An Elevated Location
It was exhilarating to create something from nothing, to put into place the early blocks of the business, to put together that totally original puzzle. Lululemon athletica was not born to play by the normal rules of retail, because we didn’t know the rules in the first place. The time had come to put a lifetime of failures and winning experiences together. To do that, I’d need a concept store.
There was nowhere I wanted to be other than West 4th Avenue in Kitsilano, just up from the beach, not far from where Westbeach’s Vancouver store had been located. I wanted the newly-named lululemon to be associated with Kitsilano and the people who lived there. It seemed locating to West 4th would be important, perhaps vital, to our success. Lululemon was inspired largely by university graduates drawn to this unique, athletic, semi-hippie-like part of the city.
I didn’t have enough money or product to rent a regular store location, so I found a space behind an inconspicuous door and up a drab-looking flight of stairs, instead of an inviting street-level storefront.
I decided there had to be a way to use this central yet cloistered location to my advantage. This required maximizing large floor space between an open office and, warehousing and strategically displaying products.
The store, I thought, could be made into a sort of interactive design laboratory. We built a sewing lab right there. I felt the visual of observing our design process would be part of the brand experience and would create word-of-mouth excitement about what we were doing.
As Amanda recalls: “We had our office area in one corner and racks of clothing set up on the other side. It created a fantastic design environment because I could interact with customers and find out directly from them what worked and what didn’t. I would take their feedback, and I would incorporate it into the next cut or the next design. Even though many people doubted our upstairs location, I loved the vibe we had in that store. It was so barebones that it had this very cool boutique feeling.”
As the store got going, we dedicated a third of the space to design and a third to stocking inventory. The remaining third was the clothing display area. It was clear I couldn’t fill our display area with lululemon’s six to eight styles, so I brought in other brands to plump up the inventory, ensure our customers had a reason to come up the stairs, and to research competitors’ pricing. I brought in Champion, Adidas, Fila, Gaia, Calvin Klein Underwear, Cannondale cycling gear, and even some of the existing dancewear apparel that I’d set out to improve upon. I bought T-shirts from American Apparel and changed the neck labels to say “lululemon” and printed reflective graphics on the front.
Shannon Gray was responsible for ordering and meeting with the sales reps from these other brands. From observing the items to which customers were attracted, she was able to determine if the top-selling products were about fit, function, fabric, or price. She used this background information to assist in designing new lululemon styles.
I knew building word-of-mouth about lululemon quality would take time. Meanwhile, I wanted our space to be as efficient as possible. We painted the space white and put down the cheapest carpeting I could find because the linoleum floor was ugly. Even though it wasn’t a storefront at street-level, it was still very memorable. The front windows had an amazing view of the mountains, and the whole space had innately good energy.
One day, my yellow lab, Bagels, tripped and spilled essential oils over a part of the rug. This turned out to be a stroke of good fortune: the amazing smell lasted for 18 months, and customers loved the aroma.
Good energy, the tunes of Al Green, and a view of the mountains meant I didn’t have to sink money into too many adornments. Instead of buying racks, I put screws in the ceiling beams from which I hung wood doweling with rope. These were used to display our clothes. Little tricks like this helped me to outfit the first ever lululemon store for less than $4,000.
A Functional Design
During our focus groups, women expressed that the cost of their time was critical. I thought this through and calculated how long it took a customer to find a garment in a store. I then compared that to what that customer would have earned at work had they not gone shopping. This information drove the store to be set up for function rather than by colourways or outfits (as is typically done in fashion stores). Our pant wall allowed our busy Guest to visually and expeditiously locate the perfect garment for her athletic function, in her size, and in her desired colour.
The thought of maximizing the working woman’s time ultimately drove the functional store design. I was fanatical about creating the right combination of store size, store location, number of Educators on the floor, number of change rooms, number of cash desks, software and the price/quality of the clothing.
It was a worthwhile exercise. Over time, lululemon stores would yield the third highest sales-per-square-foot in the world…behind only Apple and Tiffany.
