Lululemon Athletica: Chip Wilson

After noticing more and more people sign up for yoga in the late 1990s, Chip Wilson bet everything on an athletic apparel company aimed toward young professional women. What started as a small pop-up store in Vancouver eventually became the multibillion-dollar brand Lululemon Athletica, spawning a new fashion trend and forever changing what women wear at the gym. PLUS, for our postscript "How You Built That," how Mike Sorentino developed the EyePatch Case, an iPhone case that cleans and protects the phone's built-in cameras. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, really quick before we start the show, I want to let you know that we've got another live show coming up. It's on Wednesday, August 1st, in Boulder, Colorado. I'll be interviewing Kim Jordan. She's the person who grew New Belgium Brewing Company out of her basement in Fort Collins into one of the biggest craft brewers in the country. The show is sponsored by American Express, and we're hosting it at the Boulder Theater on August 1st. For tickets, go to nprpresents.org and hope to see you in Boulder.

• 0:32Guy Raz?

  People were just naked in front of the store?

• 0:35Speaker 01

  Well, they showed up in their trench coats. And, you know, we went out when we went to open the store. I went out with my wife and put my arm around her. And then we said, thanks for coming. And everyone dropped their trench coats and went running into the store.

• 0:57Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 1:09Guy Raz?

  I'm Guy Raz, and on today's show, how Chip Wilson turned workout clothes into a fashion statement and, along the way, built a breakout brand worth billions.

• 1:26Guy Raz?

  So it used to be that the clothes you wore to the gym were like the absolute worst clothes you owned. You know, the ratty old t-shirt you got for free at some event, sweatpants with your high school logo, you know, the kind of short shorts Dr. J would have worn on the basketball court? Anyway, most of this apparel was cotton-based. It was baggy. It didn't look so great. And honestly, nobody really cared. You had one job to do, which was to sweat at the gym. But at some point in the past 10 or 15 years, all of that changed. Because suddenly, the clothes you wore to work out were also the clothes you could wear to the grocery store, or at a restaurant, or even at work.

• 2:10Guy Raz?

  So, for better or worse, people were wearing their gym clothes outside of the gym on purpose. And this trend, it was called athleisure. And Chip Wilson, he was one of its pioneers. The brand he built out of his house in Vancouver is now worth more than $14 billion. Now, before I go on, let me just address the elephant in the room. Chip has said some things that are, well, how do I put this? Rude and boorish. He's put his foot in his mouth on several occasions. He's embarrassed the company. And you will hear about some of that later on in the show. But he's also an open book and open to getting grilled all about his life.

• 2:50Guy Raz?

  He's not a cautious, media-trained, soundbites guy, which is, in part, what makes him interesting. Because that's sort of how Chip grew up, without any pretension. Middle-class kid in Calgary, Canada. Chip was athletic. He played hockey and football. His dad taught phys ed at the local high school. And his mom was a seamstress.

• 3:13Speaker 01

  She lived for it. It's where her total passion was. She tried to make clothing for the kids, but of course, we didn't. We'd never liked what she made for us. But, you know, if I want to spend time with my mom, it had to be at her foot in the sewing room.

• 3:28Guy Raz?

  So, did you learn how to sew, like, from an early age?

• 3:31Speaker 01

  Yeah, I can definitely sew. But more so, I think, was working with the butterick patterns and watching my mom lay them down on the fabric and then, and then how she moved them and twisted them in order to save fabric. And I always say how important that is because, once I got into big production and you'd lay 50 to 100 layers of fabric down, when you can save even five, six, seven inches of fabric, it can mean thousands of dollars.

• 3:57Guy Raz?

  Now, before Chip would go on to sew and design clothes for a living, he actually got his first real job at an oil company, working a grueling but incredibly lucrative job on the Alaska oil pipeline for almost two years. How much did you walk away with? How much cap?

• 4:15Speaker 01

  Well, interesting, in today's dollars, probably about $600,000.

• 4:19Guy Raz?

  What?

• 4:20Speaker 01

  And I think back then, it was about $175,000 American.

• 4:23Guy Raz?

  That was...

• 4:24Speaker 01

  It was amazing.

• 4:25Guy Raz?

  Amazing. You were, like, 19. You were just given this cash and that's simply because there was all of this money to work on the Alaska oil pipeline, I guess.

• 4:34Speaker 01

  Right, and you know, but I gave, you know, I traded my life in for money. I mean, there was no girls, there was, you know, nothing there except for, you know, your work. So I always wonder, you know, if everyone got that opportunity, would they have made the same thing out of it I did?

• 4:49Guy Raz?

  That's pretty good. You're 18 or 19 or 20 with a bunch of cash. So what did you, what'd you do with the money?

• 4:56Speaker 01

  Well, I'd always had three goals in Alaska. One of them was to own my own house by the age of 20, to be in my own business by the age of 30 and retired by 40. And retirement, meaning that I was doing exactly what I wanted to do. So, so I did, I bought a house and then I finished up my degree and I worked for an oil company.

• 5:17Guy Raz?

  And this is an oil company back in Calgary, right? Because you moved back there at some point, I guess.

• 5:23Speaker 01

  Right.

• 5:24Guy Raz?

  And I guess in like the late 70s, right, pretty much around the time you graduate college, or you start to make shorts, like baggy shorts for men?

• 5:35Speaker 01

  Yeah, because I didn't, you know, have to get what it was like at that time. Men wore very short shorts that were very, very tight. You know, you only have to look at movies from the, from the late 70s to get that kind of picture. And, and they made a lot of sense to me because I had very big legs and I was, I think because I was working out three times a day, I was always in a constant sweat. And the idea of wearing shorts full-time was very appealing to me.

• 6:05Guy Raz?

