Globe and Mail Article

Marina Strauss Retailing Reporter

Globe and Mail UpdatePublished on Thursday, Jun. 10, 2010 8:10AM EDTLast updated on Friday, Jun. 11, 2010 3:40PM EDT

Christine Day has discovered a new way of managing inventory at her Lululemon stores: social media.

Instant feedback on Facebook and Twitter is helping the chief executive officer of Lululemon Athletica Inc. (LLL-T43.101.002.38%) to figure out what items are hot with customers, and which ones are duds.

Comments through social media about the chain running out of women's size 4s and 6s, for example, are helping her adjust her product purchasing to ensure she's in stock of those sizes rather than forfeiting sales, as has happened in the past. Identifying the high-demand products to carry for her “guests,” as the company calls its customers, is crucial for the purveyor of premium athletic wear.

“We learn more about that on Facebook and through social media: what are the guests really screaming for and so we actually use [the feedback] to get a little bit more indication,” Christine Day said. The running line “really shifted our guest size profile down to the smaller sizes because we're attracting a more athletic, fit guest which is perfectly in line with our target.”

The fast-growing Vancouver-based yoga wear retail phenomenon has wrestled with a problem that rivals can only envy: not being able to keep up with heavy demand for its $100 hoodies and yoga pants.

The immediate feedback of social media means the company doesn't have to wait for customer data from the stores' cash registers.

On Facebook alone, Lululemon has about 127,000 fans while it has more than 32,000 followers on Twitter. On Thursday, a Lululemon employee told one Twitter follower that its men's shorts start at 32. “Great feedback! I'll definitely let design know our guests would like smaller waist sizes for men.”

Another follower tweeted: “Any new men's downdawg [sic] shorts coming out soon? i really liked the fit of the previous line, not the most recent.”

The social media feedback is feeding into Lululemon's strong results. Its first-quarter profit more than tripled from a year earlier and handily beat analysts' forecasts. Quarterly sales jumped 35 per cent at stores open a year or more, which is a key indicator of a retailer's health. And the retailer raised its 2010 sales and profit outlook.

Lululemon “does a tremendous job of driving traffic to their website through social media outlets such as Facebook and Twitter,” analyst Jennifer Black at Jennifer Black & Associates in Lake Oswego, Ore. said. “Lululemon focuses on their guests and intently listens to their feedback, wants and desires.”

In addition, individual Lululemon stores often have their own Facebook pages for more local feedback and to let customers know about new products and events, she said.

The chain “continues to work on its stock-outs online and in stores,” Ms. Black added.

Still, part of Ms. Day's strategy is something she calls a “scarcity model.” She doesn't want the stores to carry too many size 4s and 6s, to keep customers coming back.

“If you like size 6 or 4 in one of the colourways or seasonal styles, it's never our strategy to be fully at demand level there. So there will always be a certain amount of noise that we expect but that helps keep the product and the brand strong, which is also part of our strategy,” Ms. Day said.

She said the company is getting a better grip on how much product to stock to ensure that its customers leave the stores with a purchase. Its move a year ago into e-commerce has helped the retailer gauge demand, but social media can be an even better tool.