The Trip with Shannon
In August 2001, I planned to attend the Outdoor Retailer Show in Salt Lake City for our third time. The OR Show specialized in technical fabrics and outerwear and was a great source of inspiration for the company. I asked Shannon Gray, now lululemon’s head designer, to come along for the trip.
By this point, Shannon and I had been working together for almost two years. During the first year, we didn’t see one another day-to-day, but during the second year, I got to know Shannon a little better. I had huge respect for her work ethic. As a designer and fit specialist, she was phenomenal.
My own sense of design was far more obtuse than hers. I would experiment more and often go too far. Some things I came up with were home runs, some things were disasters. But Shannon had an ability to look at something and fit it, colour it, or make it look a certain way so that people would buy it in volume. This made us the perfect team because I would have the far-out and technical ideas, which she would hone to sell in volume.
Thank God I let Shannon drive the product because I soon realized she was the best in the world at stretch-fabric fit. Lululemon would have been a shell of itself without Shannon’s expertise.
Although I knew her well in a work capacity, Shannon and I had not spent time getting to know each other personally. We boarded the plane to Salt Lake City and chatted, not as boss and employee, but just as two people. Ten minutes into our conversation, I was further struck by what an incredible woman she was.
Away from work, I realized I was seeing her in a whole different way.
We arrived in Salt Lake in the afternoon, but the trade show didn’t start until the next day. We were travelling on a shoestring budget, so as was standard for the usual three to four people we took to the shows, I’d only booked one room with multiple beds. We saw it as camping.
After checking in, we dropped our things off, headed out for a city art walk, and then caught a free outdoor concert before dinner. We talked and laughed and then went for a swim.
After a nice evening, we went back up to the room and stretched out on our separate beds. I turned on the TV.
I was older than she was, I had no way of knowing if I was her type, plus I was her boss. Shannon was the most valuable employee I had, in responsibility, integrity, and trust. I would never risk ruining our professional relationship and having her leave the company because I knew how hard it would be to get anyone else at her level of expertise. She was far too important for me to risk making a romantic move.
We each lay on our own beds while I flicked through the television channels. Then, Shannon got up. I assumed she was heading to the washroom. Instead, she came over to my bed and asked me to move over. After some time, Shannon put her head on my chest and closed her eyes, and we both fell asleep like that.
In the morning, we woke up to a new reality. We hadn’t even kissed the night before, but everything had changed.
As Shannon says: “Chip interviewed me for a job at lululemon in October of 1999. He was late for our meeting. I saw him peel into the parking lot, no shirt, no shoes. I then watched him rummage around in his car for something clean to put on. That was my introduction to Chip, him frantically picking up shirts, sniffing this one, sniffing that one, trying to find a matching pair of shoes . . . When my mom asked me how the interview had gone, I told her I wasn’t sure I’d get the job, but I did think I would marry him.”
I couldn’t believe I had been working side by side with this incredible woman and not understood how she felt. At that moment, in a hotel room in Salt Lake City, everything changed.
Many years before, as a little kid, I’d thought my grandparents had the best possible kind of partnership. They not only loved each other, but they also worked together in almost perfect synchronicity. My whole life since I’d been searching for something comparable and had so far never found it.
Even in those first few moments with Shannon, I felt like I’d found what I was looking for. As crazy as it may sound, that morning in Salt Lake City, I asked her if she wanted to marry me and she said yes. Then we kissed. It wasn’t a great kiss (we both agreed). We were both unprepared. Still, our chemistry was powerful.
Shannon told her parents right away. They were surprised, but okay with it. My own mom, dad, sister, and brother were all a little more apprehensive about the whole thing because they didn’t know Shannon. There seemed to be a sentiment of not being sure it would stick, as if it was just a brief, happy delusion.
My sons, JJ and Brett, were the two people whose feelings about this new development in my life were most important. In the past, the two had been a challenge for the handful of women I’d brought home to meet them, understandably out of allegiance to their mother.
But since I’d started lululemon, the boys were always in and out of the store, so they’d met and spoken with Shannon many times prior to me explaining what was happening between us. In many ways, she’d already won them over. JJ’s own growing interest in design meant that he and Shannon had a lot in common from the get-go. He was only 13, but his vote of confidence helped to smooth things over with their mother, who’d been worried my new relationship might be disruptive for our sons.
