How do you spot a trend in time to build a $43 billion business out of it? Ask Lululemon founder Chip Wilson.
He realized that yoga pants could be functional, comfortable, and fashionable. In the process of starting Lululemon, Wilson also pioneered the athleisure industry.
How did Lululemon start? And how did Lululemon’s activewear come to dominate the market?
In this guide, we’ll break down Lululemon to discover its beginnings, early growth, and plans for the future.
What is Lululemon?
Lululemon is an athletic apparel company that makes technical clothing for yoga, running, and working out. The company started out focused on yoga but has since branched its products out into other types of athletic apparel.
The Lululemon brand was started by Chip Wilson, the company’s former CEO. The company serves international markets and operates around 490 stores around the world.
How Did Lululemon Start?
Lululemon Athletica Inc. is the brainchild of Californa-born, Calgary-raised founder Chip Wilson. His father was a phys ed teacher, and his mother a home sewer.
At 19, Wilson got a high-paying job working on the Alaskan oil pipeline. He earned about $100,000, equal to about $600,000 in today’s money. This was enough to pay for his university education, a home, and start his first business. He called his company Westbeach Sports.
After finishing his degree, Wilson worked full-time while getting Westbeach off the ground.
Now, this was at a time when short shorts were all the rage. So he struggled to sell his long, baggy, wild patterned shorts to wholesalers.
This forced Wilson to open his own store. And because he owned manufacturing and his store, he took triple the profits. This opened his eyes to vertical retailing.
Westbeach would morph into a skateboard company and then a snowboard company. Wilson finally sold it in 1997 for $1 million.
With nothing to do, Wilson was taking it easy. Then, in one week, he noticed 3 things that indicated to him yoga was a new trend. A poster on a telephone pole for yoga, two women talking about it, and an article in the newspaper.
To find out more, Wilson took a yoga class, where he found himself the only guy in a room full of women. He realized yoga was going to be as big as surfing, snowboarding, and skateboarding.
So he decided to create the best yoga clothing for this emerging market.
Above: Chip Wilson (Image: Fortune)
Wilson had noticed that the women in his class were wearing cotton outfits. But cotton gets sweaty since it’s not very breathable or elastic. So Wilson decided to make something more comfortable, fashionable, and athletic. He designed little black stretchy pants that offered women’s bodies a better fit while exercising.
In 1998 Wilson founded Lululemon Athletica Inc. The company operated out of a design studio that became a yoga studio at night to pay the rent.
Founder Chip Wilson relied on yoga instructors, who he asked to wear his products and give their feedback. This helped his business’ early success.
Wilson’s first product was a pair of yoga pants. They were made from a mix of nylon and Lycra-synthetic elastic fibers. These were both soft and stretchy enough to be comfortable for intense yoga sessions.
Two years after launching, Wilson opened the first official Lululemon store in Vancouver, British Colombia.
The idea was to create a community hub where one could discuss all aspects of healthy living. But the store became so busy it became impossible to help customers with both sales and their lifestyles.
By 2005, Lululemon had expanded to 15 stores in Canada, 3 in the United States, and one each in Australia and Japan.
Its product range had also expanded to include tops, shorts, jackets, sweaters, yoga pants, and innerwear. It also included bags, water bottles, yoga mats, and hair accessories.
It would also patent its first fabric, Luon, which had higher-than-usual levels of microfiber. Since then it has gone on to develop several novel fabrics. These include Luxtreme, a moisture-wicking, stretch fabric, Nulux, a compression fabric, and Silverescent, Lululemon’s “stink-conquering technology.”
Two years later, in July 2007, Lululemon Athletica went public, raising $327.6 million through the sale of 18.2 million shares. Wilson stepped down as CEO the following year with Christine Day replacing him.
Over the years, Lululemon founder Chip Wilson has made several controversial statements. After these controversies, the popularity of Lululemon declined, and the Lululemon board required some changes.
Chip Wilson’s controversies include mocking the way Japanese people pronounce his company’s name and saying that making clothes for plus-size women was too costly.
He’s also blamed piling in his clothes on people that weren’t wearing his clothing correctly or didn’t have the right body shape for them.
Finally, in a 2013 interview with Bloomberg TV, Wilson said that some women’s bodies weren’t suitable for Lululemon’s clothing. Remarks that Time Magazine called “fat-shaming.”
Wilson resigned as Chairman that December, resigning from the board in 2015.
Since these incidents and the changes made in the company’s board, Lululemon has continued to grow.
How Does Lululemon Make Money?
Lululemon Athletica sells some of the most expensive yoga pants available.
The company acquired virtual exercise company Mirror in 2020. This was at a time when more people exercised at home rather than at the gym due to the pandemic.
This growth has helped the company open over 520 stores worldwide. Of these, 315 are in the United States alone.
Lululemon also sells its products via its website and mobile app. It also sells to wholesale customers like health clubs, fitness centers, and yoga studios to enhance its brand image.
The company doesn’t own or operate any manufacturing facilities. Instead, it relies on a group of approximately 40 vendors to manufacture its products.
This has helped lululemon generate $4.4 billion in revenue for the 2020 financial year. This is a twelve-fold increase from its 2008 revenue of $353 million.
Thanks to this, Lululemon stock has a market cap of over $40 Billion as of February 2022.
Of its revenue, 70 percent comes from its women’s category. The men’s segment only accounts for 20 percent.
What’s Next for Lululemon?
Lululemon announced in 2019 that it would spend the next five years focused on doubling its men’s business. This is bringing them into direct competition with brands like Nike and Under Armor.
Lululemon has also made a commitment to sustainability with its “Be Planet” initiative. Through this, the company will work towards innovating sustainable materials, using less water, and decarbonizing its value chain to protect the climate.
Wilson identified yoga as a trend, and he noticed a lack of suitable apparel for its early adopters. This helped him become a pioneer of the athleisure segment.
In 2 short years, he grew Lululemon out of a design studio slash yoga studio into its own physical location. 7 years later he took the company public.
Wilson’s vision helped build one of the fastest-growing athletics apparel brands.
After parting ways with its at-times controversial founder, lululemon has continued to innovate and grow, introducing new fabrics and making strategic acquisitions.
Looking to broaden its target market, only time will tell if it will be able to wrestle the men’s segment away from its competitors. Either way, Lululemon is one of the most inspiring apparel company stories.
Who is CEO of Lululemon?
Calvin McDonald is the current CEO of Lululemon and has been since 2018. The Lululemon brand was founded by Chip Wilson, the company’s original CEO. Wilson stepped down from the Lululemon board in 2008.
What does Lululemon’s logo mean?
The Lululemon logo is a stylized letter “A” and was chosen to represent the brand name “Athletically Hip”. While this original brand name didn’t make the cut, the logo stuck.
Why is it called Lululemon?
Chip Wilson reportedly said that he called the brand Lululemon because the letter “L” was uncommon in the Japanese language, and so a “Japanee marketing firm wouldn’t come up with a brand name with the letter ‘L’ in it” Wilson said.
What is Lululemon’s competitive advantage?
Lululemon was an early pioneer of the yoga apparel industry. The company is known around the world and has dominated the market for a couple of reasons. These include the product quality, the patented material of the products, customer loyalty, product innovation, and responsiveness to customers.
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