  Yeah. And, and so you, and, and these were like flower printed, like loud Hawaiian, like, I don't know if you've been to Trader Joe's, like those shirts, like that's what the shorts looked like?

• 6:14Speaker 01

  Yeah, exactly. But, you know, you have to see it in a context that... There was nothing like that before. Everything else was that air of brown, rust, off-color, okra, yellow, like solid colors. There was no brightness in the world at all that time. So that was a radical look. So I started, because I couldn't get loud flowered prints in 2000 meters, which is kind of what a person needs to go into business, I started doing what my mom did. She quilted fabric. So I would get masses of different types of patterns of fabric and then I would cut them into squares and then I would quilt them. And then in order to keep the stability of that, I put a backing on it, a black fabric.

• 6:57Speaker 01

  And then I realized I had reversible shorts. So normally where they long and baggy and reversible, they just really revolutionized shorts. So, and then the skateboarders started taking them on because it kind of covered their knees.

• 7:11Guy Raz?

  Well, how did they even know about them? Did you start to sell them somewhere?

• 7:14Speaker 01

  Well, I mean, that's the invention of vertical retailing because I made about 300 pairs of the shorts up in 1980 and I went to the big department stores here in Canada and they would have nothing to do with them. So I had my first inventory problem. So I thought, well, what am I going to do? So I basically set up a lemonade stand for the shorts and.

• 7:36Guy Raz?

  Where? In Calgary?

• 7:38Speaker 01

  In the downtown mall in Calgary. And I had a partner, girlfriend at the time, and so we did that together. And, you know, we, you know, we'd lay all these shorts out and in a day we'd make like a thousand dollars a day selling the shorts. And I was making like a hundred and twenty dollars at the oil company. So it wasn't tough to figure out the math of that.

• 7:58Guy Raz?

  And what, these were not swimming shorts. These were just like, what, like who would wear these shorts? What would you be doing while wearing these shorts?

• 8:05Speaker 01

  Well, these particular shorts, you know, I couldn't really. It was tough in the oil business of conservative Calgary where people were Prada suits and cowboy boots to sell them on loud baggy shorts. And so I originally called them barbecue shorts because I needed to give, men needed an excuse to wear them. I knew they wanted to wear them. But as, you know, a couple of years went on, that's, again, that's when the skateboarding market took over from the surf market and the young boys, you know, like 10 to 18 started wearing them.

• 8:39Guy Raz?

  So this is, this is 1980. You've got barbecue shorts. By the way, the barbecue season in Calgary has to be fairly short, like a couple of weeks.

• 8:47Speaker 01

  Yeah, 40 days max.

• 8:50Guy Raz?

  40 days. You've got 40 days to wear these shorts in Calgary. I mean, not a brilliant marketing move, but it worked. People were like, all right, barbecue. And so 1980 and then, but it's the same time you were still working for this oil company on the side or you were doing this on the side.

• 9:06Speaker 01

  Right.

• 9:06Guy Raz?

  And how long before you quit the oil company?

• 9:08Speaker 01

  Well, I had my goal of quitting, being in my own business by 30. So I worked through a little company for five years and quit on my birthday.

• 9:16Guy Raz?

  Your 30th birthday.

• 9:17Speaker 01

  Exactly.

• 9:20Guy Raz?

  Did you create a brand around, around the barbecue shorts?

• 9:23Speaker 01

  Yeah, I, I called it West Beach, which at the time was, I think it's probably from being in San Diego when I was young and probably the incredible feeling I had from living on the beach every day.

• 9:35Guy Raz?

  When you were a little kid?

• 9:36Speaker 01

  Yeah, when I was a little kid and I, being in Calgary, I always wanted to get back to the beach. I always wanted to get back to the West Coast. I think that's where I felt best. So that was the brand I built up around it.

• 9:47Guy Raz?

  And who, and so initially your customers were in Calgary, but how did you get the word out around Canada and beyond?

• 9:54Speaker 01

  Well, I went to, Canada was pretty easy because, you know, that I got into it almost a decade before anybody else, I think. But, and so I could slowly kind of move across like that. We opened up a store in Toronto. But then I went to a trade show in Singapore and then another one in Munich. And so, you know, when a person kind of comes out with something that's so different like that, that, you know, there's a lot of interest in it. And then I had this sense, looking five years in the future, that skateboarding and surf markets were going to be huge.

• 10:29Guy Raz?

  And, and by the, sort of that time, the mid to late 80s, what were you selling?

• 10:36Speaker 01

  Well, I mean, the beautiful thing is I, when I formed a partnership with my two guys in Vancouver, I moved to Vancouver. And then in, I'd say eighty, well, starting in eighty-three in Calgary, I'd started to do snowboarding. And I could see snowboarding coming. And snowboarding was going to be way bigger than surf or skate. And I didn't care about the boards and the boots and the bindings, because for me, that was low-margin hard goods, where I knew all the money was to be made in the clothing, especially for us, because it would take up the other eight months of the year, which we weren't really selling very much. And snowboard clothing was four or five times the price of surf and skate t-shirts and shorts.

• 11:18Guy Raz?

  And who was designing the apparel that West Beach was selling?

• 11:22Speaker 01

  Well, I was. That was my thing. And I, you know, if I look back at it now, I mean, I never had any money for clothing when I was young. I probably had a genetic desire for, you know, the kind of ideas that I had. I think part of it was, you know, my size. And I think part of it was, I wanted athletic clothing that actually fit me. So I think that was driven through both those.

• 11:45Guy Raz?

  Where are you making the stuff, by the way? Where's the clothing being made at that point?

