Inside Lululemon’s Resale Engine

Speaker A: Hello and welcome to Future Commerce, the podcast at the intersection of culture and commerce. I'm Brian.

Speaker B: And I'm Alicia.

Speaker A: And today we have two really exciting guests, uh, on a topic that's near and dear to my heart, E Commerce. Uh, and to talk about ecommerce, we have Ryan Rowe, who's the founder of Archive and storied founder. We'll get into that in a minute. Uh, and Allison Buchanan, who is the senior manager of Like New IT Lululemon, who, where she leads the brand's recommerce program. And I'm excited to have you both.

Speaker C: Welcome.

Speaker D: Hi.

Speaker E: Thanks for having us.

Speaker A: Yeah, of course. Yeah. And, um, maybe we could just take a moment, uh, just, uh, Allison, if you want to just give a little bit of a deeper dive of, uh, what like New and Recommerce looks like at Lululemon, that would be amazing.

Speaker D: Yeah, definitely. So check us, check us out. I don't know if either of you have shopped, uh, with us or traded in with us, but like, New it's is Lululemon's signature trade in and resale program. So it's our, our foray into, into circular infrastructure for our brand. But you can come into any of our 400 odd stores across the US and trade in product and receive a gift card in return. Um, and then you can also shop with us on like new lululemon.com and so we are funneling in secondhand products, um, that you have the chance to shop as if it's sort of our premium mainline experience and we'll ship it direct to your door.

Speaker A: That's so cool. That's so cool. And Ryan, you play a huge role in powering this. Talk, uh, to us about what Archive is, what it does. And you're coming out of founding a few other companies. One was acquired by Palantir, and eventually you landed on resale as a problem we're solving, which I totally agree with, which is why we're having you on the show. Uh, so what did you see in this space that made you want to go try to solve this problem? And, um, why did you build infrastructure for brands rather than maybe even do like a direct to consumer play?

Speaker E: Yeah, so like you said, I'm not new to the startup game. I've, uh, now at this point started three different companies in three totally different spaces. And I think when it came to this time around, it was 2020, middle of the pandemic. I was having sort of like a moment in my career where I just was trying to decide where do I want to invest my time as a founder knowing that I was just inevitably going to have to continue on the entrepreneur's journey. And I really zeroed in on, on climate and sustainability as something that I passionately cared about and very serendipitously met my co founder, Emily, and I'm going to credit her with this, with the sort of all of the research that went into why this was a good business idea. But I met her at a very good timing where I was ready to jump into my next thing, knew that I wanted to work on something that had an impact, knew knew what my skills were from like a software and design and product perspective background. And it just blended really well with the vision that she was painting for me, which was, it wasn't hyper specific, but it was about what we're talking about here today. How can we solve this existential climate threat, uh, around apparel specifically and the fact that brands are just producing more and more and more and ultimately um, their business model and incentive structure is not such that it leads them to doing the right thing. And so where I kind of landed on this is that this is actually a really hard problem to solve and we're probably going to get into some of that in the conversation today. Um, it requires a lot of different pieces of technology. It requires messy physical logistics. It was only obvious to me why brands didn't own resale at scale all around the world before we started. Once we started and got into this and saw, wow, there's so many different kind of components and complexity here, it's a very technical problem. It's a large scale platform problem that touches virtually every piece of a brand's business. And that was sort of the wedge that we saw when we started it is that this is gonna be hard to do well and we trust ourselves to hopefully do it better than others have tried in the past and others that may try after us and kind of build a big company, uh, that both achieves a positive impact in the world but also has legs to become a big business over time.

Speaker A: Love that. Yeah, I think that's, that's super smart because there's a, there's a lot, there's a lot of companies that you know, have products sort of floating around in secondhand markets that you know, that are totally, it's totally uncontrolled and there's often, it's not a very fair process. Sometimes it's not extremely, some not super transparent. There's a lot of questions and confusion, um, and that can lead to maybe not always the best experience. And so I love this idea of brands being able to take control of that. And I, uh, think ultimately provide the best possible experience. And so, I mean, Alison, uh, I think that, you know, there's. You've obviously believed in this. This is the role that you sort of put a stake in the ground on at Lulu. And so how did you end up in this spot? And like, why do you believe in circular commerce, uh, as an owned asset for Lululemon?

