Managing inventory via Tweets

By Gad Allon and Martin Lariviere, The Kellogg School of Management at Northwestern University. Source: The Operations Room.

Martin Lariviere

Gad Allon

How can a retailer take the pulse of demand?  Is looking at sales enough? You can’t sell what you don’t have so you may never know how many customers came into the store liked a style but couldn’t find their size. Lululemon thinks they have a found a way to do just that (Tweet to Lululemon: Smaller sizes, please, Jun 10, Globe and Mail).

Instant feedback on Facebook and Twitter is helping the chief executive officer of Lululemon Athletica Inc. 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,” [CEO] 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.”

This is an interesting twist on using social media. Obviously a challenge is getting enough feedback from customers.  I have to admit that I have rarely affiliated with a brand on Twitter or Facebook (i.e., I am old) so I am not sure how many people are inclined to provide meaningful feedback to the firm.  On the other hand, these are presumably Lululemon’s hardcore clientele so they are worth listening too. A second challenge is whether the firm has the operational capability to respond. Yes, customers are looking for more size 6 gear but apparel lead times are long. Will it frustrate customers if their complaints are heard but they only see the evidence of that next season?

A final question, what if what customers want is not completely in synch with the firm’s strategy?

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.

Lululemon wants to be a premium brand and that doesn’t align with a fire sale clearance at the end of the season. Scarcity of is part of the plan; turning away some size 6 demand is inevitable. Is that consistent with trying to solicit feedback over Facebook?