The product defect is expected to hurt Lululemon's reputation in the short-term. If women are paying $98 for yoga pants, they expect quality.
But the pants shortage could also cause longer-term problems, hurting the brand's value and sending customers to competitors.
CEO Christine Day has said that the company relies on a low-inventory model. This creates the illusion of scarcity and allows Lululemon to sell 95 percent of its product at full price.
Lululemon's customers are notorious for their fanacticism. They cite the brand's great selection and quality for reasons why they shell out for the brand.
But demand for the pants is already high, and now there is 17 percent less product.
That means that customers could line up for yoga pants at Lululemon, and be unable to buy them, putting the company in a troubling position.
Competition is rampant, with Athleta, Nordstrom, and Under Armour all investing heavily in providing the best work-out gear for women.
These companies offer very similar products for a cheaper price. None have had product blunders such as Lululemon's most recent one.
If the experience of shopping at Athleta or Nordstrom becomes better, women are going to go there instead.
Investors are also wary of Lululemon's future. Quality was paramount at the company, and this snafu raises questions about its long-term growth abilities.
Lululemon has apologized, and says it's taken steps to amend the error.
But it will have to work twice as hard to gain back customers it lost.