Lululemon: Spotting the Trend and Taking Action

Lululemon is a leading yoga-inspired, technical athletic apparel company for women and men. The brand has been publicly traded since 2007 and its stock is currently trading near its record high. The current market capitalization of the company is at $39.46 billion. Lululemon announced their net revenue of $3.9 billion in March 2020, a 21% increase from the previous year.

Source: CNBC
Chip Wilson is the trendsetter in the yoga industry

Chip Wilson is the founder of the company and he was the one that spotted the yoga trend and predicted the fashion trend now known as athleisure.
This fashion trend has emerged as a winner in today’s COVID work-from-home world.

We have learned a few important points from his podcast.

Chip Wilson has shared with us on his Lululemon’s journey, from how he started the brand till the time when he was forced to step aside from the board because of his poor choice of words used during an interview with Bloomberg.

Knowing when is the right time
Right time to get in, right time to build, right time to invest and right time to get out.

Prior to his yoga-inspired athletic apparel brand, Chip had already founded Westbeach, a clothing company that sold surf, skate and snowboard apparel. He understands that trends like these come and go. It happened to his surf and snowboard apparel brand. He went into the business when he had a sense that the sports will be something huge and decided to sell the business when they weren’t making money anymore.

Spotting a trend, and moving quickly
He was exposed to the yoga trend. He saw an article, a poster and also overheard conversations about Yoga. He then signed up for yoga classes and attended classes. The number of attendees increased from 6 to 30 people within a month. A part of him knew that it was a thing and it was growing.
Developments in athletic clothing always caught his eye as he had always been passionate about it.
When he noticed the yoga trend, he immediately started to extrapolate it. He then decided to make technical clothing for Yoga with his experiences gained from Westbeach.

He was the Chief Innovation and Branding Officer for Lululemon.

Engaging professionals who can provide good advice
At the time when he embarked on his yoga apparel brand, 99% of the people who were in the yoga scenes were female. He wasn’t a professional himself in the industry and he couldn’t try the product he made. Those products were primarily made for women. So, he had to speak and engaged with a few women in order to get advice and also creative sources from them. One of the people that he got his creative sources from was his yoga instructor.

Quality and word of mouth
He didn’t want to advertise and he wanted his brand to be marketed based on word of mouth. He focused on developing good quality products with technical features. He believed that that should be the branding niche and should allow his customers to remain with the brand after. He believes that the tipping point has to come from the people and not from advertising.

Having large economies of scale
He had his own manufacturing factory in order to have a big economy of scale. At that time, he was the only one in the industry who owned the manufacturing side right up to the retail businesses. He was earning triple the profit as compared to most people for having this business model.

Understanding that Private Equity firms may not have the same goal as you
He had a long-term vision for Lululemon but the PE firm had a different goal. His advisors weren’t giving him the best advice in his interest. Initially, he only wanted to sell 30% of the stocks to the PE firm but he ended up selling 48% and lost control of the board. The PE firms had their techniques to have the founder ousted. But nonetheless, Lululemon took off in the 2000s and is on fire up till today. The growth for Lululemon has exploded since then.

Having the right choice of words
In the end, Chip was forced to step aside after having a poor choice of words during an interview with Bloomberg. Chip said, “They don’t work for some women’s bodies … it’s really about the rubbing through the thighs, how much pressure is there over a period of time, how much they use it.” His words were misinterpreted and misunderstood. People thought he was fat-shaming and was saying that Lululemon was not made for oversized women. The reputation of the brand was at stake and the board thought that he was a liability for the brand. He has stepped down and had resigned from the board since then.