The Lululemon Fiasco, or Why Transparency Won Out

It was certainly one of the more bizarre crises that we have seen in recent times. With front page articles online and in the press highlighting the common issues for large companies, product recalls, oil spills, layoffs, etc., famed yoga pants-makers Lululemon found themselves in the press's crosshairs after they recalled their trademark athletic pants because they were see through. One could not help but chuckle at the issue given the run of crisis issues we have seen over the past few years.

There was one group of people who were certainly not laughing over the issue of see-through yoga pants (and, no, it was not the father's of daughters who wear them): shareholders of the company. As a publicly traded company, Lulu Lemon has to answer to their shareholders at the end of the day and when they have to pull a product that is 17% of their product line, that is not such a laughing matter for those who own part of the company.

But much of the way that Lululemon handled the issue alleviated any of the potential pitfalls. The first, and perhaps most important, step they took was owning responsibility to the issue. They came right out and said they were recalling the pants and explained exactly why. By doing this, they helped control all the details around the recall and what the next steps were. Whenever companies face a major recall, it is generally a reactive response to an event or series of events that has led to negative attention. The Firestone recall issues are a textbook case in what not to do in a recall and the company was forced to dig themselves out of a massive hole as a result.

Lululemon was not dealing with an issue of the same severity as the deaths of drivers due to poorly made tires, but the fact that they were the ones who broke the news before any public outrage surfaced helped squash some of the negative publicity. They admitted outright to what the issue was and promised to fix the problem as quickly as possible. While all companies do this in time of crisis, Lululemon's devout customer base trusted them to correct the issue because the brand had already built such strong loyalty with them. This is no small point in times of crisis and helped the brand keep control of the situation.

Standing in front of the issue allowed them to set the tone of the conversation. The storyline did not become "Will Lululemon recover from this debacle?" Instead, the tone was more of "When will the pants return for their customers?" As Lululemon owned the problem, they were able to report exactly how long it would take before their product would return and they could pinpoint exactly what they needed to do to prevent the same issue from occurring. This prevented any false story-lines from appearing and helped limit their negative exposure.

Finally, true to their word, the pants returned to stores not too long after the crisis was originally announced. By sticking to their promise of producing an improved pant in a short period of time, Lululemon walked away from the issue relatively unscathed. Their stock price actually exceeded its price pre-crisis and their loyal customers continue to trust the brand. The company is a perfect example of how to handle a crisis and should certainly be seen as a role model for how to tackle problems head on before they spiral out of your control.

When facing a crisis, always remember:

• Honesty at all times is critical. If you don't have an answer at that time, that is better than making one up.
• Always be proactive. Crises can pop up at the most unexpected times and places. But being able to own the problem and the tone is critical to minimize repercussions.
• Don't make promises you can't keep. If you promise to fix a particular issue, you need to be 100% confident that the problem is solved before the public sees the product again.
• Have a plan in place. In the case of a product recall, know exactly what circumstances warrant a recall. Every department should be ready to act quickly and squash the problem before it gets out of control.