by Chip Wilson
Considering how little my father earned as a university-educated teacher, I wanted to create a retail business that could pay Educators top dollar. I believed using my vertical retail model to remove the middleman would allow me to pay my staff—my Educators—30 percent more than they were earning elsewhere. For a manager, I could pay double the salary of a public-school teacher.
The First Store
Lululemon athletica opened in March of 1999. You had to be in the know because the second-floor location was so obscure—but that made the store even more special. The people who came were the invitees to our design meetings, their friends, and the small number of people who were in the yoga scene at the time.
The first store functioned a bit like a showroom. If we were going to expand to other cities, the idea was to set up in an inexpensive location in a Kitsilano-type neighbourhood. From there, we would softly educate while creating community via design meetings and developing relationships with forward-thinking athletes we would call Ambassadors.
Each piece of lululemon clothing had its own name, its own identity. I believed by naming a garment, the customer would better understand the spirit and technology, which was a part of the educating puzzle. Our first pant, for example, was a black Lycra flare-fit pant that reminded me of the seventies. We named it the Boogie Pant (in 2017, the MoMA in New York presented the Boogie Pant as a catalyst for social change in a show called “Is Fashion Modern?”).
That particular pant evolved to be the Groove Pant with a built-in band as a design feature, inspired by the look of a low-slung hippie-style belt on a woman’s hips. As a woman’s hips moved, so did the built-in panel. The original did not sell well until it was redesigned to slim out the leg to the knee and bring the flare out wider (the designer of this innovation was a woman named Shannon Gray, who I would marry a few years later).
Despite the fresh paint, the good energy, and the view of the mountains, our second-floor location on West 4th proved to be as difficult as I’d worried it might be. Being so tucked away from foot traffic was a real problem. The staff did what they could to get potential customers up the stairs, including setting out a rolling rack of our samples at the bottom of the stairs and talking to passersby about our products. It was heartening to see how much our small staff believed in what we were doing.
From the outset, profit was never the goal. I was driven by providing athletic and health information to our customers, and if they wanted to buy something, then that was a bonus. The way to make this model work was to ensure everyone I worked with was wonderful. My personal desire was to ride my beach cruiser to work every morning and never get on a plane again.
In fact, lululemon’s original vision was to provide people with the components to live a longer, healthier, and more fun life. In my mind, it was as simple as that.
I was also confident that once a woman tried on our clothing, learned its functionality, and felt the fabric on her skin, she would become a loyal customer. Generally, we only needed between three and five people coming in per day to break even, but my big problem was selling enough units quickly enough. I had too much money wrapped up in inventory, as I had to make between five hundred and two thousand units to achieve economy-of-scale. I couldn’t build more styles until I had more sales. That was the big problem with starting a vertical retail company. Success would take capital and time. I began to understand why few people would even contemplate trying to make this business model work.
I needed to push things along while we waited for word-of-mouth about lululemon to spread.
In-Store Yoga
Fiona Stang was still teaching yoga at Ron Zalko’s gym, which wasn’t ideal because you couldn’t heat the space enough to teach a proper power yoga class. I, however, happened to have just the place for such a thing. We had our clothing on rolling racks, and in the morning and at night, we would move them to the side, so Fiona could teach. The smell of spilled essential oils and sweat became synonymous with the lululemon brand.
Lucky for us, Fiona taught the only yoga class in town. People who showed an interest in yoga found out about us while they attended a class. They realized the yoga class also sold clothing and brought their friends back to peruse the merchandise.
I knew once women were exposed to our location and our pants, it would create authentic word-of-mouth. Word-of-mouth was the only way I wanted to expand lululemon. This was going to be a long, arduous branding journey but I knew the effects were exponential and demand would correlate with my ability to expand production.
“Chip had figured out a really organic way to get all these people—more importantly, the right people—into the store,” Fiona recalls. “It was a brilliant idea.”
Advertising
Yoga Journal Magazine was a mediocre publication wallowing in the depths of the granola world. I don’t even know how they made money. But, I knew the future of yoga was akin to the surf, skate, and snow business, so I thought, if I could be the top advertiser and control the first few pages—much like Burton Snowboards did in the snowboarding business—then I could set lululemon up to be the international leader in yoga.
My approach to marketing with lululemon was just as unconventional as it had been with Westbeach. I didn’t want to advertise what the brand was—I wanted to advertise what the brand was not. We wanted to be clear who our nemesis was, who we were fighting. Lululemon was against big pharma pushing unneeded drugs, unhealthy food companies, and anything that would shorten a person’s life. We were against false advertising that provided short-term gain and long-term pain.
In the nineties, with the high buying power of the yen, Japanese people were coming to Vancouver and spending their money.
Also, at that time, Roots Athletics was marketing their apparel as being athletic. That was maybe true for canoeing on a lake in Canada, but Roots apparel had no use in athletics as I understood it.
