Rube Goldberg’ digital marketing scenarios.
2. It uses scarcity instead of discounts to generate demand.
This brings the well-known personal sales principle to bear: take it away! That is, a skillful sales person may close a sale by suggesting the offer is about to disappear, for a variety of possible reasons. I recently bought something that was clearly not what I set out to buy, but the sales guy called and said, we just got this unit in, and I’m sure it won’t last a day on the floor. Several months later I’m still pleased as punch!
It is a fact that people are more aggressive to hang on to something they have, than to acquire something they don’t. This is why putting something within your reach, but then holding out the prospect that it is going away, will often motivate a customer to buy.
Lululemon is far from the only self-service retailer to practice this principle successfully. “Seasonal” merchandise leverages this principle to an extent. But so does Costco when they line their WIDE entry “aisle” with super buys of merchandise that will probably disappear within a few weeks — or less.
This is one of the forced features of Costco’s policy of not carrying anything that they cannot offer as a great buy. This means that their is considerable churn in what is on offer, at least partially driven by the fact that some quality manufacturer, somewhere, needs to clear substantial inventory, and will turn it over to Costco for clearance.
I know that this includes a discount component. But it doesn’t necessarily mean the “discount” is an erosion of the store’s margin. On that score, there is a supermarket in Norway that runs a daily, “This is what is for dinner tonight” feature, and provides a single item in massive amounts that will likely sell out in just that one day. Get it now, and solve a problem you have now, because it won’t be here tomorrow. (They’ll have something else, then.)
This whole strategy can be a part of what I refer to as the “surprise/delight” sale.
Lululemon should be commended for its success, especially in terms of differentiating itself from other retailers. Its pricing discipline is by far the most important of the three strategies mentioned, namely because competitors set the bar so low.
It’s a mistake to oversimplify around customer (or business) insights just as it is to limit its service offering. As competition continues to increase (including some very fine brands directly entering its space), intentionally omitting research and analysis, or providing limited service to customers, will be detrimental.
At the same time, Lululemon’s success comes from much more than its pricing discipline. As a retailer they get many other things right too, including merchandising, marketing and store location. It adds up, but long term, the company needs to be able to address and derive insights as well as value from its customers and their transactions.
The ‘get in your stores and listen to your customers’ mantra helps a lot of things. When home office staff actually experience a return, or see what’s selling and why, or feel their own policies working/not working, you will have lit up the most valuable tool to operating retail outlets. It also gives everyone a chance to see what their competition is doing on a regular basis.
This is not new news, BTW. Limited required that all home office associates be in stores every Thursday night, no matter where you were for exactly the above mentioned reasons … in the ’80s … because it works.
I don’t know if the growth can continue if the prices continue to rise as fast. They can, however, open more stores and expand growth outside the US. They make a quality product with an outstanding demand.
One of the best brands out there and in the ranks of Victoria’s Secret for retailers who “get it.”
More Discussions
Have Human Connections Become More Critical to C-Store Loyalty?
Are human connections the secret to c-store loyalty?How Important Is it For Retailers To Engage With AI Models Proactively?
Is it vital that retailers get their story straight with LLMs?Is Meta Committing to Retail via Meta Lab Stores, or Are Other Goals More Important?
Is Meta playing in retail, actually committing to retail, or looking for more data?
The broader concept of radical differentiation is provocative and likely to be very transferable to other retailers in other channels. Some of the specific tactics I would be wary about, in terms of adapting and expecting the same results as Lululemon is experiencing.
One thing is certain. When you have a CEO who emphasizes and practices good basic customer service, it becomes the culture. Unless you are operating in the pure price end of the market, other retailers should heed and follow.
The first two “radical differences” appear to be taken from the Apple playbook. Steve Jobs was famous for developing and launching products before customers knew they wanted them, thus creating a demand that didn’t exist before. (And he was famously skeptical about market research vs. gut instinct.) And Apple continues to play the “scarcity” game as a way to drive long-term desire and demand for its new products.
However, the 2-3 week delay in iPhone 5 availability and well-reported “apology” for the Maps fiasco provide evidence that even Apple can stumble. There is nothing wrong with Lululemon’s unconventional approach (based on its results and growth) but there is also nothing wrong with a strategic evolution toward more consumer-friendly best practices as the company’s growth inevitably plateaus.
