by Chip Wilson
I told myself that as daunting as it was to borrow such a huge amount of cash—and to put up my house as collateral—this was nothing like the old days when we borrowed money to keep the wolves from the door. This was a calculated risk with a huge potential benefit.
The biggest difference between the stress of borrowing money during my Westbeach days and this situation with lululemon was cash flow. The lululemon stores were all cash cows.
I had two factors in my favour: I knew what I could expect for income from the Toronto store, and I knew I could set up more Toronto stores to help pay back the loan in one year. I also knew that if I was going to buy back the store, sooner was better than later. It would only get more expensive, with more tense negotiation and more complicated terms.
Within a few months of realizing what had to be done, the negotiations were settled, Syd Beder was bought out, and the Toronto store was ours.
Briar Hill
The Briar Hill area of North Toronto was the residential centre of our customer base. I was 100 percent certain if we opened a new store in Briar Hill, it would be an instant success. We put our plan to open in Briar Hill into action, choosing a location that would be our flagship store. We wanted it to be iconic in the same way the first store in Kitsilano was.
I didn’t even want to put the store name outside, just a discreet logo and nothing more. I started to understand that just a logo was much more powerful a branding statement than a name alone. I became averse to using the lululemon name on stores going forward. It seemed like push marketing. I knew Super Girls loved the confidence we showed with just our logo.
This was radical thinking at the time, as no one in run-of-the-mill, old-school marketing would believe it was a good move to just go with a logo. I knew old-school marketers did not understand the subconscious thinking of our customer and her need to discover and not be pushed.
There was enough potential in the existing staff to make it worth investing in re-training them the true lululemon way. Syd had hired a women name Karen Wyder from Vancouver as his conduit to the head office. Karen was also the perfect Super Girl and took on the culture naturally. With Karen’s help, we rounded up the most amazing group of Torontonians who moved to Vancouver over the next few years and were powerhouses for the company (hats off to Erin Westleman, Jill Chatwood, Julie Ball, and Carla Anderson).
Bree Stanlake
Around that time, I was working as an Educator in the West 4th store. One day, I started talking to a Guest who told me she had just graduated from the MBA program at UBC in Vancouver, just like Darrell Kopke had.
“Great,” I said. “Want a job?”
This Super Girl—whose name was Bree Stanlake—said yes. The next day she was up and running. Lululemon was, by then, attracting a lot of lawyers and MBA-level women, but I could tell Bree was special. She had the West Coast fresh, athletic look and feel about her, and was obviously intelligent. She was also looking for a great future. As the lululemon model was producing amazing cash, I knew we were entering an era where our executives could make a better salary than they could doing normal corporate work.
Bree would go on to become lululemon’s General Manager for Canada until 2012. As she says, “I started as an Educator in Vancouver, and worked in the Vancouver stores for about four months. Then one day Chip said, ‘Emergency meeting at the 4th Avenue Store tomorrow at 9:00 am.’ I showed up. He said, ‘Okay, it’s game time, you’re off to Toronto.’ I went over for the franchisee trip with Chip and Shannon and a couple others, and just got kind of thrown into the fire from there.
“At that point, there was only one store in Toronto,” Bree continues. “Then we opened all the other stores out there. I went from Educator to the regional manager.”
One part of the training consisted of re-introducing people to the company’s ethos. Taking the focus away from sales and fashion, I educated the Toronto employees on the philosophy of the company. I enrolled everyone who hadn’t taken the Landmark Forum or written their vision and goals and ensured they had everything they needed to be successful. Within a month, everyone was re-energized and excited to be a part of lululemon, the way it was meant to be. They were fired up about moving forward, using a common language to communicate, and thinking big. Many people who stayed through the transition of the Toronto store would remain with lululemon for years to come.
In retrospect, there were a lot of unknowns in the Toronto buyout. A lot could have gone wrong. But in the end, it was an example of the importance of our culture and the areas in which we could not compromise.
“This was a major success in the history of the Canadian apparel business,” says Darrel Kopke. “There was a tribe, and that was a core element of it. There was a cultural distinction that this was not a product company. The tribe had an entrenched social infrastructure, and that created a virality. We deliberately created an industry through a long and painful process.”
We set up the store business model to take advantage of the highly-educated, well-developed employees we were attracting. Each store manager was an entrepreneur, and we paid them accordingly. We sent our managers (all women) full company financials until 2006. We helped them become financially literate so they could make their own decision as we were totally decentralized. Our managers had complete control of their windows, hiring and training etc. We knew if we didn’t give them almost total control we wouldn’t be able to keep intelligent minds active and they would get bored and quit. Our best branding came from stores who created tongue-in-cheek windows with a controversial political or social point of view. Customers talked and debated, and our managers’ intelligence shined because they questioned the status quo. This made our work fun and edgy.
This model proved so profitable that we could pay a manager two-to-three-times what other retailers could. We completely upset the low-cost wholesale-retail model. The part of the business model was critical because we had to educate customers on what they could not see visually. We needed extraordinary Educators to deliver our message and to connect on the same educational level as our Guests.