Drawing on Roots and Japanese tourists alike, we created our first of three ads—a girl wearing big glasses with the words, ‘Trendy Clothing for Rich Japanese Tourists’ with a girl wearing a Roots sweat top.
First, I wanted nothing to do with the word “trend,” despite what the New York fashion and business media said about athletic fashion. Second, I wanted to make fun of tourists that buy inauthentic tourist clothing. Third, I wanted to take a fun stab at Roots for calling themselves athletic.
I knew our targeted Super Girl would look at the ad and understand the nuances and subconsciously want to be part of the lululemon “tribe,” a phenomenon described in Malcolm Gladwell’s book The Tipping Point11.
Our second ad revolved around Vancouver’s number one gym—Ron Zalko’s—where I had attended my first yoga class. Ron had marketed his business around sex. He did an ad in the Georgia Straight in Vancouver showing a girl, her arms draped over his shoulder, saying “It’s bigger than I thought.” This apparently referred to the size of his workout facility. I found this ad pretty gutsy. Many Super Girls I knew who had seen the ad found it outright creepy.
Creepy, gutsy, or otherwise, the ad was so well known, I decided to mimic it. I had Amanda wrap her arms around me, and we used the same, “It’s bigger than I thought” slogan. Any Super Girl in Vancouver knew exactly how tongue-in-cheek that was. The ad showed us being egoless, irreverent, and risk-takers. Most importantly, it brought our market together.
A third ad, a few years later, was in response to someone who knew nothing about Asian production accusing Nike of child labour. I felt bad for Nike because producing a quality product is impossible without having great conditions for factory workers.
In North America, I noticed there were some kids not made for school, who dropped out with nowhere to go. In Asia, if a kid was not “school material,” he or she learned a trade and contributed to their family. It was work or starve. I liked the working alternative.
The accusation of Nike was the first time I saw untrue social media “journalism” come to the forefront. I learned of the damage one u
ninformed person can do when they publicly accuse an innocent party. Once in digital, always in digital. Everyone wants fifteen minutes of fame.
I decided to get in front of some wildcard individual who could falsely accuse lululemon. We shot an ad for Yoga Journal Magazine with three or four of our employees, including me, dressed in diapers and baby outfits at sewing machines in one of our factories. The caption below said, “We believe in child labour.” If we were ever accused of child labour, I would just agree.
(As a side note, my own children have worked in the business from the age of five with no pay; working young is excellent training for life.)
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11 Malcolm Gladwell, The Tipping Point (Little, Brown and Company, 2000)
Chapter 13:
A Retail Operation
Mounting Expenses
While I was waiting for lululemon athletica to reach true profitability, the costs associated with running a retail operation were mounting uncomfortably.
The ratio of buying customers to expenses wasn’t yet in our favour. I had to weigh out what I could afford. Something that fell by the wayside was theft insurance. Area break-ins were common—especially on weekends—but surveillance cameras were not, so I took a cost-effective approach. Saturday nights became camp-out nights on the second floor with my boys.
“Brett and I did security for my dad when we were ten and twelve years old,” says JJ. “Of course, Dad made sure it didn’t feel that way. We were just having fun and spending quality time together. Other little kids camped in their backyards. We did it amongst Boogie Pants and Y Bras in the store. What we’d have done if someone had broken in, I’m not sure. The sight of my dad barreling out of a tent would probably have made them take off in a hurry.”
We’d move the clothing aside, set up a tent and sleep at the store before going for breakfast the following morning. This wasn’t strange for JJ and Brett because they’d been raised in the retail business and had spent considerable time at Westbeach.
I had no choice but to bring them with me on Saturdays and Sundays, but they didn’t seem to mind. They’d hang off me as I interacted with customers or make forts out of boxes while I worked in the warehouse. The operations of the business became ingrained in them—from logistics to sales to branding. They took it all in from an early age, and at last, I found myself spending quality time with them.
A Pivotal Moment
Then, by the summer of 1999, I noticed something on the streets of Kitsilano. Women were wearing lululemon as they did their shopping, walked their dogs, or sat in cafes with their friends. Lululemon wasn’t just in yoga studios. It was on the street.
Somehow, we’d made clothing that women wanted to wear for yoga—and wear after yoga. Any reservations I’d had about making clothes for a new, niche sport suddenly evaporated. Yoga was not only gaining in popularity, but lululemon had also made the leap into streetwear.
Enough signs pointed in the right direction to make me feel I had to hold on and grow organically without the drug of conventional advertising. The question I asked myself, as my cash dwindled, was: How?
Ambassadors & Product Testers
I had developed a strong relationship with my first instructor, Fiona Stang, and, as lululemon became a hub of yoga culture in Vancouver, a handful of other yoga instructors in the city joined us. This included people like Eoin Finn, a Vancouver-based philosopher who’d been a leading figure in the yoga movement since the late 1980s. I kept coming back to the invaluable information and ideas these instructors offered, always asking questions and getting their input on our designs.