Speaker D: Yeah, uh, I do. I do believe in it. And I guess I've spent m my career in retail, and I think Ryan said it well. But I mean, retail, the name of the game is creating new things and inspiring people to be interested in those new things. And there's obviously just natural tension there from an environmental perspective. And I think there's something innately human about wanting, like, newer, better, higher performing, smarter, um, product. And there's nothing wrong with that. And I think there's a ton of great product already out there. So I think what could be old to you might be new and exciting to me. Um, so that's really this, like, thrifting mindset that I think I identify as a compulsive thrifter. And long before I ever worked for Lululemon, I was thrifting Lululemon product. Um, and I think that led me to believe in the quality and longevity of this brand's product, for example. And, and then I'd say from a business lens, I know we'll get into it, but recommerce is. Is obviously just a. A space that we are starting to realize is a strong commercial lever. So, um, from my experience, if it's done well, it's driving growth, it's driving margin, um, customer loyalty. So, like, new for our business is really sitting at this intersection of business and impact. And for me, that's an exciting space to be and something I would be willing to bet on.

Speaker C: The 11 labs SoHo pop up was an incredible success. It closed its doors. But I keep coming back in my mind to how the whole thing actually worked. Because when I walked in and I visited, I put on my headphones, I started talking to a voice agent, and it was very close to how I would talk to an actual retail sales associate. Just like being in a store, I might not have had the product name. I didn't have a SKU in mind. I didn't know what I wanted, but I had a loose idea of what I usually wear, what I already own in my closet, and what I tend to reach for. And what kind of a piece I might actually use. Living in South Florida, I think that's how most shopping starts for most people. You show up with some intent, but you don't always know exactly what you want or how to express it. And the agent asked me a few questions like what are you shopping for? What do you already have? What are you usually drawn to? And then it did what the best of retail associates do. It connected the thing in my head to something that was actually available on the show floor. And a few minutes later I was trying on a short sleeve crew neck that I would not have found on my own. And it all started because I was talking to an agent and. And that's the moment that matters. Because for every brand there are shoppers that are arriving every day with intent and they're ready to buy. But they don't know your taxonomy, they don't know which collection page to visit, they don't know which filter to use, they don't know whether the answer is buried in a PDP or a size guide or a support article. There is somewhere that your merchandising logic is breaking down that only your team understands and they just know what they are trying to solve. And 11 Labs gives brands a way to meet that intent via conversation. Klarna is using elevenlabs infrastructure to support 35 million customers. Revolut deployed it and cut resolution times by over 8x. And it's live right now at store elevenlabs IO where elevenlabs own e commerce store is up for you to talk to a voice agent for yourself. The Soho pop up might be closed, but the experience is open. Go try it and bring voice agents to your brand. Start at elevenlabs IO futurecommerce. The future voice agents are here for your brand at elevenlabs IO. FutureCommerce.

Speaker B: Yeah, I love that you hit on all of the nuances of um, recommerce and why different consumers may participate in it and how it provides that level of access, especially for a brand as known for its quality as Lululemon is. And you know, everyone has their different reasons for wanting to enter that relationship with the brand. So like new is kind of providing different opportunities for consumers, which is great. So to that point about it becoming a core, uh, retail slash business channel for Lululemon, was there a particular inflection point, um, internally that really triggered that momentum? Because we hear a lot of discourse around how so many retail executives know it's good for business. They know it's, you know, really critical to, you know, explore this path, but they sometimes need that trigger point. So was there something that happened, whether it be consumer insight or, you know, an internal discussion, that really activated that momentum?

Speaker D: Yeah, good question. And I think one great thing about Lululemon as a brand, I think we have landed for a long time now that circular innovation is just a key tenet for us and the future of our brand and the future of our industry. But I'd say for like new, that was maybe it started with, with, uh, a sustainability and a values push. And it was, this will be one of our first stepping stones into building out circular infrastructure just on our journey of extending the life of our product. Um, but I would say we started small. So our whole, I guess, introduction into this program was starting in pilot mode. So we launched first into two states, into California and Texas, because there was a lot of unknown around supply and demand. And I think the nuance of E commerce is that you're managing both. Um, so we wanted to ensure that those fundamentals held up for us. And so I'd say first inflection point for us was that the pilot signals were so strong. Um, and we found really, really strong interest in both the supply side and the demand side. Um, and that was helping us majorly in the journey to build the business case to scale. And I think as we were building that business case, we also just had this maybe broader realization that resale of Lululemon was happening at scale already all around us. And it was either, um, let it happen without us and sort of miss out on that opportunity to uphold our brand standards and a moment that could be like an extension of relationship continuity for us and our customers. Um, so that really helped, I think, drive the case for executives internally.