• 11:48Speaker 01

  Well, I'm making it in Calgary. I found some Italian couture designers that were, you know, again, just like my mother, they were at home and they weren't working, and they were amazing. So we set up a factory. And so if you can imagine, almost everybody else in the apparel industry, I think everybody else basically made clothing and then wholesaled it to somebody else.

• 12:11Guy Raz?

  Right.

• 12:12Speaker 01

  Not only was I doing my own manufacturing, but I owned my own stores. So I was basically taking the profit of two middlemen out of the business. But, you know, the big revenue part of the business was in wholesale. But my wholesale business was losing a million dollars a year. And then I had these two retail stores that were making a million dollars a year.

• 12:32Guy Raz?

  Wait, wait. Explain this to me, because you had these retail stores and they were doing well, but you also had a wholesale business, which was losing money?

• 12:42Speaker 01

  Well, it was a quandary because I needed the volume from wholesale to get to economy of scale production to bring my prices down. And because my prices were down, my retail stores could make so much money. But I couldn't really make any money in wholesale because if I made something for $20, then I would have to sell it to Dick's Sporting Goods for 40, and then they would sell it for 80. Where in my own retail stores, then I was putting it in there for 20 and making $80, so there was a $60 profit in there. And so I kept thinking to myself, how can I get to economy of scale production? And that was the, you know, the big, big driver.

• 13:25Guy Raz?

  And were you, I mean, what was your vision? Did you think this is gonna, we're gonna take on, we're gonna be the biggest snowboard apparel company in the world?

• 13:34Speaker 01

  Sure. I mean, Japan had just exploded, so it was about 30% of all snowboard's business. And the drive to grow and to grow fast, knowing that what I'd seen in Surf and Skate, where it started off with three companies, went to 500, and then went down to three again, I knew the same thing was gonna happen in snowboarding. So when's the right time to get in? What's the right time to build? What's the right time to invest? And when to get out was always in the back of my mind. And sure enough, you know, probably in 96 or so, the Japanese yen started to collapse. So we're starting to think that snowboarding wasn't the cool thing to do anymore.

• 14:16Speaker 01

  And so the market was changing drastically, and we still weren't making any money because we were just reinvesting just to keep on top of the competition.

• 14:26Guy Raz?

  So you decided to sell?

• 14:28Speaker 01

  Well, yes. And we sold to a public company out of Salem, Oregon, Moro Snowboards. And, you know, we, quite honestly, could not make payroll on Friday, and we sold Wednesday based on brand value only.

• 14:45Guy Raz?

  Wow. You probably walked away with a good chunk of cash.

• 14:49Speaker 01

  Well, I had partners and I had banks and I had private equity in there at that time. So I walked away with a million and after tax, eight hundred thousand. And then you've got to, you know, I had paid myself probably thirty to forty thousand dollars for eighteen years.

• 15:05Guy Raz?

  Oh, wow. You didn't now, well, yeah, you didn't walk away with a whole lot.

• 15:08Speaker 01

  No, I needed a car and I needed to buy a house of some sort, which was the best thing I ever did, living in Vancouver.

• 15:15Guy Raz?

  Okay, so, okay, so here you are in your early forties and like, I mean, what were you gonna do?

• 15:21Speaker 01

  Well, actually, my goal was to be financially independent by forty, so I failed in that goal. And, you know, I was thinking about what I wanted to do and then I, and I had this thing, I have always believed in this three times thing. So when I see something three times and I move and I move really quickly. So I'd seen, I'd seen an article in the paper about yoga. I'd seen a poster on a telephone post with a little ripoff about the yoga class. And then I overheard a conversation in a coffee shop about yoga and I went, wow. So I, I went to this yoga class. You know, it went from about six to thirty people in thirty days. I was the only guy in the class.

• 16:04Speaker 01

  And it's in a gym and, you know, of course, I'm always noticing athletic bodies and clothing and how it fits. I mean, I'm really a big data guy around, you know, I look at everybody top to bottom and I analyze it. And at the time, the fashion of gyms was to wear your very worst clothing. And mostly because probably ninety percent of people in gyms were men and, and, you know, you knew you were gonna sweat in it, you were gonna get ugly in it, and you just wanted to throw it in the wash afterwards. So nobody thought about athletic clothing being nice.

• 16:41Guy Raz?

  So, so just to get inside your head here, you're in this yoga class and you are observing what everyone's wearing.

• 16:49Guy Raz?

  You must have been thinking already, I have a business idea. When did you start to add 2 and 2 and say, wait a minute, I can make this type of clothing? Like, how do you go from one yoga class to that thought? Was it instant? Did it take a week? Did it take a month?

• 17:05Speaker 01

  Well, I wasn't doing anything. And I think I was looking for what my life was going to be. And so what I saw in yoga was exactly the same thing I saw in surf, skate, snowboarding. So, like I said, it went from 6 to 30 people in 30 days. And I extrapolated out to five years away. And I went, this is going to be substantial. Now, I didn't think it was going to be as big as surf, skate, or snowboarding. And I had really no idea at the time it would be 100 times bigger.

• 17:37Guy Raz?

  It's a big deal, right? This is like, you're spotting a trend, like, pretty early in 1997. And you probably can't fully explain why you were able to see that trend. But it was just this, like, intrinsic feeling you had? You just, a part of you just knew that this was going to be a thing?

• 17:57Speaker 01

  Yep. Again, I was extrapolating. But you also have to get, I was probably the only person in the world thinking about technical clothing outside of mountain clothing. So, you know, the real question in my mind is, do I use this? Or do I just say, you know, I called my 18 years at West Beach, my 18-year MBA. And so, you know, do I just leave all that information behind? Or do I say, you know, I've got something here and it's worth using?

• 18:32Guy Raz?