According to the WJS article, Lululemon is successful because it listens to customers and makes adjustments accordingly, practices good inventory control, so it does not have a discount mentality, and clearly states its return policy. What’s so radical about that? It’s good business. This is what every retailer should be doing.
Lululemon is fortunate to have an almost cult-like following. While it’s great to sell most everything at full price, having a “we aren’t your personal shopper” attitude combined with a strict return policy is concerning for a chain that relies on getting shoppers in to pay full price for merchandise they don’t have to have. It can be a rapid fall from the top in fashion, and providing so-so customer service plus a strict return policy could eventually push them in that direction.
I love it! Too bad there’s nothing for me to buy there. I figured that Lululemon was just another clone of every other high-end/new-age retailer, but this is a great way to stand out from the crowd. Will it be effective in the long run? Hard to say. But it’s terrific to see someone zagging when everyone else is zigging.
If I had to pick an approach that’s worth emulating, it would be getting out and listening to customers. There are no registers or customers in the home office, so it’s good that the CEO is out seeing and hearing things first hand.
Selling stuff at full price is always nice as well, but they seem to be in a unique position where the customer sees the scarcity as a good thing, vs lack of selection.
The one thing that peaks my curiosity is, why is the customer shopping there vs somewhere else? Better product? Customer service? What is it? The product doesn’t appear that unique, so is it the fashion label that sells?
Everyone talks about how important the customer experience is, but what do they do to measure it? You can’t improve what you don’t measure. I love the fact the CEO is in store listening to customers. It obviously can’t be her full-time job, so a practical approach is to use associates and 3rd party groups to help get a read on customer experience. A recent study we did for an apparel retailer showed that 80% of shoppers walked out without a purchase and only 64% were pleased with their in store experience. Sounds like Lululemon is performing better than this.
I love their second point. Scarcity is far better than discounts. I spoke with an executive at a major apparel retailer in the spring that said their shoppers are now conditioned to wait until sales are at 60% off or better. This kills the bottom line and only creates a downward spiral of heavier discounts to drive traffic. Finding a way to condition consumers like Lululemon and frankly, Costco (seasonal treasure hunt), is a great strategy if you are disciplined.
Ah … how tres radical!
Use store level input to drive executive decision making! Brilliant!
Don’t give away the farm! What a concept!
Pick your battles and fight them well! Well, I wrote an entire book about the wisdom of this strategy.
These aren’t radical concepts, they are the building blocks of great retailing.
We seem to be treating this like a potential “best practice,” as though “differentiating” is some mechanistic process that you can copy and get the same results. That is so 16th century.
If you can copy it…it isn’t differentiation.
I know zero about Lululemon, but if they are successful, it’s because of the whole picture, not one or two behaviors or policies. The secret sauce for ANY organization is in the alignment of its energies. It’s how things come together.
Items 1 and 2 in this list have been used with great success by the Spanish fashion retailer Zara for a number of years.
Add to that Zara’s world class supply chain which can design, manufacture and deliver a new cutting edge fashion line to the stores in a little over a week, and you have a winning formula.
There’s no substitute for walking around the store and observing. Lululemon’s policies are consistent and well-understood, always a plus when dealing with customers. Kudos to them for keeping it simple.
Listening to customers is not radical, but the way LuLulemon does it qualifies as such. This allows them to manage their inventory in a very real-world way. Having the CEO spend time and interact with customers in the stores sets a great example for the rest of the store associates. Of course, collecting all this insight at store level is no good unless headquarters listens, so put these together and you have radical differentiation worth emulation.
The other part of this radical differentiation is having the right type of employees — this article in Fortune earlier this year speaks to CEO Christine Day’s approach.
The Scarcity and non-Nordstrom approach are more a reflection of their business model with very short seasons and non-replenishable styles. It communicates uniqueness and impulse buying. Good Zagging.
Having a deep understanding of consumers is critical for success. Listening to consumers rather than relying on service is a far better way to understand consumers. Making the shopping experience interesting by having a constantly changing assortment rather tha finding the same items on every visit certainly has merit.
A 14 day return policy also promotes quick return visits. If you are too busy to return something in 14 days, you probably are not visiting the store often enough to find those new items. This is not a store for everyone, but certainly appears to be a preferred store for its loyal consumers.
