Thursday, November 15, 2007

Trouble in Lu-Lu Land: Why False Advertising is Bad

Workout-apparel company Lululemon is in hot water because of an issue I like to refer to as "the seaweed scam". The retailer, which has achieved a cult-like status with its athletic customers, has been claiming that its VitaSea line of clothing contains seaweed, and releases amino acids, minerals, and vitamins when the wearer sweats. The product labels also go on to read that they "reduce stress" and provide "anti-inflammatory, antibacterial, hydrating, and detoxifying benefits." Of course all of these fancy-schmancy benefits result in an inflated price. But recently, a New York Times reporter ran his own tests on the material, and discovered that there is, in fact no seaweed in the fabric. "There was no significant difference in mineral levels between the VitaSea fabric and cotton T-shirts," the report read. Uh-oh.

Lesson #1: false advertising is never a good thing, and people will always eventually find out. As in the case of Lululemon, your loyal customers might also begin questioning your company's ethics overall. Lululemon also claims to use materials like soybeans and bamboo in its clothing, but after the NYT report, I wouldn't be surprised if this was outed to be a sham as well.

In the company's defense, Lululemon founder and Chairman Chip Wilson claims that the company simply trusted its supplier claims. No internal testing was actually conducted other than simply putting the garment on. Since it doesn't "feel" like cotton, Wilson logically deduced that it, in fact, must be seaweed. Right...

Lesson #2: don't place blame elsewhere, and always, always, always test products that you put your brand name on. It's your company name on the product. As Benny Hill so profoundly advised: "never assume, or you'll make an ass out of you and me."

Although I haven't actually bought into the over-priced Lululemon craze, I don't doubt that the clothing indeed feels nicer than cotton, and is probably very comfortable. However, claiming that it's something it's not simply isn't right, whether by intention or lack of knowledge. A similar analogy in the technology arena would be a speaker manufacturer claiming that the sound waves emitting from the latest floorstanding model will help improve hearing or let you hear frequencies only dogs previously could; or an LCD monitor company saying that an anti-reflective technology will reduce migraines and cure colds. These claims are equally bad whether they're based on outright fabrications, or the fact that the company believed some doctor from a third-party company simply because he "said so".

What's worse for the company is that it just filed for IPO in July, so the seaweed cafuffle could negatively impact stocks. At last check, Lululemon stock was trading at $42.74, down from $60 in October. There might just be big trouble in lu-lu-land.

Aside from the allegedly false material claims, and the admittance that products aren't tested by the company itself, my main concern is actually for the customers who bought into the whole seaweed, anti-stress marketing ploy. If you purchase an item of clothing because it feels good, is comfortable to wear, or downright fashionable, that's perfectly fine. But if you think a pair of sweatpants will hydrate and detoxify you, get your head out of those pants and grab a glass of aqua!


Lee_D said...

After the inital shock to LULU's share price yesterday morning, it rebounded back to the ~$42 level by the end of the day, which indicates that the market, and Lululemon's customers aren't overly alarmed by this news.

That said, Chip Wilson needs to hire someone to speak for the company, because he has a history of shooting himself in the foot, and his off the cuff responses to the media seldom do Lululemon any favors.

Given how conscious Lulu is about the image they convey to their customers, I would expect them to issue the mea culpas shortly. Or, this is just the tip of the iceberg to begin with, and it's all downhill from here. Who can say?

JET said...

LuLu should leave the seaweed stuff to the fish and concentrate on what it seemingly does well and that is lifting the asses of 40-something stay at home yummy mummies who need every bit of ammo when competing with their 18 year old daughters!