  After the break, how Chip Wilson eventually used that 18-year MBA to graduate to an even bigger business, a business that would change the athletic apparel industry forever. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 19:00Guy Raz?

  Hey, welcome back to How I Built This from NPR. So after attending his first yoga class in Vancouver in the late 1990s, Chip Wilson had this idea for his next clothing company. But it actually took him a while before he acted on it.

• 19:15Speaker 01

  Yeah, I had to read an article in the paper one day that told me that 60% of the graduates at a university were women in 1998. And I went, wow, you know, something really, really big is going to come out of this. And that is, we're going to end up with a market that's never occurred before. And that is a 22 to 35-year-old, single, professional, well-traveled, stylish, athletic woman who kind of owns her own condo. And that's so, you know, when I kind of put these things together, and I think that it just reinforced that this market was there and ready for something big, especially in athletic clothing.

• 20:00Guy Raz?

  So what did you do? Did you run back from that yoga class and go back to your house or wherever you were living and start to sketch out ideas?

• 20:10Speaker 01

  Yeah, there was a little bit of that. And I talked to, of course, Fiona Stang, who was my yoga instructor, who had kind of dropped out of the New York financial world to become a yoga instructor in Vancouver. And like I did in surf, skate, and snowboarding, I started to use her as a sounding board and as a creative source. Because unlike surf, skate, and snowboarding, where I was a boy and I could fit in the clothing, I knew exactly what was going on. I obviously wasn't a woman. And I could see that yoga at that time, anyway, was 99% women. And if I was going to do this and I was going to transfer my knowledge of what I'd learned in snowboarding, Lycra stretch pants into yoga, then I needed some advice.

• 20:55Guy Raz?

  All right, so you had some money to play with from the sale of your other company. And you knew how to sew, of course, and you knew how to source material. So what was your first move in starting the business?

• 21:06Speaker 01

  Well, one of my big issues in life is all's been about rashing of clothing. And I could never really believe that, well, Nike was a shoe company. So I know they didn't really understand clothing either because even in their running shorts, they had these open seams in between their legs. And I'd run 5K and I'd totally rash. So for me, it was like solving athletic problems. I went to Japan. I'd heard about these machines that were $40,000 apiece, which was huge at the time. And I bought four of them.

• 21:40Guy Raz?

  A machine to do what?

• 21:41Speaker 01

  They were flat seams. So it's the first time you could put two pieces of fabric together and the machine would flat seam the fabrics together and then cut off any excess fabric so that there was nothing flapping around on the inside.

• 21:56Guy Raz?

  So the idea was to basically make athletic wear that would eliminate rashes?

• 22:02Speaker 01

  Yes. And when I was running 10Ks or triathlons, the rashing was the thing that was always the pain point of what I'd call high-level athletics. And again, because I became a fabric scientist of sorts, I could bring in the wicking, the moisture wicking, I could bring in the anti-stink, I could make it thick enough where it would smooth over a girl's body so she could feel comfortable wearing it, getting up in the morning, putting it on at work, and then walking down to the yoga class and then walking home.

• 22:35Guy Raz?

  And was the idea to just make athletic gear or yoga clothes? Or was it to make fashionable apparel?

• 22:45Speaker 01

  Well, I think I was just the right person to be putting, like I said, the two together. And my drive and what differentiated Lou Lemon from everybody else is I came at it from function and then put fashion into it.

• 23:00Guy Raz?

  All right, let's do a reality check here for a sec. It's 98. You don't have a lot of money. You took a pretty big bet, like you pretty much bet everything you had.

• 23:10Speaker 01

  Right.

• 23:12Guy Raz?

  Why? Why were you so confident this was going to work?

• 23:16Speaker 01

  I think because when I started to do my first design meetings with these 10 groups of 10 women, and we had like five or six samples, and they touched the fabric and they put it on, it was the first time that really a synthetic fabric felt like cotton. There was nothing like it. It was just nothing like it. So I think that, looking in the eyes of the consumer, I could tell that this was something that was going to be unbelievable.

• 23:45Guy Raz?

  All right, so you bet everything on this, and then you open a store, right?

• 23:51Speaker 01

  Yeah, but I can only get a store on the second floor, in the right area, on the right street in Vancouver, which has probably got more athletic stores than any place in the world because of the type of environment we have. But it's really hard to get people up to the top floor. So the only way I figure out how to do it is to combine my business with Fiona Stang, my yoga teachers. And I had all my clothing on rolling racks, and we'd move it all out to the side and have yoga classes there early in the morning and then at night. That would bring women into yoga, but also see what our clothing was, and then it'd kind of move from there.

• 24:30Guy Raz?

  So your first store was essentially a yoga studio with a boutique inside?

• 24:36Speaker 01

  Correct.

• 24:37Guy Raz?

  Okay, so you have this company, which you decided to call Lululemon. And by the way, where did that name come from?

• 24:47Speaker 01

  Yeah, I probably get asked this once a day. And so when I had West Beach, I had bought a skateboard brand called Homeless. And with Homeless, I started to sell that to the Europeans and the Japanese.

• 25:04Speaker 01

  And it started to occur to me that the five big trading companies in Japan were making North American brand name clothing. In other words, they would come up with their own brand name in order to deliver that to the Japanese customer. But Japanese, those big trading companies would never come up with a name with an L on it because it doesn't exist in the Japanese language. And so what I got was that the young kids could see through that and they went, "A name with an L on it is more authentic North American. It's not like a Japanese knockoff." So it had real value to them. So I started to go, "Oh, that's really a neat idea." So I, over the next couple of years, I just started doing alliterations in my mind and with Ls.

• 25:48Speaker 01

  But it was a pretty risky name at the time because Lemon was really connected with really bad quality Detroit cars.

• 25:56Guy Raz?