Workplace romances can be tricky, and it was reasonable for people to be concerned there might be favouritism, or that the work environment would change. But ultimately, the people we worked with knew how important integrity was to both Shannon and I, and how we would not let our relationship hinder lululemon’s success.
We immediately fell into a routine. We worked 12-hour days, went home together, worked out, ate dinner, went to bed, and woke up to do it all again. There was nothing to explain or apologize for since Shannon knew what the business was going through all the time. I could talk to her about issues and count on her to understand. I loved her and the life we were already building together.
I also made good on that promise to put a real ring on Shannon’s finger just a short time later. We were in Paris at a fabric show. The ring I bought – which wasn’t extravagant by any stretch of the imagination – meant a lot. I was nervous to leave it in the safe in the hotel room, so I carried it with me everywhere, waiting for the perfect moment to ask Shannon to marry me.
This trip was a week after 9/11, and security everywhere was heightened. I was worried that the ring would set off an alarm and I’d be forced to get down on one knee beside an x-ray machine. Luckily, that didn’t happen, and I finally popped the question at a nice little Parisian café. It was perfect.
Initially, we figured we’d get married as quickly as we could. “We’ll just go to the justice of the peace, or we’ll just get the boys and pop off somewhere,” says Shannon. But then a good friend of hers insisted on putting something together for us. “She knew how busy we were with lululemon, working flat-out, seven days a week. She started planning a little backyard affair for the following spring, allowing Chip and me to grow the business we were both so passionate about.”
April 20th, 2002 was a Saturday and our wedding day. I went into our West 4th Avenue store to work as I usually did. The number of Guests in our store had been steadily growing for a long time, but on that Saturday afternoon, I was taken aback by how many people were coming through the doors.
The change rooms and cash desk had huge line-ups. The Educators were lit up with enthusiasm especially as we had a very lucrative daily, weekly and monthly incentive program that paid educators as entrepreneurs. There was energy in the air. I immediately jumped in to help and worked at the front of the store, directing traffic.
As the day went on, the store became even busier. I didn’t feel I could leave. I kept an eye on the clock. I was cutting it close, but I wanted to stick around to find out how our sales had gone. Plus, we needed every extra pair of hands we could get. It felt like we’d reached a critical mass.
A seemingly random day in the calendar was doubling the best day of sales in the history of the company – $30,000.
At the last possible moment, I rushed out of the store, ecstatic with the revenue and the experience of everything coming together. I had a dozen things to do, and I was running late, but the first thing I did was call Shannon. I couldn’t get over the fact there was no logic behind that day being so extraordinary. It wasn’t a holiday of any kind – it was just a weekend in the middle of spring.
For the first time in a long time, I felt like a whole new future was ahead of me. I believed I could pay for a mortgage and raise a family without working myself to death. I felt like we would be fine. I rushed home, threw on my tuxedo, and with JJ and Brett as my best men, I married Shannon Gray in our back- yard, surrounded by our friends and family.
Shannon and I had turned a significant corner in our personal lives that day in April, and it felt like lululemon had too. Our store was doing huge amounts of business week after week. A few years earlier, I’d noticed women wearing our clothing here and there on West 4th. Now it seemed I was noticing it all over Vancouver.
The lululemon Manifesto
At a certain point, I became aware it wasn’t just our designs that were becoming ubiquitous – it was what we were putting them in.
The shopping bags we gave our Guests were suddenly everywhere I looked. Women, men, and even children were carrying them, using them as grocery bags, lunch bags, gym bags, shoe carriers, and just about everything in between. People had come into the store just to ask for bags and not even purchase anything. Our culture was being broadcasted far and wide, and there was a reason why.
In 1998, I spent 30 minutes compiling a list of sayings I called the Manifesto. It was just a list of random statements about how I lived my life with authenticity and integrity. Friends are more important than money, was one. Do one thing a day that scares you, was another. Children are the orgasm of life, another yet. Most of these thoughts had come from my life experiences, my parents, my commitment to transformational development disciplines, and our lululemon library.
I thought these observations were interesting enough to post beside the cash register so people in line could read something thoughtful while waiting. I quickly found other people liked these observations and aphorisms and were asking for their own copies.