It quickly became a synergistic relationship. We supported one another and believed in what we were creating. We not only believed, but our livelihoods also depended on yoga picking up momentum. These yoga instructors had started to act as spokespeople for lululemon. I decided at this point lululemon would never set up its own yoga studios as it was not our job to compete with our best partners and brand builders.
As Fiona recalls: “People ask me what it was like to be one of the first lululemon testers. I don’t really remember it being that official. It was like, my friend Chip is starting a yoga clothing company, and he’s asking me to test designs and tell him what I think. I loved the clothing and was happy to share my thoughts about it, but mainly it just seemed very natural and fun.”
I decided I would formalize the relationship by asking these leaders to become brand testers, providing them with new designs in return for their invaluable feedback in regularly scheduled design meetings.
As time passed, the testers became known as Ambassadors. They realized how serious I was about perfecting the products. They recognized that I was listening to what they said, and they saw the results of their feedback in the designs themselves.
The Ambassador program was also a unique marketing opportunity. We would photograph our Ambassadors and put the pictures in the local newspaper with the name of the Ambassador’s yoga studio… and then we’d put a small lululemon logo at the edge of the picture. The first goal was to make the Ambassadors’ businesses work. The second goal was to provide just enough financial love to the media publications to allow them to justify an occasional editorial piece on lululemon.
Old-school marketers would not have understood our desire to build an authentic tribe with community-based yoga, but within a short period of time, people wanted to be part of the Ambassador team. This all contributed to maven yogis vouching for the lululemon brand and creating an underground surge on our way to the tipping point. Slowly we were getting more people up the stairs and into our world.
Hemming
I thought about the inconvenience of purchasing pants, washing them, shrinking them, and taking them to a tailor. I wanted to eliminate that need entirely. I surmised that Super Girls did not have time to go to another business, try on the pants again and get their pants hemmed. Of course, women are particular about the exact length of pant and need the pant to be 100 percent functional for a yoga class. I wanted someone to buy a lululemon product and wear it beautifully the first time.
If Japan had seamstresses in each store, I wanted hemmers in ours. I took that one level higher and hired not just hemmers, but design graduates fresh out of school. Not only could they sew and hem, but they could also create. Starting with Amanda Dunsmoor, I’d set up a studio where the designers could work but also talk to customers.
If the store got too busy, the designers came into the sales area to help. They’d interact with customers and then create, create, create. This approach replaced traditional buyer statistics. It laid the foundation for lululemon to listen to its Guests and Ambassadors and create amazing new products that directly addressed their feedback. Statistical sales printouts don’t tell the buyers what shade of purple a customer would have preferred or what size they would have bought if we had it in stock.
Over the years, these early insights became cultural practices that included company-wide design calls, product testing in local communities, and design meetings based on climate, lifestyle, and the popular athletics of that region.
I refused to allow algorithms or metrics to run lululemon.
Design Meetings
Through our early days, focus groups and design meetings remained a critical part of our growing success. With the second-floor location, these meetings were another way of bringing people in to see where our store was. We’d have sushi, I’d give each participant a $100 gift certificate, and we would ask a series of questions that prompted an open dialogue.
This customer perspective—whether I agreed with it or not—helped to move lululemon ahead of its competitors, because the information I was listening for was the future. I designed meetings with Guests and then a separate meeting with our Ambassadors.
I welcomed negative feedback and made sure we invited people who had made store complaints. Design meetings gave us a face-to-face platform to disseminate information to Guests and Ambassadors who spread it to t
heir clients. I also held meetings with the store Educators, which gave me a third and equally important viewpoint with which to work.
Focus groups and design meetings were some of the very best branding exercises for lululemon because during these interactions I would be asked very pointed questions about the business. Sometimes I’d have a good explanation for why something was the way it was. Other times the question would flag a need for follow-up or change.
Despite these rapid innovations, business was growing too slowly. I had a lot riding on whether lululemon could hang on through those first few months. The wholesale prospect crossed my mind more frequently as lululemon struggled to remain profitable.
A New Approach to Wholesale
I was always thinking about how to get the product on more people more quickly. I knew anyone who wore our product would be an instant convert and would tell six other people within a week. I visited the venerable Glencoe Sports Club in oil-rich Calgary with a new branding idea.
I proposed they sell eight of our main pieces in their shop. It was a wholesale agreement in which I would make no profit. I would move through styles at break-even and build up my base to get to economy-of-scale. This was part of my developing break-even marketing mantra.
I suggested I control all buying and fulfill inventory as quickly as they could sell it. I knew how in-demand our clothing would be at a place like the Glencoe, and how profitable it would be for the club. Lululemon would get in front of the perfect high-end customer, and the Glencoe could make millions of dollars.
Unfortunately, this meant butting heads with the merchant system the Glencoe (and all other retail stores) already had in place. The buyers whose job it was to curate clothing (and other wholesale items) wanted the product, but they weren’t willing to give up the ego of their job or look at a new model. They didn’t understand lululemon was a design-led company because they had never dealt with one before.