  Yeah, right, a lemon, yeah.

• 25:57Speaker 01

  But I actually came up with about 20 names and 20 logos.

• 26:01Guy Raz?

  What were some of the other names?

• 26:02Speaker 01

  Well, the only one I can remember right now is called Athletically Hip.

• 26:06Guy Raz?

  Ugh.

• 26:07Speaker 01

  So.

• 26:08Guy Raz?

  Ugh. What a horrible name.

• 26:11Speaker 01

  Well, that's what the girls thought too, because I had 10 focus groups of 10 people and I had them vote on the names and the logos and they came up with the name Lou Lemon. But the logo actually came from Athletically Hip. So it was a stylized A from The Athletic.

• 26:29Guy Raz?

  So here's a question for you, because I'm curious. I'm a, as you know, a man like you. And you are selling a product primarily to women in a, you know, a sport that yoga or an exercise that you weren't really an expert in. You were not like some yogi guru. You weren't, you're a big guy. You're like a football player type of guy. And yet you were trying to create a market and sell a product to

• 26:59Guy Raz?

  To young women. How did you do it? Did you sort of step back and have other women kind of sell the product for you?

• 27:11Speaker 01

  Yeah, I mean, I had, in between West Beach and Lululemon, I'd really decided that I only wanted to work with people I loved to work with. And so I was really determined to develop people, to train them, to mentor them, and then get out of the way. And as I was running out of my money for my second time, I had taken another $200,000 loan.

• 27:35Guy Raz?

  Wait, because the first time you ran out of money, you were running West Beach, right?

• 27:40Speaker 01

  Right, and I got, West Beach, my old company, moved back from Salem to Vancouver, and they asked me to run it. And it was like a gift out of heaven because I was, we were really low on money. We were, I didn't want to advertise. I wanted word of mouth of the quality of our clothing to be the branding niche because I really did believe in the tipping point, and it had to come from people. It couldn't come from advertising. So I was, again, another incredibly lucky thing. I hired this woman who, Shannon Gray was her name, the first person I'd ever seen that had a design portfolio without using stretch clothing. And within about two weeks, I, after hiring her,

• 28:24Speaker 01

  I left her in charge of Lululemon as the CEO for a year, and I went back and ran West Beach.

• 28:29Guy Raz?

  And that's how you were able to make some cash?

• 28:32Speaker 01

  That's how I was able to make more cash, exactly.

• 28:35Guy Raz?

  So you, and so we should foreshadow, there's a foreshadowing here that Shannon eventually becomes your wife. You're now married to Shannon, she's your wife. So you, so Lululemon like really launches in 98 in this neighborhood in Vancouver. And does it take off right away? Is it just like insane? Or was it a slow burn?

• 28:55Speaker 01

  It was very slow burn. And then it was so slow that even when I left for, to run West Beach, we were running out of money. I had a lot of inventory because I needed to make at least 500 to 600 of every of our six styles in order to get the price down. So I fell into the trap of wholesaling. And so I... I made a big deal to wholesale to a sporting goods company in Vancouver and I shipped to them and they immediately went bankrupt. So that really took the company to the very edge. We had no money to pay payroll again. I was only a couple of weeks away from the end of it.

• 29:34Speaker 01

  We had just decided to move across the street from our second floor into a store on the main floor on Fourth Avenue at $10 a square foot because it was an old beat up electronics store. And then another thing from heaven came and it was they fired me at West Beach. Well, and I used that loosely, but they combined with Sim Skateboards and the CEO of Sim Skateboards became the CEO, so they let me go with a severance fee of $50,000. And if it wasn't for that $50,000, we never would have been able to finish our store.

• 30:09Guy Raz?

  Wow.

• 30:10Speaker 01

  Just before Christmas time.

• 30:11Guy Raz?

  This is in 2000?

• 30:13Speaker 01

  Yeah, this is in 2000. And even though we had this great yoga pant and tops, Shannon had designed this polar fleece bra, which got into the newspaper and brought everybody into the store. And of course, while they were there, they mostly bought the yoga pants because they could, you know, we were in a position then to educate people on the technical features of our pant. And once we had somebody in them, they were a customer for life.

• 30:39Guy Raz?

  And if you were taking a yoga class in Vancouver at that time, presumably you would have seen the label because the label was like right on the outside of the waist band, right?

• 30:51Speaker 01

  Yeah, I put it there because I was very clear that I didn't want big logoing. And I thought that somebody should look in the mirror and not see any logos. And I definitely didn't like logos on the left breast because I looked at it as being kind of corporate logoing, you know, it's always there on the left chest. So I decided I wanted the logo small. I wanted it to be discreet and in a place that nobody could see.

• 31:18Guy Raz?

  So you, I guess around 2002, you opened your first store outside of Vancouver. This is in Toronto, or Toronto, as they say in Toronto.

• 31:27Speaker 01

  Yeah, so we had, in my second floor, you know, in Vancouver was really a pop-up store in the, you know, where people had to really look and find it. We did the same thing in Toronto almost a year before we opened the store there. And it was, we got a way of developing the marketplace, which became a Lululemon business model. So we would go into every city in the future, set up a store in a back alley or in a side street, and develop our market, invite yoga instructors in before we spent, you know, 600 to a million dollars on a store. And, you know, again, created word of mouth, which was, you know, my favorite type of marketing is break-even marketing, because I never had any money for marketing, so that was a given.

• 32:08Guy Raz?

  Well, you did, I mean, you guys did some, some stunts, right? Like, when you opened your shop in Vancouver, you said the first 30 people who show up naked get a free outfit.

