Member Brief: The Lululemon Dossier

Sign In

Fast forward. The Lululemon direct to consumer (DTC) business is on the upswing. Bloomberg reports a 47% increase in the brand’s sales after a revamped Oracle site and improved customer acquisition strategies. Shares rose 14% in after hours trading yesterday, with the Vancouver brand’s stock inching toward its trading highs. According to analysts, the stock’s value reflects an investor confidence in the brand’s plans to address: (1) international expansion (2) eCommerce revenue growth (3) and continued traction with male consumers.

Read more by signing in. Not a member yet? Learn more here.

Issue No. 273: Modern Luxe Doesn’t Bend

Watermark_ByTailorBrands
Pictured: Outdoor Voices, from our Open Letter to DNVB CEOs

In November of 2016, Lean Luxe’s Paul Munford penned somewhat of a scripture to upstart modern luxury brands: promotion-heavy retailers will not last. There are few takeaways from “The Downward Spiral” that are worth mentioning as recent economic reports suggest that the retail apocalypse is coming to an end, a great sign for aspirational DNVBs that are looking to expand into physical retail.

Screen Shot 2018-06-12 at 10.05.48 AM.png

We are in a time of unprecedented retail brand launches, collaborations, acquisitions, and re-imaginations – much of which is online-first. This begs the question, what will separate the winners from the commodities? There are early and permanent decisions that determine a brand’s trajectory. For every Mizzen + Main or Ministry of Supply, there is a State and Liberty. For every Outdoor Voices, there is a Bandier. And for every Away, there is a Raden. Each decision matters. And no decision matters more than pricing and a brand’s promotional tendencies.

Here are the top ten takeaways from some of Munford’s best work:

  • No maneuver in retail appears to be as easy to roll out, yet no strategy is as detrimental to a retailer’s long term prospects as the heavy discount. It is a palliative pill: wonderful for the consumer in the short run, but ultimately bad for both business and shoppers over time. It commoditizes the brand, forcing companies to differentiate on price. 
  • The second problem, also related to scale, is systemic to the industry itself: The need to constantly add more and more products at regular intervals, flooding the marketplace with goods that are newer, but rarely better.
  • The lure of the discount, then, becomes too hard to resist. It provides a short term boost to the bottom line and the illusion of growth, but at the expense of brand reputation and sustainable profit — two vital arteries for a business’s overall health.
  • Modern luxury companies have figured out the formula, and it’s remarkably simple: create less merchandise than will sell (and predict, if possible, the sell-through rate, with pre-orders), keep demand high. Embrace the waiting list, as Everlane, Glossier, Caraa, and Alala, among others, often do. 
  • Never discount; preserve the standing of the brand. These tactics certainly do not work, however, or at least for very long, if product standards are below par.
  • Hermes, for instance, is notorious for never slashing prices. Its products carry a prestige because of that, and there is always a demand, no matter how frivolous the item. And they certainly are not above testing the limits of consumer devotion: It has even gone so far as to repackage its cutting floor leather scraps to sell them as high-priced gift boxes.
  • That opposition to discounting would come from founders within the emerging modern luxury industry is no coincidence. For one, it displays the trademark sense of calm confidence in the product that this group is quickly becoming known for. 
  • As for Mr. Preysman, the full price mantra feeds into his mission to constantly refine the product, to make it better, and push it ever closer to perfection according to the standards of the brand.
  • Surprisingly, rejecting the discount is also quite consumer-centric. The eternally-wise Ben Franklin said it best, of course, when he offered this observation: “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”
  • It takes superb maturity and a great deal of resilience to fight the urge for the temporary discount boost at the expense of preserving a long term reputation. 

Maturity, patience, grit, and perhaps temporary poverty are keys to developing the types of brands that grow to compete with age old legends and fierce (but hopefully friendly) rivals. In 2013, Brooks Brothers commented on Mizzen + Main’s influence on the shirting industry for the New York Times:

While Brooks Brothers experimented with “performance” shirts akin to Mizzen & Main’s, [Brooks Brothers’ spokesman] Mr. Blee said that customers preferred the general wearability of conventional all-cotton. The stretch fibers felt synthetic to them. Although a range of Brooks Brothers oxford shirts have moisture-wicking properties, he said, “We are known as a natural-fiber house: 100 percent cotton, 100 percent cashmere.

Just five years later, Brooks Brothers is launching a competitor to compete in a menswear world that is being re-defined by technical fabrics and other innovations.

Mizzen+Main on Twitter

we’re old enough to remember when Brooks Brothers laughed at performance menswear: https://t.co/5hBzcUHAEx https://t.co/xCN29dVk81

I remember the joy of that article hitting the newsstands on December 18, 2013. Not because of the notoriety that it would provide but because it had been over a year and half and we really needed the sales. We stood firm on our price while we built allegiances and Kevin worked feverishly to improve the product. And the company lasted. What Lavelle and team has done today is nothing short of spectacular. And it has allowed the brand to stand, eye to eye, in the same clubs and on the same courses as the company that invented the polo shirt (sorry, Ralph).

To achieve growth and longevity, branding cannot be viewed as a soft skill. Price cannot be viewed as an arbitrary number to manipulate. The five forces must always be considered. And patience must be paramount because great brands start slowly. In the age of modern luxury DNVB’s this is as important as the products themselves.

Read more: An Open Letter to DNVB CEOs (Issue No. 254)

Read the rest of Issue No. 273 here.

By Web Smith and Meghan Terwilliger | About 2PM

Member Brief No. 16: Patreon’s Signal

Sign In

If you’re an independent creator, Patreon is your home. The upstart has accomplished great traction in a short period of time. CEO Jack Conte and Sam Yam’s creation launched in May of 2013 after Conte grew increasingly frustrated by Youtube’s lack of monetization. As the story would go, Conte beta-tested the site with his own personal Youtube audience and began raking in $7,000+ per video. Youtube’s monetization would earn him a little more than $50 for the same work. Fast forward five years and Patreon is synonymous with patronage, as much as Kickstarter is synonymous with crowdfunding.

Read more by signing in. Not a member yet? Learn more here.