I asked some surf and snowboard graphic friends of mine (Cowie & Fox) to make the Manifesto look like artwork. Then I photocopied a bunch to leave at the cash register. Most customers who came in the store wanted to take a copy, so we started putting them into every bag automatically.
Soon afterwards, I thought of creating a bag with the Manifesto on it, instead of in it. I reasoned that one of the world’s worst environmental wastes were pretty, but useless, paper packaging from the luxury fashion world and single-use plastics from low end retailers. I wondered if I could develop a reusable bag with the Manifesto printed on the sides that would add to people’s lives instead of being another piece of garbage. I didn’t want people to walk around the street with a bag featuring a logo or lame words for the sake of demonstrating to others that they were wealthy enough to buy luxury. I was all about function - with fashion being a distant second.
I wanted customers to be sitting in their car or on the subway or at home and pick up the Manifesto and spend 10 minutes reading it. I noticed the transformational effect the Manifesto had on people. It validated the way I wanted to live my life, and I saw this occur for others too. The Manifesto was not just inspirational, it was aspirational.
I researched a few different options and came up with a 100 percent polypropylene reusable shopping bag that was durable, waterproof, and recyclable. We created them for Christmas gift-giving, so that the present was “wrapped” in our Manifesto. As far as I know, we were the first company to make these expensive, reusable and recyclable shopping bags.
As Darrell Kopke, our first general manager, recalls: “The fact that the word ‘orgasm’ was on the bags caused a bit of a stir. I got a call from an outraged customer not long after the bags came out. She was particularly upset, she said, because as a result of bringing the bag home, she had to explain the meaning of the word orgasm to her 12-year-old daughter. I listened to her patiently and when she was finished I said, ‘You’re welcome!’ That was the end of the conversation.”
As I reflect on the lululemon shopping bag, I realize just how great our branding was. The popularity of the bags was spectacular. Not only did they create conversation, but they were recognizable around the world! It was proof that our Guests aligned with our psychology of health, athletics, and the West Coast way of living.
Unfortunately, inspirational and aspirational quotes from lululemon would fade from the picture. Eventually, future company leadership would become overtly and unnecessarily concerned by potential litigation and social media blowback - being led by customer complaints rather than our core Guest.
The Original lululemon Manifesto (2003)
(these were the quotes on the side of the lululemon shopping bags)
- Coke, Pepsi and other pops will be known as the cigarettes of the future. Colas are NOT a substitute for water. Colas are just another cheap drug made to look great by advertising.
- Drink fresh water and as much water as you can. Water flushes unwanted toxins and keeps your brain sharp.
- Do yoga. It lets you live in the moment and stretching releases toxins from your muscles.
- Your outlook on life is a direct reflection of how much you like yourself.
- Do one thing a day that scares you.
- Sunshine absorbed into the skin might be worse than no sunshine. Get the right amount of sunshine.
- Listen, listen, listen and then ask strategic questions.
- Life is full of setbacks. Success is determined by how you handle setbacks.
- Compliments from the heart elevate another person’s spirit and will often result in an encouraging word for someone else – a domino effect.
- Write down your short and long-term GOALS four times a year. A class study at Harvard found only 3% of the students had written goals. 20-years later, the same 3% were wealthier than the other 97% combined.
- A daily hit of athletic-induced endorphins will give you the power to make better decisions and help you be at peace with yourself.
- Let SWEAT FLOW from your pores once a day to regenerate your skin.
- Jealousy works the opposite way you want it to.
- One hour of aerobic exercise will release endorphins to regenerate cells and offset stress.
- Wake up and realize you are surrounded by amazing friends.
- Communication is COMPLICATED. Remember that each person is raised in a different family with a slightly different definition of every word. An agreement is an agreement only if each party knows the conditions for satisfaction and a time is set for satisfaction to occur.
- Friends are more important than money.
- Live near the ocean and inhale the pure salt air that flows over the water. Vancouver will do nicely.
- Do not use cleaning chemicals on your kitchen counters. Try vinegar and lemon. Someone will inevitably make a sandwich on your counter.
- Stress is related to 99% of all illnesses.
- Don’t trust that an old-age pension will be sufficient.
- Do yoga so you can remain active in physical sports as you age.
- Observe a plant before and after watering and notice the benefits water can have on your body and your brain.
- You ALWAYS have a choice and the conscious brain can only hold one thought at a time. Utilize your freedom to choose.