When I was young, I wanted T-shirts with big logos. I wanted other people to understand who I was, and because I was inarticulate and insecure, the logos talked for me. When I wanted to meet a girl, I hoped the logo on my shirt would tell the girl I was cool. With surf-skate-and-snowboard, the target market was 14- to 18-year-old boys, so the logos were large, necessary, and driven by sponsorship. A company would pay an athlete to wear their branded apparel, which would inspire young boys to buy that brand.
As I grew older, became confident, and stopped growing, I could afford better quality clothing that lasted longer, so I no longer needed the big logo. I didn’t want disposable T-shirts, and I didn’t want my apparel to be dominated by a logo. I wanted my clothing brand to match the quality of person I aspired to be.
I always believed a well-educated, marketing-savvy consumer could easily see through the purchased loyalty of sponsorship. A more sophisticated athletic consumer was looking for a product that had better quality and a smaller logo. The size of the lululemon logo was one inch in the first year. We shrunk it to half-an-inch the second year and placed it on the backs of garments. We made the logo reflective, so it would be functional.
Back when Westbeach had become popular, competitors had set up around us, making Kitsilano the most concentrated area for sports apparel retail in the world. I knew I did not want customers to enter lululemon and expect to get the same treatment that they would get elsewhere, where a salesperson approaches them, suggests such-and-such would look good on them, that this item is discounted, or that clearance apparel is in the back.
One of lululemon’s very earliest Operating Principles was never to tell a customer something looked good on them. We assumed our intelligent customer did not need to be talked down to. Talking fashion used up our customers’ time – it was fake and added nothing to the experience.
My next step was developing a staff training system for how best to deliver a technical product. I wanted to rename every component within our unique business philosophy. I didn’t want to call staff “salespeople” because I hated the connotation of one person attempting to fool another.
While making snowboard jackets, I had wanted to insert technology not visible to the customer. Salespeople and hang-tags at a wholesale sports store frustrated me because neither could explain the superior hidden value of technology-enhanced apparel. On the other hand, in my Westbeach retail stores, I could describe hidden technology to customers, which, in turn, meant there was no problem getting top price. I had to have my own stores and educate the customer.
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 our staff – our Educators – 30 percent more than they would earn 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 behind the item, 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 ’70s. 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 their 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 the aforementioned Shannon Gray, who – spoiler alert – 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 few employees 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 to 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 500 and 2,000 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.
Fiona Stang was still teaching yoga at Ron Zalko, which wasn’t ideal because the class space couldn’t be heated warmly 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 mornings and in the evenings, we would move them to the side so Fiona could teach yoga classes. 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 class. They realized the yoga class venue 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.”
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 want- ed 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 ’90s, with the high buying power of the yen, Japanese travellers 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 Point1.
Our second ad revolved around Vancouver’s number one gym – Ron Zalko – 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 woman, 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 infamous, I decided to mimic it. I had our designer 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 it was. The ad showcased us being egoless, irreverent, and risk-takers. Most importantly, it brought our market together.
A third ad, a few years later, was a tongue-in-cheek response to the media frenzy around Nike and child labour. I felt bad for the slanderous media targeted at Nike because producing a quality product is impossible without having great conditions for factory workers.
In North America, I noticed that there were some kids not made for school, who dropped out with nowhere to go. For some families, it was work or starve. I liked the working alternative.
The Nike accusations were the first time I saw social media “journalism” come to the forefront. I learned of the frenzy one uninformed person could create when they so publicly accused another party of something. Once in digital, always in digital. Everyone wants 15 minutes of fame.
I decided to get in front of any possible wildcard individuals who could have falsely accused lulu- lemon of such practices. 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.” This way, were we to ever be accused of child labour, I could just agree.
(As a side note, my own children have worked in the business from the age of five with no pay; working young, under the right conditions, is excellent training for life.)
- Malcolm Gladwell, The Tipping Point (Little, Brown and Company, 2000)