Speaker B: Yeah, I think that's a great point. That behavior is happening regardless. So the opportunity, it's kind of on the brand, right? To be able to create these experiences, take ownership of it, and in some way differentiate in a way where people say, oh, instead of going to this third party platform, I'm going to stick with the brand. In a way, it's part of the loyalty loop, um, which I find to be fascinating and maybe we'll get into that in a little bit. But Ryan, I want to ask you, I mean, obviously not every customer or retailer is the same, but what do you observe in your conversations with brands broadly? Like, are there any trends or patterns in terms of what's triggering activity and movement towards recommerce? Um, are there any, uh, critical steps to early stage success? Like I could imagine, there's some preliminary work or conversation that needs to happen in order for a project to be successful.

Speaker E: Yeah, it's really interesting. This is something that's changed dramatically over the years since we started the company to now, I'd say back in 2020, 2021, when we were talking to our first brand customers, it was like just as Alison said, it was like very much a conversation around sustainability in a lot of cases, not a super well understood one. It was just sort of this vague idea that's like, yeah, like I've heard about this. It's maybe worth trying. It's interesting. Maybe our consumers want it. You know, whatever the motivation is, it was, it was very like dip the toe in and not a lot of conviction about what it could become or what it, you know, meant for a brand to be doing. From a business perspective, fast forward to today where most of our conversations with prospective brands and the biggest brands that we work with is, is all about the commercials. It's. Is this thing a viable business unit effectively on its own? Uh, you know, does it drive meaningful revenue? Is it doing so at a healthy margin? You know, how can we build a P and L and a forecast and a plan to grow this, you know, by such and such amount every year? And it's, it's really kind of changed the whole narrative, which means that for us, that also changes what matters to us and sort of what we're building. I think to answer your question specifically on like what components need to be in place or what needs to be true, it, it again is like kind of validated by what Allison said. Like you need simultaneously like some executive buy in. Like you need somebody to believe high up in the organization that there is potential here so that they can clear roadblocks and set up the right conversations and invest in team members like Allison and her entire team to actually do the things that need to be done to build a big business around resale. We kind of set up our business at the beginning to be very, uh, to take a lot of ownership and take a lot of the hard work away from the brand so that we could, you know, we've launched entire resale businesses with brands where there's one person fractionally thinking about this and we're doing 99% of the work. And then there are cases in which a brand has in earnest invested and built a team around this. And we're playing more of a support role through our technology and platform and strategic partnership and everything in between. But it really does require that sort of top level Executive buy in as well as someone who's willing to navigate the org and unblock and do the work, work at a minimum so that you can kind of connect the day to day operation and what you need to do to build the business, launch it, grow it to that sort of what's, what's on the plan for this quarter, next quarter and beyond.

Speaker A: You mentioned something like sort of your, your level of involvement with the, the program. I've seen a lot of different models on this sort of front. Uh, Ryan, maybe get into a little bit of the details of like how you actually like the mechanics of uh, like getting in the like new. Is it direct to, from peer to peer, is it being inspected? Who's inspecting the items?

Speaker E: Um, like how does the thing work? Um, so this actually has also evolved over the years. So when we started archive back in 2020 the first thing that we built was a white labeled peer to peer marketplace solution. So that it was brand could go to market with a resale program that was purely customer to customer. People list their items for sale, other people come and shop those. The idea was to create a super low barrier to entry resale m solution for a brand who just literally just wants to put a thing on the, on on the Internet and have customers show up, build a community around that re engage, attract new customers into the brand, etc. That worked great. But what we found is as we moved up market into the enterprise, first with the North Face and then sort of New Balance and Lululemon and beyond, uh there is an entirely like different source of inventory that you have to work with in the form of brand owned inventory coming through channels like you know, damaged returns or trade in as I'll say, where the brand's actually buying that stuff back from the customer. Or it could be factory seconds like it kind of, you know, anything that can't be sold as new is kind of up for grabs in this ecosystem. And to deal with that kind of stuff you need to deal with the messy, challenging physical logistics problem of uh, you have a bunch of stuff coming in truckload by truckload and you need to work your way through it, figure out what's resellable, what has value, how to value it, how to condition grade it, whether it needs to be repaired or cleaned or treated in some way and then ultimately when it does go for sale on the site, how to fulfill it, handle returns, etc. So there's the whole logistics and reverse logistics business as well. And we handle that through a network of partners around the world. That specialize in those activities and we build the software that those partners operate on so that the whole ecosystem is sort of connected and everything flows through the same kind of core source of, through platform, if that makes sense.

Speaker A: You know, from a consumer perspective. In this case you have a like new store, but uh, there's also like on Amazon you can see like new products for uh, existing listings. So uh, is there like a thought process around having a separate store versus having the owned listing, uh, and then having like, like, like new options as an option?