Duke
Shannon was admitted to hospital in mid-October 2003. I remember it raining as hard as I’ve ever seen it rain in Vancouver. Things happened quickly once we were there. We didn’t know whether we’d be having a boy or a girl until the moment our son, Duke, took his first breath. As soon as I could, I picked up JJ and Brett from school and brought them to the hospital, where they each held their little brother. At that moment, life couldn’t get much better.
Shannon was eager to strike a balance between being a new mother and remaining a creative force at lululemon. She’d worked right until Duke’s arrival and made her return to the office when our baby boy was around ten-days-old, bringing him in with her every day. But, after three weeks, as much as she loved being back in the office and working, she felt she wanted to spend more time at home with Duke.
“Designing for lululemon was my absolute dream job,” says Shannon. “It just fit me perfectly. Though it was uncomfortable to let it go, there was a bigger goal that needed attention. I’m fortunate that Chip had been so inclusive with me about the business. There’s never been a line between what’s his job and my job. He’s always open, always sharing. We got to have those conversations before the actual changes happened.”
I fully supported her decision to step back for the time being.
Besides adding Duke to our family, 2003 was a watershed year for lululemon. I felt as if we’d reached a tipping point in Canada. We had systems in place for each new store opening that laid the essential groundwork for entering a new market.
The essential building block to our growth other than our people development program was what I’d learned from the book The E-Myth19. The myth holds that entrepreneurs have control of their lives, when, in fact, they don’t—entrepreneurship is a 24/7 operation with no downtime. The solution is to set up the business from day one as though it was a franchise, so that it could successfully operate without the
founder.
I was meticulous in setting up our quality-control, brand, design development, people development, and store operations. Because the first store operated so well on its own, I could always be operating according to my expertise, that is, five years in the future.
Yoga and athletics were becoming ever more popular among our target market of educated women in their early thirties. I also believed the prudish way Americans dressed for athletics was ready for a change. I envisioned a future when West Coast functional clothing combined with flattering European design lines would change the way the world dressed.
We knew how to generate interest by working with yoga studios and the community. Plus, as more people in Canada grew to recognize the lululemon brand, it would be even easier to break into new retail environments.
In the life of any company, there are cycles of growth that force those driving the bus to figure out where they need to steer. This was the point we’d reached. Things were taking off, and I had to choose where we were going next.
Addressing this plan meant asking critical questions. Who were we? What did I want lululemon to be? Were we a local company that thrived on being quirky and small? Or were we on the cusp of becoming a major international brand?
As I faced the questions of where we were going next, I also kept investing in our culture and people. Bree Stanlake recalls, “It was just unbelievable. It was a group of people who just truly believed in what we were up to. It was grounded in our belief in the product, and everybody’s almost maniacal, fanatical adherence to product quality, innovation, and walking the walk.
“We all wore it all the time, and exercised in it, and did yoga in it, and really just believed in what we were doing, which was elevating the world from mediocrity to greatness.”
Honing the Culture
A key component of the lululemon culture was family values. As part of our hiring practice, we screened for people who wanted families. We wanted our people to meet the perfect mate, we wanted people to have children, and we wanted the family nucleus to be an energy generator. I believed if our employees’ families worked, then our company worked.
Delaney Schweitzer’s team put together a training checklist that included chapters on Culture, Product Knowledge, Store Operations, Community, Inventory, Guest Conversations, and Guest Experience. Everything was covered. One of their first assignments was to create a curriculum called Foundation, which would serve as lululemon’s onboarding program.
Jenna Hills, one of our Robson Street Educators, became part of Delaney’s team. “We were accountable to ensure that every single employee got invited to attend the Landmark Forum,” Jenna recalls. “Landmark Education was our other foundational training program. It gave us a common language and allowed us to be real with one another. By living the principles of personal responsibility and integrity, we became unstoppable.
“We believed if we did a great job of providing people with the tools to be 100 percent accountable for everything in their lives, not much else was needed,” says Jenna.
We made a big cultural shift by changing our vision. I decided that our existing vision of “making components for people to live a longer, healthier and more fun life” wasn’t big enough. Our vision became our mission, and our new vision became “elevating the world from a place of mediocrity to greatness.”
This vision aligned better with our mantra of “giving before expectation of return.”
Before we had an HR department, a brand team, or any of that, we had Training and Culture. Training and Culture was our brand department and HR, all in one.
New York Fashion Media
Even as we grew as a company and changed the way women dressed and lived, New York fashion magazines overlooked us. To this day, I think the media turned a blind eye to lululemon because we did not fit into their co-dependant business model of paid advertising in exchange for editorial coverage.
The fashion media model of that time relied on getting wholesale clothing samples months before publishing a magazine. Wholesale companies made samples to show store buyers on an eighteen-month production cycle from design inception to in-store sales. The samples that wholesalers used to sell their product to retailers were made available to the fashion media for magazine photo shoots.
