by Chip Wilson
“Chip wanted to climb into my brain,” says Fiona. “He wanted to know everything I could tell him about yoga. When he started talking about this company he was going to start, you could have seen the excitement in his face. That’s how I feel about yoga.”
Fiona’s interest was inspiring, but there were still two other reasons to think carefully about embarking on another business venture—my sons JJ and Brett. I wanted to inspire my boys to find their own passions someday—what they could be the best in the world at—and how they could earn a good living while doing what they loved. I knew that retiring at forty-two and just sitting on an ever-diminishing pile of cash wouldn’t convey these possibilities to my boys, especially as they approached adolescence.
I wondered if it would be possible to balance being a great dad while also devoting my time and energy to getting a business off the ground. The answer, I realized, was that it was up to me. I made a choice to be engaged on both fronts, fatherhood and business. I felt it was imperative for JJ and Brett to be integrated into my new venture. After all the travelling I’d done with Westbeach, I was determined to never get on a plane again without having my family with me.
In JJ’s words: “My memories of dad’s new venture started with Brett and me being brought into it. We were on a plane flying from Vancouver to San Diego to visit our grandma. Dad would always sit in the middle, sort of against his will because he was so big. Brett and I were little kids, but we were both drawing logos for lululemon. I’m not sure if any of those got adopted, but I think if you went through dad’s book of creativity you would see these squiggly lines, coming together to make a lululemon logo in some way. I think he’s always tried to get us involved. His way of being a dad was to always educate us in what he was doing and how he was doing it.”
The pieces were in place. All I needed now was to determine what my new venture would look like day-to-day.
Chapter 11:
The World in 1998
No Athletic Clothing for Women
As of 1996, teenage girls had just broken into extreme sports, an area which had long been dominated by men. For decades before this, athletics and sweating were not known as feminine virtues. The “cool” girls regularly skipped Phys-ed classes and smoked cigarettes. Of course, girls competed in Olympic events, although at much lower numbers than men. I was raised in the world of competitive swimming where girls made up 50 percent of the participants, but where there was also a high dropout rate when girls became women—curves made hydrodynamics challenging.
The first girls in non-Olympic sports entered through surfing, but most girls entered through snowboarding, as snowboarding was so much more accessible than surf. The 1990s era of athletic girls coincided with the very Portland, Oregon male grunge look, which went well with snowboarding fashion. As girls became women, the timing was right for them to express their sense of femininity through yoga.
Meanwhile, the World Wide Web was just being figured out (although e-commerce was still non-existent). Boys were being coddled by their single mothers and girls were dominating education. Coke and Pepsi were marketed as the “American Dream,” fast food was becoming a staple, and Americans were getting fat—but no one was acknowledging it.
In the world of apparel, most clothing shrunk after only a few wash-dry cycles as everyone used hot water and hot dryer settings. In this context, there was no athletic clothing for women, except for shrunken men’s styles.
As I embarked on a new venture, I knew I was the only person in the world thinking of non-mountain technical apparel.
My ability to predict athletic trends was both a gift and a curse. I was designing items five years before public acceptance, so, naming the next trend, and getting it to stick, proved challenging. Back in 1995, I had coined the word strech (street-tech) to describe the intersection between streetwear and technical apparel, but the phonetics didn’t work, and the term was never adopted. In 1996, I started calling the movement from office wear to street athletic clothing streetnic (street technical).
In 2014, the New York fashion media would eventually describe this intersection as athleisure, which is a term I don’t like, even if I must acknowledge that it’s here to stay. To me, athleisure denotes a non-athletic, smoking, diet coke-drinking woman in a New Jersey shopping mall wearing an unflattering pink velour tracksuit. Too much leisure, too little athletics.
The Hedgehog Concept
A year earlier, during the six-hour drives to and from Oregon, while working for Morrow, I had listened to perhaps a hundred audiobooks. I loved the histories of the retail growth of Starbucks, Walmart, and General Electric. I listened to everything by Jim Collins.
From this listening, I concluded that four of the audiobooks summed up the other ninety-six. These main four comprised the philosophical, cultural, and people development ideas I wanted to use to form the basis of my new company. These audiobooks were:
The Goal by Eliyahu Goldratt3—a fun, fictional novel describing manufacturing bottlenecks, opportunities, and overall theory of constraints.
The 7 Habits of Highly Effective People by Stephen Covey4.
The Psychology of Achievement by Brian Tracy5—how to be a great citizen, parent, and goal-setter.
Good to Great, Jim Collins6—the concept is “good” is the enemy of “great,” and a “Level 5 leader” has trained a replacement better than themselves.
The fifth addition to this list is not an audiobook, but a course, The Landmark Forum.
In the book Good to Great, author Jim Collins introduced me to the Hedgehog Concept7.
Collins contends that the area where all three circles overlap is where a person or company is most powerful. The intersection is where founders and their companies are intertwined and the greater the overlap, the better the business. For my own life, and in considering my new venture, I drew the following:
Circle 1. What was I “passionate” about? Athletics.