Speaker E: Yeah, the separate store. Um, so there's a few reasons for it. So the first is the barrier to entry. I talked about like actually building the underlying infrastructure to add secondhand items to your primary E Commerce channel is a really hard thing to do. That's why we built our entire product and platform. You know, the metadata and the data modeling of used inventory is very different. Fundamentally new inventory, the shape of it, how you merchandise it, all of that stuff, uh, needs to be treated in a very special way. And so we, we stand up a separate kind of shopping ecosystem because it's just a totally different problem that you're solving. And you know, it feel, but we did that in a white labeled way. So it feels very on brand. Now with that said and that being true, there are all sorts of synergies that can and should and will exist between these two channels and what, you know, you touched on one of them, which is you're interested in a product and you want to see the used or the new versions, depending on who you are and what your priorities are as a shopper and a fan of Lululemon's product. Or you can even imagine things where it's like this style is out of stock on the main channel because they don't make it anymore. Um, or the color that you love doesn't exist anymore or whatever it is in a way to cross sell onto like new and same thing the other way around. You're on like new, you find a thing, you're like, this is really great. But because resale inventory is super spotty, they don't have my size. I'm going to jump on to the main channel and buy this item because it looks great and I discovered it here and I think that is sort of the future sort of vision of where this is going. But for, and I'm curious if Allison has much to add. Like you have your perspective on this, but uh, for an enterprise to actually move into this world where you're kind of tightly integrating from a technical and operational perspective, these two channels with a third party vendor involved, etc. Things get complicated fast. And so it's just a matter of building those relationships and those bridges and getting there over time versus starting there.

Speaker D: Yeah, I can build a little on that too, which I think I like fundamentally agree with how Ryan and M, his team have positioned Archive as like a white label brand channel that can sit beside our ecosystem. And I'd say we chose that upfront because we were in pilot mode and we were in scrappy startup mode of like, let's make sure we can prove that this works before we want to pull it in house and integrate it really seriously. But I would say the lessons over the past five years have been that it's a fundamentally different problem and we uh, know that the challenge of taking in one of one items is a completely different warehouse management system need and to fulfill that product looks very different than fulfilling that product from our mainline warehouses. And then from the shopping experience, I think it's been, it's been such a journey to see how second hand shopping has evolved and I think we are making such strides into how, how you could shop on Ecom with us. But and I also think there's a long way to go that we haven't cracked it yet and there's still new things to test and try. But you're shopping based on condition and um, possibly a hemmed product or uh, you're looking at colorways that don't exist anymore. So it is a fundamentally different way of interacting with an E comm site. And so I think the more we look at that, the more we are happy that it lives separately and can be really quite agile and we can test and learn into that space. And I think as Ryan said, the best thing we can do is put the right thing in front of the right person at the right time. So we will be hopefully quite savvy about how we can present up those opportunities across both our ecosystems. But honestly for speed and for innovation in the E commerce space, we're happy to have it live in parallel.

Speaker A: That's so cool. Yeah. And to that end I actually think there is a difference in consumer psychology uh, around this. And just starting off by even having a resale site is actually a stamp of we believe in the quality of our brand and the last thing value of our products. And actually I think it's that vote of confidence from the brand that their stuff is worth your time and can last. Um, but the second part of it is I think uh, you kind of Got into this earlier, Alison, you were talking about, I mean you can use the exact words, but you were like, I'm gonna pop some tags, got $20 in my pocket. Like you were ready. You know, talking about the thrifting experience and finding like a bargain and a deal. And I think setting up a like new site, a really interesting uh, uh, way to approach that because it is a bit of a treasure hunt. When you're in a like new store, you're looking around, you're browsing in there, you're a certain kind of customer, you're looking for something. It's a little bit less specific than going onto the main site, maybe knowing what you already want because it's based on inventory and availability. Um, and I think that you know, that future state where you end up having listings of you know, like new on, on the product detail page actually can change the mindset of like what of like, of the shopper around what like new is. Um, and actually maybe even change the profile of someone that would buy like new, um, because you're standing it up against that direct product and so it becomes almost like a non discounting option for something like that is like new. And I think that's really interesting and I love the initial approach because I do think there is a whole set of consumers out there that Lululemon is going to be able to capture or is capturing ah, through the process you have now. And I am curious to see, see like how this like shifting mindset around what the product actually means and like how to engage with it will change people's shopping behaviors overall. And um, I'm curious if you've seen any general like, for maybe like some of those accounts that you're keeping track of. Have you seen any changes in shopping patterns for the brand as a whole, uh, as a result of launching like new?