Because we were accountable only to ourselves, lululemon had a nine-month production cycle. We didn’t prioritize samples for photoshoots. There was no reason to as we only sold in our own stores. The value of lululemon products was in the feel and function of the garments, which could never be effectively relayed to the customer through glossy photographs.
Our nine-month production calendar also kept us ahead of the fashion houses in regard to the demand for this new athletic apparel with all-day performance. We had created the future of apparel, and our business model made it too easy for New York fashion media to ignore.
Looking back, I wish I had documented more of the lululemon story in a diary or taken more photographs to capture the context of our early years. We didn’t make samples, and we didn’t believe in New York media advertising, so we never did photo shoots. My personal culture (and therefore lululemon’s) was never one of self-promotion or “look at me.” This came back to bite me in the future as social media evolved. Because there was no documented history of lululemon, the media took control of the story.
There is a brilliant book out now called The Four Billion Dollar Tweet20, by Ryan Holmes of Hootsuite. This book describes how social media is here to stay. Companies, politicians, and individuals need to use it to speak directly to the customer or voter.
As lululemon was successfully eliminating the wholesaler and going direct to the customer, proper use of social media would have allowed us to eliminate the media middleman and communicate directly with the consumer. I would then have had a voice to offset the skewed filter of old-school media and non-customer social media comments. Unfortunately, I didn’t change with the times—but that’s a story for later in this book.
Throwing Logs on the Fire
The opportunity to grow, to expand lululemon sustainably, was an opportunity to share what made us unique. The more we grew, and the more new markets we encountered, the more opportunity we had to elevate the world from mediocrity to greatness—one Educator and one Guest at a time.
I was really clear that we were not in the wellness business. We were not interested in making sick people well. We wanted to give normal people the opportunity to be their best. By being their best, they would elevate those around them. It seemed to be an idea everyone was excited to get behind. People were calling us a cult and employees were in on the first wave of lululemon tattoos.
“Lululemon could have died in November 2003,” says Darrell Kopke. “The problem was cash flow like it is for every other apparel business. We went from two to eleven stores and invested all our money in inventory. Our warehouse was piled to the roof with clothing, and we had no readily available money to pay the factories. We bet the farm that we would sell everything that Christmas.
“By the second week of December, we knew that lululemon was going to be unstoppable. Our sales were through the roof. We sold through tons of inventory, and we had our first million-dollar month in one of our stores. We would open a store, and within three months it had paid itself off. We were just throwing logs on the fire.
“We made a ton of mistakes but we were able to make them because we were allowed and encouraged to, and we had the kind of revenue growth that enabled us to make mistakes and still live through it.”
Darrell is right. We were really good at celebrating mistakes and learning from them. A big part of our growth was driven by empowering people and creating an environment that would foster creativity and new ideas. This was especially relevant as it related to our Guests and our community. For example, we originally held yoga classes in the first store to increase foot traffic coming up the stairs. When we moved to the street-level store, we had as much foot traffic as we could handle, so we stopp
ed offering in-store yoga.
A while later, our community people came up with the idea to reinstitute in-store yoga at every location. I’ll admit I was not aligned with the idea at the time, but the employees wanted to do it, and it ended up having fantastic results. It proved that allowing our people to take ownership was a vital part of our company’s successful formula.
At Westbeach, I’d often led by command-and-control. At lululemon, after I set the culture and documented the Operating Principles, I chose to be a leader by developing and mentoring others. I was fanatical about developing people because the future was so huge that I had to get out in front of it. I made it my job to do nothing. Inside of nothing was the ability to be the future before it occurred. It was now time for me to think about how to establish lululemon outside of Canada for the first time.
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19 Michael E. Gerber, The E-Myth, Why Most Businesses Don’t Work and What to Do About It (HarperCollins, 1986)
20 Ryan Holmes, The 4 Billion Dollar Tweet (Hootsuite, 2017)
Chapter 19:
Looking South
Victoria’s Secret
Toward the end of 2004, I received a letter from Victoria’s Secret expressing their interest in lululemon. I sat back and savoured the moment. If Victoria’s Secret was interested, it meant we’d succeeded in bringing something special to the world.
I discussed the letter with several people at lululemon. We were flattered, but it didn’t take us long to agree that this wasn’t a direction in which we wanted to go. The letter confirmed what we already knew: we had a successful formula of our own.
It occurred to me that Victoria’s Secret might use our concepts to develop their own line. Although our focus was athletic pants, I decided I wanted to look at athletic bras as well. I knew we couldn’t be a complete women’s athletic company without being best in the world at athletic bras by 2013, still ten years away.
I considered our position. A lot had changed in our first five years as a business. I was very happy with our jump on the market and the moat we’d built up. We had an industrial trademark on all innovations and had trademarked the lululemon name and logo worldwide. Our profit margin was twice that of most other apparel retailers.