Circle 2: What could I be the “best in the world” at? Black stretch pants.
Circle 3: What would be my “economic engine”? Vertical retail.
The idea of designing technical clothing to suit athletic activity drove me. My brain worked full-time on athletic solves. Design sketches littered my day timer. Throwing myself into solving the apparel issues of yoga was exciting, and I was ultra-passionate about maximizing the athletic experience that produced an endorphin rush.
As I further considered the way the Hedgehog Concept8 applied to me, I realized the convergence of my three circles was not yoga apparel. It was people development. I knew people development was the key to my specific business philosophy.
Linguistic Abstraction
Culture is a way of operating such that people act consistently, inside and outside the company.
Consistency arises from a belief in the vision, values, and linguistic abstraction (a common set of terms and definitions that all employees understand) of the company. Lululemon’s linguistic abstraction was composed of a series of twenty to thirty terms and definitions that arose from the previously-listed books, audiobooks, and participation in the Landmark programs.
Our linguistic abstraction allowed the company to communicate with speed and efficiency across all departments and geographies. A person in Vancouver had to be able to communicate effectively with a supplier in Beijing. Just like the Guttenberg press or the fax machine or email, abstractions enabled exponential communication. A company of developed employees who understand the same business terms also grew exponentially.
A few examples of lululemon’s linguistic abstractions are as follows (the entire list is available in the FAQs on my website):
Committed Listening: Listening without obligation to act, paying attention to both verbal and non-verbal communication.
By-When Date: The date on which a project or task is promised to be completed.
Condition of Satisfaction: An action or criteria against which completion can be measured.
Looking Good: A pro
tective way of being that is inconsistent with how we declare ourselves to be.
Talking into the Listening: Within a conversation, each person’s position is based primarily on how they were raised and their life’s experiences. For a conversation to be effective, the person speaking must consider the filter through which the listener hears.
The Fabric
From my first yoga class, I knew exactly the fabric I wanted to use to make my yoga apparel. I had used a version of my dream fabric as a first layer under snowboard clothing for the emerging fourteen- to eighteen-year-old female snowboard market. At the time, it was thick and shrunk too much, but the cottony feel of this particular synthetic fabric was amazing. It was unique because I could apply technical properties to a synthetic fabric to manage sweat and stink. As a bonus, it was matte-black. Globally, with Westbeach, I wholesaled fifty-seven pairs of those pants. All fifty-seven women who purchased them wrote to me pleading for more.
I realized that a lighter version would be ideal for yoga clothing. My key invention was to cut the pattern extra-wide—effectively using twice the fabric of existing dancewear pants—so when the fabric stretched, it would not be see-through or shine. I worked with a fabric mill to improve on the shrinkage, weight, and technical capabilities. The fabric still shrunk too much. It was good but not great.
The next thing to consider was the stitching and seaming of the apparel. From my time as an athlete designing triathlon clothing in 1979, I knew damp, snug clothing combined with repetitive movement always resulted in chafing.
I couldn’t believe anyone at Nike had ever run ten kilometres in a pair of Nike shorts without developing a rash on their inner thigh. They left their inner leg seams wide open. The result was very painful for anyone with prominent muscles. I guessed Nike runners were too skinny or were paid too much in sponsorship money to complain.
The problem was athletic designers didn’t exist in 1998. I was it. One-hundred percent of designers coming out of schools focused on runway fashion or wedding dresses. Designers were first and foremost aesthetically driven. Apparel function was way down on the list of priorities.
Over the previous year or two, I’d been reading about a new type of garment construction in which two pieces of material abutted one another in something called a flat seam. That meant there’d be no raised seam inside the garment and, therefore, less chafing with movement.
I immediately understood that flat seaming was vital to solving the number one athletic problem of rashing. But, the prohibitive cost of the sewing machines combined with the challenges of training inexperienced and unsophisticated retail staff to educate the customer on this hidden technology meant that the consumer would probably not understand the value.
Refining the fabric took over six months. During this time, I also made a major purchase—two Japanese flat-lock sewing machines for a total price of $80,000.
By the time I’d imported the machines and developed the fabric, I’d spent more than 10 percent of the money I’d made from the sale of Westbeach. It felt like a huge outlay of cash, especially given that I was still a long way from having a final product.
With the flat-lock machines, I could cut labour time down to about six minutes per pant. It was almost like using a robot. I had expensive fabric, expensive machines but low labour costs. With robot type machines, I could match the price of Asian manufacturing in Canada.
Before flat seaming, all seams were ugly, so fashion designers hid them. With beautiful flat seam technology, I pulled the seams outside as a functional solution to prevent all rashing. This meant the seams were visible on the outside of the garment. By doing this, I inadvertently discovered that I could use these seam lines to accentuate the female body.
I believe this seam idea changed fashion design for the next twenty years.
A New Generation of Women
A few years earlier, I’d dated a top-level track athlete. She was incredibly fashionable, passionate about the environment, and had a great mind for business. She was younger than I was, and she gave me a new context for the next generation. Our relationship didn’t work out, but she’d given me the experience of observing a new market of women that had never before existed.