Speaker D: I think yes. And I also think we may not have known what we didn't know previously of. We've got longtime fans of our brand who are shopping with us consistently. But I think that they were also possibly shopping with us or with a secondhand marketplace and picking up our brand or a competitor brand elsewhere. So I think that's been interesting for us to monitor is it feels like new has become an on ramp for a number of different Personas and profiles and there are like the longtime fans of products who are so excited to see discontinued styles come back or they know every single colorway and they're completing their collection. So I think the thrill of the find and the Thrifter is really like one key demographic. But I think the piece that's exciting to us as a brand too is there's new guests entirely to our brand that are discovering us through like new or they've lapsed with us and they've been shopping elsewhere for a long time and this is giving them a good reason to re engage. So I think we're starting to look at it like this on ramp for different customer mindsets and different maybe exposure and experience levels to our brand. And um, our hope is that we're giving a number of different entry points across our markets to be able to show you our product. You decide where you want to engage with us. Again, if you want to continue to find a lower barrier entry with like new or replenish staples through like new and then love the product and trade up into our mainline business. That's um, that is totally the purpose of this recommerce channel.

Speaker B: Yeah, I mean just over the course of our conversation we have been able to unpack so many different entry points and so many different reasons why people would engage with a experience like new. Um, but Ryan archive data has even shown that about 50, 50% of resale shoppers are new to the brand. So that point about, you know, resale or recommerce being an acquisition tool, um, can you kind of break down how, uh, the different performance levers, I guess you could say, because you know, I mentioned earlier that it's a way to kind of get people into the loyalty loop and continuously engaging. Right. Like you, when you're done with the product, you hand it in directly to the brand, you get the gift card or the credit and then you buy again from the brand. But can you hit on that acquisition point a little bit? Because I think that piece is sometimes overlooked or maybe not as um, in depth in our conversations about the business opportunity for E commerce.

Speaker E: Yeah, and this is actually a really important point. Um, and it relates to the fact that the brand needs to sort of account for that acquisition as part of the accounting for the overall value of recommerce in their ecosystem. And that's not always happening automatically, uh, because it's so nuanced and complicated and when that uh, customer is showing up and whether they're graduating to kind of mainline full price sales away from uh, the secondhand channel and all of these other things surrounding it. Um, but to answer your specific question about customer acquisition, I think resale has established itself as, you know, a very, very fast growing macro trend. Right. Like it's growing far faster than Ah, retail as a whole and globally as well as in the US and you know, if you dig into that data it's, it's kind of, it's a few different things at play. Um, obviously there is value like economic kind of overall pressure and the fact that there are more and more value conscious shoppers and people looking for a deal. Um, and resale happens to be a really great place to find a high quality product at a better price than you could otherwise. But there's also like something in um, you know, sustainability especially as you trend younger and younger, um, around actually just having a preference for investing in used things over new things things because the sort of, the knowledge of what buying new versus buying used means for the environment, um, is another obviously growing trend. And these two things are not, uh, you know, take value and sustainability as like two primary drivers are not things that a brand's M mainline channel necessarily has access to in quite the same way that resale does. And so you're attracting customers um, that are maybe curious about your brand, have, have either been priced out of it or for other reason been uninterested that all of a sudden are a new, like it's a, this is a new opportunity for them to explore because, and so we find in our data that a lot of customers are actually trying brands for the first time with a used item, uh, because it's a way for them to test things like fit and material and quality, et cetera, at a much kind of lower barrier to entry. And like Allison uh, said earlier, this was happening on third party marketplaces like that, that's where, and so if the program exists and the awareness is there, people like shopping direct from brands. It's a better experience. You know, there's better data, there's better guarantees, there's just a better overall feel of that experience. And, and that's ultimately why through these channels you have such a unique opportunity to attract a new customer.

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Speaker B: Yeah, absolutely. I'm glad you brought up the data piece because I do find that to be an advantage. I have searched on third party sites myself as a shopper and you know, there's always that disconnect where you have a particular way of defining an item. Maybe you're trying to use the product name specifically or the colorway to find something and it's sometimes difficult to get to the actual item M you're looking for. Like I personally like to use these sites for looking for archive goods or older collections like you mentioned earlier. So having it be owned by the brand again, it's like you're speaking the language, quote unquote. Um, but there are a lot of other data nuances to making this recommerce experience effective for the shopper. Right. Like there's different, there's variable conditions, there's, you know, one of a kind or limited collections. There are so many different things at play. Right. So walk us through some of the those complexities a little bit further so our listeners fully understand like the data work that goes into this and you know, how, um, you know, AI is maybe coming into play to kind of help facilitate that and make it a bit easier for Brands, um, you know, to manage the experience so people can find what they're looking for.

