Lunya has filed for a Chapter 11 bankruptcy
The founder of Lunya is Ashley Merrill. She graduated from UCLA with an MBA. After that she worked in some different jobs for a while. In 2012, she founded Lunya, a clothing brand dedicated to the needs and lifestyles of modern women. Its design concept is to make modern women feel confident in wearing at home, creating a brand of comfortable sleepwear.
Lunya, a high-end sleepwear brand that sells for 10 times as much as its peers on Amazon, recently filed for bankruptcy under US bankruptcy law. Lunya was founded by Ashley Merrill in 2012. Its silk pajamas, bathrobes and sleep skirts have achieved good sales and good reputation on e-commerce platforms. Lunya is more than just a women’s sleepwear company, it’s the fulfillment of Ashley Merrill’s lifelong dream. This sleepwear brand with many halos can’t withstand the impact of demand and competition in the end.
In the early stage of the company’s development, it invested heavily in product development and tried various materials and styles. In terms of channels, Lunya sells through independent websites, Amazon, Wal-Mart and other e-commerce channels, and has developed offline retail stores and wholesale channels. However, Lunya’s product pricing is relatively high in the same category. But when people shop, the design of sleepwear doesn’t show as much differentiation as the price. Once the advertising conversion rate is not enough, the order will be reduced, and the performance will drop accordingly.
According to bankruptcy documents, Lunya’s income reached a high value in 2020 and 2021, with an annual income of about $50 million. In 2022, company revenue drops significantly to $35 million. In mid-2021, Lunya significantly increased its inventory. This is because the company’s management believes that e-commerce growth will continue during the Covid-19. Therefore, Lunya’s inventory has increased significantly, and the outlook is bright. However, due to a change in an external factor, Lunya’s marketing suddenly suffered a heavy blow.
This is a major event in the advertising of independent stations in 2021, which has a fatal blow to the entire industry. At that time, after updated the Apple system, users could choose not to share their information with the advertising platform. Therefore, for many sellers, precise advertising will fail. This hit Lunya exactly. For Lunya, its target consumer is extremely precise high-income urban women. And this precise advertising strategy is the key factor for Lunya’s success. The change of Apple’s policy caused the conversion effect of advertising to plummet, causing Lunya’s sales to plummet. Lunya’s target customers and Lululemon’s tend to be the same. This type of product needs to consider precise advertising strategies and target groups. The emergence of this policy made Lunya immediately re-find the direction of advertising and adjust its strategy.
Not only that, Lunya has also opened 7 self-operated retail stores in the past two years. These retail stores are too large, and the rent is a big additional expense for Lunya. In the past year, Lunya’s performance has continued to decline. In 2022, about 83% of Lunya’s revenue will come from e-commerce, with retail stores and wholesale accounting for 8% of sales each. Revenue fell 29% year-over-year in the first quarter of 2023. Over the past 12 months, Lunya’s e-commerce business has averaged a monthly net loss of $135,000. Under the pressure of performance loss and debt burden, Lunya had to apply for bankruptcy and reorganization.
Lunya’s official website is currently running a big promotion with as low as 40% off, and it is seizing the opportunity to clear the inventory. Under the current fierce competition, Lunya’s situation is indeed not very good. The traffic of independent stations is obviously much more expensive than before, and the advertising cost has increased a lot. In Amazon and Wal-Mart, it is difficult for it to compete with peers with cost-effective advantages, and what cannot be ignored is the strong rise of Shein and other major e-commerce companies. All e-commerce companies are using their own methods to attract traffic and advertise. The choice of Lunya’s next step is very critical, and every step after that must learn from the previous lessons. For companies that want long-term development, companies don’t invest too much cash flow on inventory, and don’t rely on one advertising method.