- Just like you did not know what an orgasm was before you had one, nature does not let you know how great children are until you have them. Children are the orgasm of life.
- Lululemon athletica was formed to provide people with components to live a longer, healthier and more fun life. If we can produce products to keep people active and stress free, we believe the world will be a better place.
- DO IT NOW. The world is changing AT SUCH A RAPID rate that waiting to implement changes will result in you being two steps behind.
- Will you choose a life of a glass-half-empty or a glass-half-full?
- Take various vitamins. You never know what small mineral can eliminate the bottleneck to everlasting health.
- Nature leads us to mediocrity for safety and reproduction. Average is as close to the bottom as it is to the top.
- Dance, sing, floss, and travel.
- Visualize your eventual demise. It has an amazing effect on how you live for the moment.
The most brilliant franchise agreement
After the franchise agreement with Syd Beder in Toronto, which was less than optimal for me, I thought of a new way to structure a franchise agreement that worked for everyone. Lululemon product was in demand, and I didn’t have to franchise. I also didn’t want to give up branding control. I did need money to expand and we were too few people in our Vancouver office with too much to do.
So, I wrote the cultural, training, and leadership requirements to franchise but the brilliance was in the financing.
The franchisee would pay 50 percent of the cost of the monthly product, 60 days in advance. They would pay the other 50 percent upon delivery. What this meant is the franchisee would pay only half of the normal “wholesale” cost. Consequently, I could grow exponentially as I didn’t have any unfunded production costs and my unit quantities grew. As my production quantities grew, my cost per unit dropped and I could get better margins in my own stores.
The franchisees would pay a 25 percent royalty on sales. This might seem high, but we would only get paid if product sold, and the franchisee only fronted half the amount of money of a customary wholesale relationship, and we all got paid daily from the cash register. It was inherent on us to provide the franchisee with the very best inventory at the right time.
The employees of lululemon were bonused on the performance of franchisee stores in the same way they were our own brand stores. This eliminated an “us versus them” attitude, and all lululemon stores operated as one.
All subsequent lululemon franchisees made $8 to $15 million in profit for themselves over the next 6 years with the exception of decisions made by our CEO in Japan and our CFO in Australia where agreements were formed on the basis of finances and taxes instead of human psychology.
In late 2002, my cousin Russ Parker came from Calgary to see the lululemon store in Kitsilano. After showing him around, Russ told me he wanted a franchise.
“Although I had been considering a couple of business opportunities,” says Russ, “I knew within a day of seeing lululemon in operation that it was something I wanted to be involved in. The electricity was palpable, and I loved the vibe in the store. People were communicating with each other in the office in an open, honest way you rarely observe in an office environment. I wanted in.”
This time, I also brought on a lawyer to help me make my franchise agreements just right – including an easy buyout. The buyout clause stated I could buy back the franchise for four times the profit and pay for all depreciated leaseholds and inventory at cost. This meant no negotiations in a buyout; it also meant that I could buy the sales of the franchises for four times the profit and the public market would give me 10 times the profit, or more, if we ever went public.
It was a great deal for me, and it was a great deal for Russ – he would stand to make about $10 million over the next five years.
So far, the desire to get to five stores quickly to get production costs down was becoming a reality. Syd Beder was running a very busy store in Toronto, my cousin Russ did extremely well as soon as his Calgary franchise opened, and Shannon’s sister and brother-in-law had started a successful franchise in Victoria. This, I believed, put us in a strong position to open our second Vancouver store.
Naked on Robson Street
Every city has its own premier shopping district. While lululemon’s origins were tied to Kitsilano, Vancouver’s shopping mecca at the time was Robson Street. Even though the focus on Robson was high fashion and not athletic apparel, it was almost impossible to run a store in Vancouver and not think about the possibilities Robson offered.
At that time, Robson was one of the most expensive retail areas in the world, primarily due to the value of the Japanese yen and the influx of well-heeled Japanese tourists. We wanted to set up next to the Robson luxury stores with a product that was completely different. A luxury brand is usually defined as a company with impeccable quality, sold at a price available to only a few. At lululemon, we believed we had impeccable quality that could be sold at a price accessible to anyone who appreciated technology and fit.