Speaker E: Yeah, no, I'm glad you brought that up because that's ultimately one of the biggest value propositions to a consumer um, for branded resale is the, the sort of data that, that drives that experience and sort of, there's a lot of different things to think about. So there's the brand data about the products and sort of all of the sort of metadata, descriptive information, official photography on a model, all of the different you know, official color names and ah, you know it's not just called red, it's Alice and say a special, say a lulu specific red insert lululemon color name which tied or whatever. But these, these things like truly matter um, to the customer that's going through. But then as you touched on it, there also is all sorts of metadata that needs to be collected about the item through the process that, by which it goes from being uh, just a total raw secondhand good to being available for sale on the site. And the metadata that's collected could be the condition that it's in whether or not a repair was done, whether or not there's a defect, where that defect sits on the item. Very specifically maybe a photo of that defect and what it looks like. And if that's coming through our warehouse operation, we need all of the software that helps collect uh, and manage that metadata and maybe route it somewhere where one of those defects could be corrected or fixed or repaired, et cetera. If it's coming through a peer to peer channel or a trade in channel either then have another set of data collection and stuff that you need to track. And so at the end of the day all of this feeds not only what is the shoppable inventory that we have available to us, but it also drives things like what is the overall profit margin of this business. Because we know how much stuff we're actually seeing versus how much stuff we're selling. But it also affects pricing, right, because you don't want to take a heavily uh, used and stained item and put it right next to a perfectly, you know, almost as good as new item and charge the same price for those two things. And you need to be really smart about how those are priced against, you know, all the other factors that you have at play and how that product may be it's price changed on the main channel over time with sales and markdowns. And so there's just so much data ingestion and data analysis that's happening on an ongoing basis, basis to make this story clean and to make all this stuff work. That like I said all the way back at the beginning of the call, that's why this is a hard problem.

Speaker A: Yeah, I feel like, uh, dealing with some of those items that come in could be a real challenge. And you have the same processing costs on the, uh, less new items as you do as the very new items. And so how do you manage that? Because it seem, I mean you just, you've said it over and over, Ryan. This is a hard problem to solve. Like um, you know, it sounds like data is a, you know, is a big part or AI. AI is a big part of like sort of streamlining this. Are you relying on AI to make assessments about these things? Is that, is that how it works? And so it doesn't really matter how it comes in. It's like you've got AI going.

Speaker E: You asked about this. And so the AI thing here is interesting because, um, we started making our investments in AI last summer and the kind of first iteration of that, and Allison has seen some of this, um, with our Lululemon program is specifically what we're talking about here. It's in data integrity, it's in filling holes in data. Uh, it's in helping with identifying a product against the digital record we have of it if we don't know what it is because we can't quite tell. Um, and it's also about gaining efficiencies in the warehouse. So actually equipping the people who are on the floor, unpacking the, you know, the box with 100 items in it and making them faster at, uh, identifying it and faster at condition grading it and making them more accurate at condition grading it. So fewer mistakes are made and fewer unexpected moments for end customers. And look, lower returns rates. That's where a lot of sort of our initial investment has gone into, I'd say, where our framework and mindset is shifting. And this is all in the last couple of months with sort of how quickly things are moving in the age of AI, uh, is more agentic and thinking about this more in terms of, rather than us like assisting our human operators with, you know, data at their fingertips or some sort of like chat experience, actually embedding and training agents that will optimize around very specific things like pricing or like routing in the warehouse to that question, and having these special, uh, purpose built agents more proactively and autonomously making these decisions rather than sort of assisting a person in doing so. And that's sort of where our investments are going. Um, from here on out.

Speaker A: That makes sense. And Allison Lululemon just named, uh, its first chief AI and Technology Officer. And uh, you're really pushing hard into personalization speed to market. And so I feel like, well, how does, how does like new fit into this broader AI strategy? Uh, we know working with archives, intelligence, product and uh, you know, um, being able to connect your customers with the right product, whether that's new or like new or both. Uh, how's that kind of coming together?