What I loved reading here is that the sales people are ‘connected’ to the executive decision makers. Whether by a chalk board that actually gets sent in, or by a CEO who visits stores, this gives the employees that extra connection that says that they count and are important. Great strategy! Wish more retailers would find ways to do this also.
What is so amazing? Listen to your customers, observe them and see what they like! Is there anyone who SHOULDN’T be doing this? As for the return policy and the sales strategy, these are rather unique, but to some extent have been employed by others. Costco has used the treasure hunt; high-end brands with limited availability and ultra high prices have done this for years (Rolex, LV, Hermes) and try to return one of these brands — it ain’t gonna happen! Lululemon isn’t really doing anything new, but when people see something being done right, they think it’s new because so many get it wrong and wrong has become the norm!
Two quick questions:
1) How many CEOs do you know spend time each week in their stores? How about each month? Quarter?
2) How much better do you think their chains would perform if they relied less on financial reports and more on actual in-store experiences?
There’s much more to Lululemon’s success than a CEO who visits stores, but it’s hard to imagine anyone steering a ship without getting into the water every now and then.
Observing, listening to what your customers are saying and doing while they are actually shopping in your store is the best way to get valued insight. All too often, brands depend on expensive research and statistics rather than rolling up your sleeves and just watching and listening your shoppers in their ‘natural’ shopping behavior. You may not like what you observe and hear from both your employees and customers, but if you react to their point of view, the benefits to your brand and bottom line will flourish in the nanosecond communication world of the digitally empowered consumer.
We often try to complicate the obvious by implementing ‘Rube Goldberg’ digital marketing scenarios.
2. It uses scarcity instead of discounts to generate demand.
This brings the well-known personal sales principle to bear: take it away! That is, a skillful sales person may close a sale by suggesting the offer is about to disappear, for a variety of possible reasons. I recently bought something that was clearly not what I set out to buy, but the sales guy called and said, we just got this unit in, and I’m sure it won’t last a day on the floor. Several months later I’m still pleased as punch!
It is a fact that people are more aggressive to hang on to something they have, than to acquire something they don’t. This is why putting something within your reach, but then holding out the prospect that it is going away, will often motivate a customer to buy.
Lululemon is far from the only self-service retailer to practice this principle successfully. “Seasonal” merchandise leverages this principle to an extent. But so does Costco when they line their WIDE entry “aisle” with super buys of merchandise that will probably disappear within a few weeks — or less.
This is one of the forced features of Costco’s policy of not carrying anything that they cannot offer as a great buy. This means that their is considerable churn in what is on offer, at least partially driven by the fact that some quality manufacturer, somewhere, needs to clear substantial inventory, and will turn it over to Costco for clearance.
I know that this includes a discount component. But it doesn’t necessarily mean the “discount” is an erosion of the store’s margin. On that score, there is a supermarket in Norway that runs a daily, “This is what is for dinner tonight” feature, and provides a single item in massive amounts that will likely sell out in just that one day. Get it now, and solve a problem you have now, because it won’t be here tomorrow. (They’ll have something else, then.)
This whole strategy can be a part of what I refer to as the “surprise/delight” sale.
Lululemon should be commended for its success, especially in terms of differentiating itself from other retailers. Its pricing discipline is by far the most important of the three strategies mentioned, namely because competitors set the bar so low.
It’s a mistake to oversimplify around customer (or business) insights just as it is to limit its service offering. As competition continues to increase (including some very fine brands directly entering its space), intentionally omitting research and analysis, or providing limited service to customers, will be detrimental.
At the same time, Lululemon’s success comes from much more than its pricing discipline. As a retailer they get many other things right too, including merchandising, marketing and store location. It adds up, but long term, the company needs to be able to address and derive insights as well as value from its customers and their transactions.
The ‘get in your stores and listen to your customers’ mantra helps a lot of things. When home office staff actually experience a return, or see what’s selling and why, or feel their own policies working/not working, you will have lit up the most valuable tool to operating retail outlets. It also gives everyone a chance to see what their competition is doing on a regular basis.
This is not new news, BTW. Limited required that all home office associates be in stores every Thursday night, no matter where you were for exactly the above mentioned reasons … in the ’80s … because it works.
I don’t know if the growth can continue if the prices continue to rise as fast. They can, however, open more stores and expand growth outside the US. They make a quality product with an outstanding demand.
One of the best brands out there and in the ranks of Victoria’s Secret for retailers who “get it.”