Luxury customers, meanwhile, could buy “time” in their lives and were consequently often in great shape and very healthy. These wealthy women were the trendsetters who helped to propel the lululemon brand.
On the other end of the spectrum, we already had the hard-core yogis and athletes in community street stores and had supplied them with the best-functioning athletic garment in the world. I knew that once people used the best of something, it would be almost impossible for them to use anything else.
We signed a lease on a Robson location and designed our first professionally-built store. Then I took out an ad in our local weekly newspaper offering a free lululemon outfit to shoppers if they came naked to the store on its opening day. The response was unbelievable. It was so strong that I became concerned there would be a naked riot, and we would be forced to hand out our entire inventory free-of-charge.
I went back to the paper and placed a second ad. This time I clarified that only the first 30 naked Guests would score free clothes. I had forgotten about Vancouver culture – that given a chance, the whole city would show up naked.
On the day of the opening, at around four o’clock in the morning, people started lining up outside. It was a drizzly, cool October morning in Vancouver, but groups of people were showing up wearing raincoats and nothing else. It was still dark outside, but I could see the numbers were growing. The inside of the store was still swarming with our efforts to get it ready.
Not long after the line formed, the media showed up with trucks and vans. As dawn broke, a large crowd of spectators had assembled. Milestones – the restaurant across the street – had a balcony packed with people craning their necks over their breakfasts to get a look at those lining up. Even lulu- lemon’s introverted accountant had shown up not wanting to miss the spectacle.
As we got ready to unlock the front doors, I was very excited . . . until I got a good look at the group of people clustered by the front door. The first two customers lined up were young girls who couldn’t have been older than 14.
I turned from the door and went to find Darrell Kopke in the back. I was verging on panic, thinking about the media and the video cameras filming, the crowd of spectators, and these kids about to strip down. What was supposed to be a funfest was suddenly verging on becoming a PR catastrophe.
After a couple of minutes assessing the situation, I asked Shannon to help greet the naked Guests. We went to the door, opened it up, and stepped out to the crowd. I shouted, “You guys are fantastic – thanks for coming!” The tension broke that instant and there were cheers and clapping. Then we counted off the first 30 naked people over the threshold.
As it turned out, those girls at the front of the line weren’t alone. They were sisters – and they came with their equally naked mother and grandmother.
Dozens of Guests continued to show up naked to the store all day, just because they could do it. Three naked men arrived that morning and just didn’t want to leave. It was a little creepy, but we rolled with it. We had no issues with the police, and this reminded me why I love Vancouver so much. There are plenty of cities in North America where this kind of event in 2002 wouldn’t have gone over nearly as smoothly.
By closing time, it was clear the day had gone phenomenally well. The publicity was worth millions and was so much more fun than a standard press release.
Our store on Robson enjoyed a strong start that continued past that first day. The volume of foot traffic on Robson Street brought in tons of new customers and introduced many people to our world. We made use of our prominent store windows and used them to reach our community authentically. We treated every lululemon store window as a living, breathing expression of the empowered team of Educators in that store. It was theirs to create as often as they wanted. Unlike other retailers that had pre-set merchandising and window dressing, we encouraged our stores to be locally relevant and entrepreneurial with the “advertising” that the window represented for people walking past and into our stores.
The challenge I’d anticipated before opening on Robson was maintaining our ability to do retail our way in a high-fashion environment. People came to Robson expecting the usual luxury fashion commission sales pitch, and they might be surprised when they didn’t get it.
Jenna Hills, one of the first Educators hired at the Robson Street store, says: “Chip would visit a few times a week. He always selected a few Educators to do a walkthrough. Nothing got by him. He was fastidious about approaching every single person in the store with a sense of urgency. Time was a huge value. He gave feedback with clarity and was generous with his love.
“One story I remember was at the end of a monthly staff meeting. Everyone from Vancouver would gather at the West 4th store in the evening after closing. I was sitting on the floor, like we did, when Chip said we couldn’t grow this company without those of us in the room stepping up. He said any one of us could be making more in a year than a corporate lawyer or an accounting partner in five years’ time. It was up to us, and the company needed us. I knew it was the truth. It struck me like lightning. Five years later I broke six figures for the first time in my life. At that staff meeting, I was making 10 bucks an hour. But I’ll say it anyway – it wasn’t about the money. It was about creating possibility.”