As fashionable as she was, her athletic clothing never fit well, and it wasn’t flattering. I’d long wondered why.
The answer lay with the mantras of Adidas and Nike. At that time, both companies were all about men, shoes, competition, and winning at all costs. Their idea of women’s athletic clothing was to take men’s apparel and “shrink it and pink it.” It didn’t perform well for women, but there were absolutely no alternatives.
Shrinkage
While vacationing in Mexico in the seventies, I remember seeing a homeless man wearing a twenty-year-old Aca Joe sweatshirt. It struck me, at the time, that despite its age, the sweatshirt still looked solid.
Aca Joe colour-dyed their fully sewn garments in a hot dye process resulting in zero post-purchase shrinkage and a velvety hand feel.
Considering that Aca Joe technique in the context of my new venture, I knew I wanted my company to be known for goods that would not shrink when a customer got them home. I wanted everything I sold to look, feel, and perform as well as it did when it was purchased five years earlier.
At that time, women often had only one set of athletic apparel and would reuse the same outfit day after day. A hot wash eliminated stink but ensuring the garments wouldn’t shrink was key. The only way to achieve this was to put every garment through a hot water wash and in a hot dryer before selling it to the customer.
Devising the Business Philosophy
From Westbeach, I’d gained a superior understanding of Canadian and Asian manufacturing. I’d also acquired the business skills to manage a small-to-mid-sized company. I had eighteen years of vertical retail experience, which was about eighteen years more than any other person on earth.
I also loved to interact with people. I believe this made me unique because a person in the apparel business tended to be either a manufacturer who did not like people, or a retailer who loved people but had little understanding of manufacturing. I straddled the middle. I was not an expert in anything other than knowing how the vertical retail puzzle worked.
I had a healthy chunk of money for start-up costs. I was starting from scratch, but I already knew what I wanted the company to look like in five years. All I had to do was work back from that five-year vision to create a plan.
Choosing to be unconstrained by my past experiences, I knew I could create this new company any way I wanted. All the little things that hadn’t worked for me at Westbeach could be easily solved in my new business philosophy. The model I was formulating was so counterintuitive to “normal” apparel methodologies that I wanted to think fresh. Each piece of the puzzle had to work with the others. A change in accounting procedures could easily mess up speed in logistics. A change in the design of a garment could mess up the layout of a store.
I also knew I wanted to call my salespeople “Educators,” and that much of our success would rest on our ability to educate customers on the technical solves that they could not see (like the flat seaming). With education, I was confident that the customer would understand why our product was three times the price of that to which they were accustomed.
I knew this model would only work if the Educators were phenomenal. It occurred to me that I could potentially transform a defined group of post-university women into Educators, using a catalyzed self-development program. Again, people development was the convergence of my Hedgehog Principle, as developed by Jim Collins.
Finally, I wanted to maintain 100 percent control over my brand without any dilution from middlemen. This meant staying as far away from wholesale as I could, and totally embracing vertical retail.
To explain vertical retailing, I need first to describe the wholesale business model: manufacturers (known as wholesalers) make a product and sell it to a retail store who then sells to the customer. The wholes
ale model has a middleman.
With the wholesale model, great technology is impossible. When I made a stretch, black, first layer snowboard pant for women at Westbeach in 1996, it cost $40 to make, and we sold it to snowboard shops for $80. The shops would sell it to the customers for $160. I knew if I changed to a vertical model, I could bring the cost of the pant to $30 and sell it inside my own retail stores for $90. At $90, I was sure I could sell thousands!
With wholesaling, I couldn’t get the customer to pay for technology they couldn’t see. Retail stores like Dick’s didn’t have trained salespeople who could enhance the value of the product by educating customers on what was hidden. Further, retailers rarely paid on schedule—or sometimes went bankrupt—which meant the manufacturer had difficulty planning their budget (as was the case for Nike, Under Armour, and Adidas with the Sports Authority bankruptcy of 2017).
When a company’s primary revenue comes from wholesale, the store buyers call the shots. Typically, buyers review data on what has sold in the last quarter and extrapolate from that data to decide what they will buy in the future. In effect, wholesale buyers just want more of the same as last year. Therefore, successful but outdated designs are rewarded. Buyers are given bonuses for achieving annual budget metrics and are disincentivized to risk.
I wanted to design apparel from “amnesia”—as if I’d just woken up in the hospital with no memory of my past or any apparel I’d ever known. I wanted lululemon to be design-driven, not buyer-driven, which would mean that all final decisions would be made by designers and not buyers.
Another danger of wholesaling is the loss of control over markdowns. Too many discounts on products can cheapen the value of full-priced items. Deep discounts can also damage the overall image of a brand.
One benefit of vertical retail is the complete ownership of branding and customer experience. I wanted complete control of the store display and staff hiring. Every single detail the customer saw in my ideal store would go through a specific creative experience.