• 32:18Speaker 01

  Well, it was worse than that. I actually put my first ad in as anyone that shows up gets a free outfit. And then I realized it was in Vancouver and I was going to get every person in the whole city would show up naked, so I couldn't really do that. So I had to put another ad in a week later saying the first 30.

• 32:32Guy Raz?

  And did that happen?

• 32:34Speaker 01

  Oh, yeah, and it created global media. Everybody showed up. There was TV trucks all up and down the street and...

• 32:41Guy Raz?

  People were just naked in front of the store?

• 32:44Speaker 01

  Well, they showed up. It was October morning. It was, you probably never heard this about Vancouver, it was overcast and drizzly. You know, they all showed up in their trench coats and, and then, you know, we went out, when we went to open the store, I went out with my wife and put my arm around her and then we, we said, "Thanks for coming," and everyone dropped their trench coats and went running into the store.

• 33:07Guy Raz?

  This is, and like, nobody, nobody was arrested? Because like, this is not normally allowed in most cities.

• 33:13Speaker 01

  Well, especially in 2002, but I think it's, it's part of the culture here, and there's lots of nude beaches, so I don't think it was, I don't think it was out of the realm for, for Vancouverites. I'm very proud of our city and our police for, for, you know, stepping back and, you know, just observing.

• 33:32Guy Raz?

  So around 2002, Lululemon really starts to grow. Like, 2003, you opened your first store in the US in Santa Monica, which obviously you chose that because that was sort of, right, the center of the yoga culture in the US, I guess.

• 33:46Speaker 01

  Yeah, I think probably the big thing that happened after we opened up Toronto and the second store in Vancouver is, you know, I asked my lovely wife to marry me. She said yes. And so it was April 20th, Saturday, when we were to get married. And I'm working in the store. And really, I became almost a traffic cop because the number of people coming in the store was something they would never seen before. I think it went from a $10,000 Saturday to a $30,000 Saturday.

• 34:16Guy Raz?

  So, obviously, like, you've got a store in Toronto, you've got one in Santa Monica, and then I guess your next stop was Melbourne, Australia. You're growing fast.

• 34:26Speaker 01

  Mm-hmm.

• 34:27Guy Raz?

  But you still, I mean, assuming you didn't have enough cash flow to really scale the business at that point?

• 34:35Speaker 01

  Well, I only, after that, we started making a lot of money. And I don't, just don't mean a little bit of money. I mean, a lot of money. I mean, you have to understand that, again, that nobody in the world had, was owning manufacturing right to the retail store. I mean, I was taking triple the profit of most people.

• 34:58Guy Raz?

  But, I mean, I guess it was 2005 that you went out and sought outside investors who then, because at that point, you'd owned 100% of the company. So you sold, I guess, about half of the company and then stepped down as a CEO. Why did you do that? Was that the only way you could, like, you could expand and scale?

• 35:19Speaker 01

  No, no. I mean, because I had built retail stores around the world, I'd done global manufacturing. I mean, honest to God, I could have done it all. But even though it was making so much money, I'd never taken any money out. My wife and I, neither of us came from money, and we were always scared. You know, we were scared that an earthquake would hit, or, you know, like, this seems really good, but is it true? Is it happening? We'd have to pinch ourselves every morning.

• 35:46Guy Raz?

  Yeah.

• 35:47Speaker 01

  And then, and I wanted advisors. I wanted people around me that could make sure that I wasn't going to run into roadblocks.

• 35:54Guy Raz?

  Okay, so you've sold about half the company to private investors. A new CEO comes in. You stay on as chairman. And then, and then I guess you become like Chief Innovation Officer at this point, right?

• 36:07Speaker 01

  Right, and it allowed me to sit in the middle of the design department, which is my love is innovation and quality and athletic. So, I mean, that's where I really flourished. And I hadn't developed as a chairman. I didn't understand public boards. I didn't understand how to act or be. I mean, I think people think, oh, you know, I ended up with a lot of money. You know, Chip Wilson's a businessman, but nothing really could have been further from the truth. Just a passionate product guy.

• 36:39Guy Raz?

  So, it's interesting because even though you are still the biggest shareholder, you all of a sudden had outside investors who came in and had their ideas for how this company should be run. So I have to imagine, starting in 2005, even though you're no longer CEO, there was some tension that begins.

• 37:01Speaker 01

  Well, yes. I think my, my mistake happened when I was at West Beach and I brought in private equity. We had a board of directors, but they had no vested interest. They were there to help us out and they were wonderful. So I had this context of my mind that bringing in private equity and having a group of like really great advisors with me, where we're all on the same page and moving in the same direction, was going to be another wonderful experience.

• 37:29Guy Raz?

  Yeah.

• 37:30Speaker 01

  But it wasn't, you know, they, it's my own fault. I mean, the private equity, they're there to make money for their investors. And I had a very long-term vision for Lululemon and they had quite a short-term vision for Lululemon.

• 37:45Speaker 01

  So we went, we ended up going public way too quickly.

• 37:49Guy Raz?

  Right, but when you guys went public, like in 2007, this was a hot stock.

• 37:54Speaker 01

  Right, yeah.

• 37:55Guy Raz?

  And you actually sold a chunk of stock pretty early on, right?

• 38:00Speaker 01

  Yeah, you know, again, you know, I had advisors that were just giving me advice that was good for them and not necessarily for me. You know, I really only wanted to sell 30% of the stock to the private equity guys, but I ended up selling 48, so I lost control of the board seats and I didn't know how to negotiate for them. So that is important because as we go public then, you know, the advice I got was, hey, Chip, you should sell more of your shares into the marketplace because the more shares that are out there, the more, the more the institutional investors will be able to get a good chunk of it and be able to hold it for a long time. But the reality of it is, is all these were techniques to have kind of an owner, founder dissipate and kind of move into the background and not

• 38:44Speaker 01

  have the power, so to speak, to control a board. And that's really what I lost and it's my own fault, but that's what I ended up with.