Speaker D: Yeah, you got it. You got two of the key principles. I think we, as we declared our AI strategy, we said for Lululemon as a business, said like we care about AI investments into product innovation, into speed to market and into personalization. And a lot of that does fall very upstream in the value chain for product creation. But commerce is downstream. Um, but I would say a few of those really still apply to us. And I'd say personalization, it would be my big drum to bang, I think. And I think what Ryan and his team have been so focused on, but there's so much breadth, um, within your ecommerce inventory and you're getting one of ones and you're getting um, unconventional sizes potentially or old styles. Getting that in front of the right shopper at the right time is pretty critical. Um, so I think there's lots to do on search and navigation recommendations that will help us make that experience work for folks who are shopping secondhand. And also that's kind of the benefit of having this on an E commerce platform versus is just being able to shop in store. And I mean one of there's many challenges of having to do this online only and uh, not uh, in a brick and mortar experience. But I think one of the benefits is layering AI into the shopping experience. And then I do think we have our own sort of um, supply side piece. That would be not something that the mainline brand would consider. But I think as we've layered on this sell with us experience, which is the peer to peer experience that Ryan described. I'm excited, excited. I don't think we've scratched the surface too far on this yet. It's brand new for us, but I think there will be personalization and some smarter tactics on how we pull inventory from a guest who didn't realize that this was sitting in their closet and, and it could happily go onto a market and have uh, have a new, a new home. And I think there's some interesting things we can do around. We know there's high demand for this product at this given time. Let's, let's nudge and see if we can have that placed back into our ecosystem and then huge benefit for that guest then to have a gift card potentially payout out of that and then come engage with us again. So that's exciting on the personalization side. Um, and then we've got our own version of speed to market too, I think, which is like listing product can be really challenging on other marketplaces if you've ever tried to sell anything anywhere. And um, who better than us to help supply you with the product data that you need to make that listing very clean, uh, and very shoppable? Um, and then the intelligence from shopping behavior I think is what we can help to feed into making the expensive reverse logistics of E commerce make a little more sense.

Speaker B: So interesting. Well, and I think the one piece that we've kind of been hinting at over the course of our conversation is this is something that consumers want. They're engaging with it and, and every step of the way you and your team are learning more about your consumer. So as you kind of open that aperture, so to speak. And it's not just brand led recommerce, but consumer led recommerce, uh, or peer to peer, um, there's still all of that data and insight that you're collecting about them and their preferences, what they're buying. So, um, is there any sort of discussion around the long term opportunity there? Like how the data, you know, generated through like new can actually be used as a competitive lever for the broader lululemon business? Like, and like what to design, what to bring back. I don't know. Just thinking big picture.

Speaker A: Yeah. Has anything ever like gone up in value like above its original asking price? Sorry, that's a tack on question. Bunny trail.

Speaker D: Hop on the bunny trail. No, I love that. I mean we like, we do have limited collections or partnerships or I don't know if you've heard of some seaweeds. It's a, it's a half marathon that we run locally here in Vancouver and it went away for a number of years and we brought it back. But there's vintage Seaweeze gear that has like 10x in value on other secondhand marketplaces. So it is fun to be a part of that archival collection of product that we can, we can knowingly bring back. Or we could ask you if it's in your closet because someone else may be very, very interested in it. Um, but yes, I think like we are hopefully providing all the signals of resale back into Lululemon. And I think that's been um, like our goal as champions of recommerce as we try to tell the right folks in this organization, uh, why there's strong benefit for E commerce across the very many like guest analytics channels or loyalty channels, um, even product design. I think you were alluding to Alicia. I feel like there's some fun pieces we can provide the data back on like what demand has been like evergreen for certain styles or colorways that keep getting chosen time and time again. Um, I think a lot of the durability and longevity of the product is something that we can feed back into. Uh, our product team has our own internal circular design principles and so they're always thinking about how they create product for longevity and for second life. So can it be resold or repaired or recycled really effectively? Um, so all of that I think funnels back into product development, development and then on um, the sort of overall like 360 view of our guest, all data is helpful. We want to be able to have numerous points that they can engage with us. And so it's interesting now to have like a trade in mechanism or a sell with us mechanism or shop, resell with us, shop new with us. I think all of that is just painting this fuller picture of our guests and how they want to engage with our brand and we're excited to keep them in this growing ecosystem. So cool.

Speaker A: Yeah, I'm just thinking about what you said Allison, and it sounds like there's so many ancillary benefits to running a recommerce program that are not captured in just like the dollars and cents of it. It's like more data. It's having a strong brand that uh, pulling into the community, it's putting a stamp of approval and just sort of saying we are a quality product, we are worth hanging onto. It's actually, it's a brand move, it's a customer engagement move. It's like a general ecosystem move. It's introducing new customers and first time customers into your larger uh, platform. The benefits seem like way beyond just the I get this much margin Ryan, as you think about uh, you know, the upcoming sort of years, there's, there's sort of that pilot to profit center move that Lululemon ran with you. But it seems like there's so much more opportunity uh, ahead. So um, as, as brands start to think about okay, what does circular commerce look like? Um, and like how does that, what's the overall impact? Uh, how do you see things starting to evolve the next, you know, two to Five years.

