Lululemon, a premium yoga apparel brand known as the "Chanel of yoga wear," has taken legal action against Costco, a large warehouse retailer.
The lawsuit is based on allegations that Costco is selling imitations of Lululemon's popular products through its private label, Kirkland.
According to a report by the Wall Street Journal (WSJ) on the 1st of this month (local time), Lululemon has filed a lawsuit against Costco for its product replication activities in the U.S. District Court for the Central District of California.
Lululemon claims that Costco is illegally utilizing Lululemon’s brand value, reputation, and efforts by selling similar products that mimic the design and concept of Lululemon’s offerings.
Lululemon criticized Costco for ambiguously labeling the manufacturing information of Kirkland products, which may lead consumers to mistakenly believe that they are produced by the same manufacturer as Lululemon products.
Concerns about brand value damage due to price differences
The price difference between the two brands is substantial.
Lululemon's flagship product, the "Scuba Hoodie," is sold for $118 (approximately 160,000 won), while a similarly designed "Danskin Half-Zip Pullover" sold at Costco is only about $8 (approximately 11,000 won). This is just one-fifteenth of the original product's price.
Lululemon argues that several of its popular products, including the Scuba Jacket, Define Jacket, and ABC Pants, are being copied and sold at low prices under the Kirkland brand.
This is not Lululemon's first legal action.
In 2021, Lululemon also filed a similar lawsuit against the bicycle manufacturer Peloton, which was resolved when Peloton agreed to gradually halt production of the contested designs.
Lululemon’s efforts to protect brand value amid financial difficulties
The recent strong response by Lululemon against counterfeit products is believed to be influenced by the company’s financial situation.
Lululemon has been experiencing a slowdown in revenue growth, and it recently faced a quality issue where leggings launched last year were recalled just weeks after their release due to problems with thin fabric and stitching.
Additionally, the potential for price increases due to tariff issues at Lululemon’s major production bases in Vietnam, Cambodia, and Sri Lanka is also a burden on the company.
Furthermore, changes in consumer purchasing patterns due to inflation are negatively affecting Lululemon.
Consumers, facing increased living costs, are showing a preference for cheaper "dupes" (counterfeit products) with similar designs rather than high-priced brands.
In this context, Lululemon’s CEO Calvin McDonald has significantly revised the company’s growth outlook for the year.
For the first quarter, a revenue increase of 6-7% is expected, amounting to between $2.335 billion and $2.355 billion, while annual revenue growth of 5-7% is anticipated, bringing it to between $11.15 billion and $11.3 billion. These figures represent only half the growth rate of the previous year.
Image source: Photo = Insight, Photo provided by Lululemon, material photo for understanding the article / gettyimagesbank