• 38:55Guy Raz?

  But this company just like went, took off, right? I mean, through the early 2000s and to the 2000s and then it just, it was on fire, right? I mean, Lululemon was everywhere and was, is today, but I mean, that, despite the challenges that you faced, it did explode in growth. You got to admit that, right?

• 39:19Speaker 01

  Oh, it was unbelievable. I mean, you know, okay, so things happened to me, big deal. I mean, definitely, I probably have a long-term vision for my family and I had a long-term vision for Lululemon and, you know, and those things never kind of work out perfectly, but all in all, I mean, you'd have to admit that what occurred and what has happened has made me incredibly happy and incredibly wealthy.

• 39:44Guy Raz?

  In 2011, Lululemon, you land on the list of Canada's billionaires, which, I mean, means you achieved your goal, financial security and more. Was that like a marker for you? Was that important for you? Or did you think, did you not really care?

• 40:04Speaker 01

  I really didn't care because I, again, my drives were family and my absolute passion for athletic clothing. And I think my wife and I, again, we're just all was so scared of losing it all. You know, like, we could still go to the store and only buy one tube of toothpaste. We couldn't see ourselves buying three to save time. I could do it in my business, but I couldn't do it at home.

• 40:34Guy Raz?

  All right, so let's address the one elephant that everyone I say, Chip Els is going to be on the show, everyone says, "That guy, didn't he once say?" And this is the, let's just give the outlines of the story. 2013, Lululemon has to recall certain pants because there were concerns that they were too sheer, that they were see-through. And in an interview you gave, offhand, you said, "You know, look, some of these pants just don't look good on all women's bodies." Something to that effect. And this caused an enormous uproar. Like, essentially, the interpretation of it was that you were saying overweight women shouldn't wear Lululemon pants. What happened? What's your take on what happened?

• 41:17Speaker 01

  Well, I think you have to go back and to the end of 2012. I mean, I was quite frustrated with the board. I think that the board and I didn't see eye to eye on how the company was being run. And then there was, everything, I said what happened, did happen. There was a huge quality issue. So I went on this program on, I think it was NBC.

• 41:42Guy Raz?

  I think it was Bloomberg.

• 41:43Speaker 01

  Bloomberg, yes, thank you. And I did know, from working in the stores, that there was definitely something happening to our...

• 41:53Speaker 01

  Clothing. And I didn't know what. Anyway, the question was really about the pilling. And I said, well.

• 41:59Guy Raz?

  Like pilling in the, when friction happens, the fabric pills.

• 42:03Speaker 01

  Right.

• 42:04Guy Raz?

  Right, okay.

• 42:04Speaker 01

  What was, you know, you've done that interview with Blakely on Spanx. So suddenly, women were coming into the store and not wanting Lululemon for athletics. They were coming in looking for it to shape their bodies. But the sewing technique and the fabric wasn't meant for it. So what they were doing is buying two to four sizes smaller than what their size was in order to get out of the garment what it wasn't made for.

• 42:42Speaker 01

  So when you stretch anything to a limit and then it, you sit on a wooden bench or something like that, then pilling occurs to a greater extent. So anyway, that, but I didn't know that till afterwards. I hadn't really put two to two together. I didn't realize what a big issue it was. And the words that I said were not all women, I think something all women belong in every pair of Lululemon pants or something.

• 43:13Guy Raz?

  You said, quite frankly, some women's bodies just don't, just actually don't work for.

• 43:17Speaker 01

  Yeah, yeah. Which is a lot different than what you said.

• 43:21Guy Raz?

  Which is that a lot of people thought you said that overweight women shouldn't wear Lululemon pants.

• 43:26Speaker 01

  Yeah. I mean, what you said is what I think people hear, which is a lot different than what I said, just so we're there.

• 43:33Guy Raz?

  Did you, um, did you get depressed?

• 43:37Speaker 01

  Yeah, I'd have to say I was because, you know, then they, the board took me off as chairman because they felt like I wasn't the right front man for the company anymore and I was a liability to Lululemon. I mean, this is, you know, after 30 years of doing, you know, thousands of public interviews and, you know, I say one thing and, and suddenly I'm a liability.

• 44:01Guy Raz?

  So what, I mean, so how did you kind of, I don't know, did you, did you think about that? I mean, I take your point that you feel like you were misunderstood and that that wasn't your intention, but whatever happened, that's what came out and that was how it was interpreted?

• 44:15Speaker 01

  Yeah.

• 44:16Guy Raz?

  And did you have some time to reflect on it and to think, that was just, I'm just, that was just dumb?

• 44:23Speaker 01

  Well, it was a poor choice of words. It was absolutely devastating to me. It was devastating to my family. I mean, people would come up to my wife and go, how can you be with a man like that that would say that type of thing? But more so, it was the antithesis of everything I had built, you know, with woman and for woman for Lululemon. It was the very opposite. But, um, um, yes, it was, it was, if I could take it back, I certainly would.

• 44:58Guy Raz?

  Is it, is it strange? I've asked this question of other founders, Chip. Is it strange to build a company, put your blood, sweat and tears in something that people don't pay attention to for a long time? And all of a sudden, everyone jumps on it when it starts to take off. You know, right? Success has a million fathers and failure is an orphan, right? So all of a sudden, and your company, this thing you built, your idea, the name, the product, and then you're no longer in control. Is that, is that weird?

• 45:27Speaker 01

  Yeah. You know, um, um, my vision for Lululemon and what it could have been, it is not everything that I think it can be. And, you know, life is all about how you handle setbacks. And I think Lululemon still, I'm the, I'm the most informed cheerleader and I think it has, you know, a great future still.