Speaker E: Yeah, I mean you're, you're definitely preaching to the choir, um, talking to me about this and, and actually what. The picture you just painted is so true. And that's simultaneously what makes our business so, so exciting, but also so frustrating because when you have a thing that's adding value to 10 different places within an existing decades old organization, it is very hard, hard to create that sort of mind shift, mindset shift and paint that picture across. Especially in organizations that are, you know, maybe designed very like vertically, uh, versus horizontally, where there's, you know, different groups of people and teams and leadership ladders that care about different things. And you have to make this sort of like different pitch to every single one of them, but somehow also coordinate all of them. And this is, you know, Alison, you know, lives this from the inside, I live this from the outside. And, and this is the, this is like the challenge to solve in my mind around branded resale. Because the, the, we can see it in the numbers. Like you said that like, even if you just looked at the dollars and cents, the revenue potential is massive. It's insane and undeniable because you can just see the transactions happening in the world on third party marketplaces. But then if you were to actually somehow quantify all of these ancillary benefits so that uh, somebody at the brand could wrap their head around like, oh, you know, wow, like now I kind of see this, it becomes this like sort of undeniable opportunity space. And the challenge is how do you actually execute against that? And I think that we've kind of shifted as an organization in archive to focus on this problem. Um, because we think this is actually the key unlock to brands, incentive structures and entire operating models changing in this way that Alison started to kind of paint the picture of where your product design team is using this data and think you about this. Your global merchandising team is thinking across used inventory and new inventory and how they want to sell that in aggregate, uh, you know, to, to the consumer and the different types of consumers that you have, your pricing strategies can, can go, you know, across these channels, your performance marketing can go across. And if you really kind of look at that version of the future, and this is, this is, you know, to answer your question very specifically, what I imagine will happen in the next two to five years, hopefully sooner rather than later for all of our sakes. But uh, I think it's an inevitability because the more entrenched we get with each of the brands that we work with and demonstrating these wins one at a time across different pieces of the business, the more clear it becomes and the fewer roadblocks we find. But uh, it's a, it's a, it's a long, you know, like actually changing the way an organization who has been manufacturing things in order to sell as many of them as possible, you actually change that behavior pattern and create incentives around actually the objective function is just revenue. And ah, how we get there can look different is. That's a many year long process. If uh, if you can kind of imagine,

Speaker A: I can't imagine. And uh, you know, I think that pulling those different organizations together, I think it requires vision. And that's something that we really talked about at Future Commerce is this idea of sort of who holds the vision in your organization, who can understand how all of those different pieces that affect all those different departments, even though each of them has their own KPIs. It actually in aggregate is a net win in more ways than just that KPI can quantify. Uh, Allison, I know this is a big question, but vision is something that Lululemon's had over the years and being able to look ahead into the, the market you're in and sort of see what's coming and see how people are changing their engagement, um, with Athleisure or uh, with um, you know, technical or whatever the product type is that you're selling. Um, and so um, as you think about the recommerce program and the like new program at uh, Lululemon, how do you see customers finding new ways of engaging in the next couple years?

Speaker D: Yeah, I guess I'll kick that off just by saying, like, I've got a good amount of gratitude I think for the internal leadership at Lululemon who I think remain really open minded to experimenting. And I think that's kind of crucial where you uh, I think Ryan has, has been a pioneer in this space. I feel like my team has been a pioneer in the space and we're starting to like formalize some of these points of view because you need the data to run to be able to look back at it and decide if it was something truly valuable, that you can start to again build the case and then keep growing to scale or pass key data back into other parts of the organization to say, hey, should we pull this closer into our loyalty projects? Um, I think we are definitely lucky to have a leadership team who is curious about how the market will evolve and they're trying to look at how retail as a whole will be potentially changed or altered by the secondhand sort of boom that's happening all around us, and there's an acknowledgment that we want to be a part of that. Um, so I think, to answer your question on how I think the guest behavior will change, I think we'll keep. I mean, we'll keep experiencing the excellent product innovation that Lululemon has always brought to market. And then in my team, we're excited to see that flow through our channels years down the line when the next thing has been released. But there's product coming back into the E commerce sphere that people are really, really excited to see again. And I think both things can be true at the same time.

Speaker A: Love that. I like that. Love that. Alicia, you have anything else? Any last questions that you didn't get to ask that we missed out on? All right, well, uh, Alison Ryan, it's been such a pleasure talking with you both and diving deep into E Commerce. I think I believe in it. I am a huge fan of it. Uh, I personally love to see more brands entering into this market because I think it is good for the world, and it also is good for people, and it's also really fun, and so what a great initiative you have here. Thank you so much, uh, for coming on the show, and, uh, thank you all for listening to Future Commerce.