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Lululemon Seeks Balance with Scalpers Over Popular Clothes

Some might see it as a good problem to have: a new clothing line is selling out. But "scalpers" are reselling the items online, frustrating customers.
Image: A shopper walks out of the Lululemon Athletica store in New York
Lululemon Athletica is hearing from frustrated customers who find the company's new line of street clothes sold out online, only to see items reappear for sale by "scalpers" at higher prices. SHANNON STAPLETON / Reuters

Fans of Lululemon Athletica's workout apparel fawned over the brand’s new line of fitness-inspired street clothes when the company posted pictures online in advance of its rollout Tuesday, but that enthusiasm quickly turned to frustration. Social media users complained that items on Lululemon’s website sold out rapidly — sometimes in the moments it took them to complete a transaction — and soon reappeared on eBay at inflated prices.

It’s a problem ecommerce pros say the trendy yoga brand could solve with some tech fixes — and one that business experts say it might not want to.

“It's an interesting problem Lululemon has, not the worst in the world as it shows their brand value has increased to the point where ‘scalpers’ have jumped in,” Lisa Walker, product marketing manager at Elastic Path Software Inc., said via email. The drawback is that the company loses control of a key part of the customer’s experience. “Counterfeit items are always a risk on Ebay, which hurts both the customer and the brand,” she said.

Customer Jessica Moore posted her frustration on the company’s Facebook page the same day the new “&go” collection debuted.

“The tech mesh tights I wanted to order are already sold out, and a quick check of ebay reveals that some sellers are already offering them (and selling multiple pairs, which suggests that they bought large quantities) at prices between $189 and $299(!!!) when they retailed at $108,” Moore wrote. “What are you doing to make sure that all your customers get a decent chance at buying them instead of sellers hoarding them so they can sell at hugely inflated prices?”

Scarcity has always been a part of Lululemon's business model. New colors and popular items routinely sell out, and Lululemon characterized &go as a “capsule” collection of “limited quantity,” but the issue lately has ballooned into a public relations headache for the company, which also has faced criticism over its handling of inferior product complaints and out-of-touch comments from its co-founder.

"People want what they can't get. If something is scarce and exclusive and you give them a very narrow path to get there … then everyone takes that narrow path."

Last month, Lululemon responded to complaints about third party sellers and high prices by instituting a short-lived ban on anyone reselling its items, which prompted complaints that the company was penalizing loyal customers.

The retailer changed its stance after a couple of weeks.

“Lululemon did not fully withdraw their position on reselling, but adjusted their approach to focus on large volume resellers … who purchase entire size, color and style runs,” a company spokeswoman said via email.

She said these buyers now are evaluated on a case-by-case basis. “There are some buyers who will remain blocked as they have demonstrated a clear pattern of acquiring and reselling large volumes of our product at an elevated price point.”

Lululemon didn't clarify how it blocks resellers, except to say, "we do not receive or obtain any private or personal information from eBay or other channels."

Elastic Path’s Walker said it’s possible to block IP addresses, “ but so is making end runs around these blocks.” It would also be possible for a company to block a specific credit card number or mailing address, but a determined buyer could circumvent these hurdles.

In order to scoop up large amounts of inventory, resellers often rely on software programs that process transactions 10 or 15 times as fast as a human could complete a purchase.

“If you have a robot that can perform one purchase transaction every ten milliseconds, you’re going to be faster than the guy who’s clicking the mouse,” said Andras Cser, vice president and principal analyst at Forrester Research, Inc.

To fool these programs, “You typically have to add something that requires a human being doing it,” Cser said. While Lululemon could add a solution like a captcha generator, some retailers don’t like putting a roadblock — however small — in front of customers, Cser said.

“Anything that is invisible like device identification — there’s a lot less friction there,” he said, describing device fingerprinting as a Javascript tool more effective than an IP address ban. “It basically does not penalize the real human being.”

There’s a chance, though, that Lululemon might not want to dissuade scalpers too aggressively in spite of the complaints, said Yu-kai Chou, who studies consumer behavior as a partner at the Enterprise Gamification Consultancy.

"People want what they can't get," he said. "If something is scarce and exclusive and you give them a very narrow path to get there … then everyone takes that narrow path." And if that narrow path means paying $300 for yoga pants, there are shoppers who will grit their teeth and click "buy it now" on eBay.

"From a business standpoint, I don't even see it as a problem …. This just proves everyone loves their products so much," Chou said. "Maybe they're not the most lovable brand, but they're commercially successful."