• 45:46Guy Raz?

  You have another, do you have another business in you?

• 45:50Speaker 01

  Well, what I learned is that when I left Lululemon, you know, even though it was maybe $2 billion in sales at the time, my, my brain was on Lululemon being $7, $8 billion. And I'd worked so hard building a company like by brick by brick that it was, I don't think I can go back and, and be a starter of a company at the age 62 anymore. And I've probably got too good a life to want to do that again. And my, my absolute favorite thing I do is my, I've got 12 year olds, twin boys, and I'm coaching flag football. And nothing could be more fun.

• 46:30Guy Raz?

  Yeah.

• 46:31Speaker 01

  Nothing could be more fun.

• 46:33Guy Raz?

  Chip, you've heard the show before.

• 46:37Guy Raz?

  How much of your success is because of your intelligence and work? And how much of it is because you were really lucky?

• 46:46Speaker 01

  I think I was pure passion for athletic, technical product. And I would have worked 18 hours a day for the rest of my life for no money. Now, I think what happened is I got lucky because my drive and passion met a world that wanted what I wanted. And that was the lucky part.

• 47:13Guy Raz?

  Chip Wilson, he's the founder of Lululemon, which, at the time of this recording, has a market cap of more than $14 billion. Chip is now helping to run his wife and son's athletic apparel brand, Kit & Ace.

• 47:31Guy Raz?

  And please do stick around because in just a moment, we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's time now for how you built that. And today's story starts about eight years ago when a TV producer named Mike Sorrentino was out in the field and using his smartphone to take pictures for his company's website.

• 47:52Speaker 02

  And what I found was when I would be in a place like Louisiana after the BP oil spill, I was constantly having to wipe smudges from my camera lens.

• 48:03Guy Raz?

  And by doing that, Mike was missing a lot of really good shots. Meanwhile, people were starting to worry about whether cameras on your phone could get hacked. And Mike kept wondering why nobody had solved these two things.

• 48:15Speaker 02

  Yeah, well, think about it. You have a camera that you carry around all day, every day, but it doesn't even have a lens cap.

• 48:22Guy Raz?

  So Mike figured he would design an iPhone case where you just slide a switch at the top to cover up the camera lens.

• 48:29Speaker 02

  And on the inside of that lens cover is a fabric lining, and it also wipes the lens clean of any smudges.

• 48:35Guy Raz?

  So a pretty great and simple idea. And around four years ago, when Mike first thought it up, he said, first thing, I got to patent this.

• 48:44Speaker 02

  You know, the most important part of getting a patent is having a good patent attorney. A good patent attorney is really expensive. So my wife gave me the great advice of do some side work. And find a way to finance your invention.

• 48:56Guy Raz?

  So Mike started doing some video production on the side to pay for a lawyer. Meanwhile, he worked with an engineer who helped take his paper sketches and make a prototype with a 3D printer. But at the same time, he was getting some pushback.

• 49:10Speaker 02

  Even close friends were like, this is a dumb idea.

• 49:15Speaker 02

  Why are you doing this?

• 49:16Guy Raz?

  Right. People kept saying, hey, Mike, you're a TV producer. Why are you trying to break into the iPhone accessory business? And Mike says they kind of had a point.

• 49:24Speaker 02

  Yeah, I'm not one of these OtterBox or Speck or one of these major brand phone case companies who gets the specs and the designs of these phones before they come out. So I've got to wait for the phone to come out to the market. Then I've got to go to the Apple Store and measure it and then send it to the engineer. And then it's a lot of back and forth.

• 49:43Guy Raz?

  But by the end of 2014, with the help of $20,000 that he raised on Kickstarter, Mike found a factory in China to make his first run of iPhone 5 and 5S cases with lens caps. And then somebody gave him a tip.

• 49:58Speaker 02

  Somebody said to me, if your product's ready in January, you have to go to the Consumer Electronics Show. You have to be at CES.

• 50:06Guy Raz?

  So that's what Mike did. He found a way to camp out in someone else's booth at the Consumer Electronics Show in Las Vegas.

• 50:13Speaker 02

  And there were a lot of people that came up to me and said, well, jeez, I feel like this should be on the market already.

• 50:20Guy Raz?

  But no, Mike says he was actually the first guy to come out with an iPhone case that has a lens cover and cleaner.

• 50:27Speaker 02

  Right. And our logo is something I made up in Microsoft Paint. It's a little phone case that looks like a little pirate. It's got an eye patch. That's why I came up with the name Eye Patch Case, because it covers up the camera's eye.

• 50:39Guy Raz?

  Since he launched the Eye Patch Case, Mike sold about 5,000 of them, and he's making a profit. But he's still splitting his time between iPhone cases and video production, and he says it's a pretty good combination.

• 50:52Speaker 02

  I worked in an industry that was all about ideas and content and things that you could not touch. So to have a physical, tangible product in my hand was so incredibly rewarding.

• 51:03Guy Raz?

  If you want to find out more about the Eye Patch Case or hear previous episodes, head to our new podcast page, howibuiltthis.npr.org. And of course, if you want to tell us your story, go to build.npr.org.

• 51:20Guy Raz?

  And thanks so much for listening to the show this week. You can subscribe at Apple Podcasts or wherever you get your podcasts. And while you're there, please do give us a review. You can also write to us at [email protected]. And if you want to send us a tweet, it's at howibuiltthis. Our show was produced this week by Janey West with original music composed by Ramtin Arablouei. Thanks also to Noor Kudsi, Sanaz Meshkhanpour, Neva Grant, and Jeff Rogers. Our intern is J.C. Howard. I'm Guy Raz, and you've been listening to How I Built This from NPR.