Lululemon Athletica: Chip Wilson

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People were just naked in front of the store? You know, we went out when we went went to open the store, I went out with my wife and put my arm around her and then we um They always said thanks for coming and everyone dropped their trench coats and went running into the store. From MPR, it's how I built this.

show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. 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.

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 events, 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 ten or fifteen 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. So for better or worse

People were wearing their gym clothes. outside of the gym on purpose. In this trend it was called at leisure. 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.

No. 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.

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

Hm. So did you learn how to sew like from an early age? Yeah, I can definitely sew. But more so I think it was working with the butterick patterns and watching my mum lay them down on the fabric and then And then how she moved them and twisted them in order to save fabric. And I only say how important that is because once I got into big production and you'd lay fifty to a hundred layers of fabric down, when you can save even five, six, seven inches of fabric, it can mean thousands of dollars. Now before Chip would go on to sew and design clothes, 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 cash? Well, interesting in today's dollar is probably about six hundred thousand and back then it was about a hundred and seventy five thousand American. Amazing. You were like Nineteen.

You were just given this cash and and that's simply'cause there was all of this money to work on the Alaska oil pipeline, I guess. Right, and you know, but I ga 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. It's pretty good. You you're eighteen or nineteen or twenty.

With a bunch of cash. So what did you what did you do with the money? Well I'd almost had three goals in Alaska. One I wasn't to own my own house by the age of twenty. uh to be in my own business by the age of thirty and retired by forty. And retirement meaning that I was doing exactly what I wanted to do. So So I did, I bought a house and then I um finished up my degree and I worked for an oil company. And and this is an oil company uh back in in Calgary, right?'Cause you moved

Right. And I guess in like the late seventies, right? Um pretty much a r around the time you graduate college or or you start to make Shorts, like baggy short for men?

Yeah, because I didn't you know, I y have to get it what it was like at that time, men wore very short short that were very, very tight. You know, you only have to look at movies from the from the late seventies to get that kind of picture. And uh 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 short full time was very appealing to me. 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 short look like Yeah, exactly. But y you know, you have to see it in a context that There was nothing like that before. Everything else was that era 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 I started um

because I couldn't get loud flowered prints in two thousand meters, which is kind of what a person needs to go into business, I started doing what my mum did, she quilted fabric, so I would get masses of different types of patterns of fabric, and then I would uh cut them into squares and then I would quilt them. And then in order to keep the stability of that, I put a packing on it of black fabric, and then I realized I had reversible shorts, so not only were they long and baggy and reversible, they just really revolutionized short. And then the skateboarders started taking them on because it kinda covered their knees. Well how did they even know about them? Did you start to sell them somewhere? Well, I mean that's the invention of uh of vertical retailing because I

made about three hundred pairs of the short up in nineteen eighty 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 gonna do? So I basically set up a lemonade stand for the shorts and uh Where? In in Calgary? In the downtown mall in Calgary. And um 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 short out and in a day we'd make like a thousand dollars a day selling the short 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. And what these were not swimming shorts. These are just like what like who would wear these shorts, what would you be doing while wearing these shorts?

Well, these particular shorts, y you know, I couldn't really s It was tough in the oil business of conservative Calgary, where people were Pratus suits and cowboy boots to sell them on Loud. Baggy shorts. Um, 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

Yeah. This is nineteen eighty. You've got barbecue shorts. By the way, the barbecue season in Calgary has to be fairly short, like a couple of weeks. Yeah. Okay. Forty days now. Forty days. You've got forty days to wear these shorts in Calgary. I mean, not a brilliant uh marketing move, but it worked. People were like all right, barbecue and so nineteen eighty and then But uh it's it's the same time you were still working for this oil company on the side or or you were doing this on the side working for And how long before you quit the oil company? Well I had my goal of quitting uh being in my own business by thirty, so I worked for a little company for five years and quit on my birthday. Your thirtieth birthday. Exactly.

Did you create a brand around around the the barbecue shorts? Yeah, I I called it West Beach, uh, which at the time was I think it's probably from being in San Diego when I was young and probably the The incredible feeling I had from living on the beach every day my little kid. 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. And who and and so initially your customers were in Calgary, but how did you get the word out around

Canada and beyond. Well I went to Can it was pretty easy because you know that I got into it almost a decade before anybody else, I think, but uh and so I could slowly kinda move across like that. We opened up a store in Toronto But then I went to a trade show in Singapore, uh, and then another one in Munich.

And so you know When we 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 The skateboarding and surf markets were gonna be huge. And and

By the sort of that time, the mid to late eighties, what were you selling? 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 But starting in eighty three in Calgary, I'd started to to do snowboarding and I could see snowboarding coming, and snowboarding was gonna be way bigger than Uh surfer skate. And I didn't care about the boards and the boots and the bindings'cause 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 uh snowboard clothing was four or five times the price of Surf and skate T shirts and short. And who was designing the apparel that West Beach was selling? 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 uh desire for, you know, 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 to both those. Wh where are you making the stuff, by the way? Where's the clothing being made at that point? I'm making it in Calgary. I found some Italian couture designers that were Um, you know, ho again, just like my mother, they were at home and they weren't working and they were amazing.

So we set up a factory. Um 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. 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 mm 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. You also had a wholesale business which was losing money? 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 and But I couldn't really make any money in wholesale because Um If I made something for twenty dollars then I would have to sell it to Dick Sporting Goods.

for forty and then they would sell it for eighty. We're in my own retail stores than I was beg putting it in there for twenty and making eighty dollars. So there was a sixty dollar 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 the big big driver. And were you uh w I mean w 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. Sure. I mean in in a Japan had just exploded. So was about thirty percent of all Snowers business.

And uh 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 five hundred, and then went down to three again. I knew the same thing was ha 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 all in the back of my mind. And sure enough, you know, probably in ninety th

six or so the Japanese yen started to collapse. So we're starting to think that snowboarding wasn't the cool thing to do anymore. 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. So you decide to sell.

Well, yes. Uh we and we sold to a public company out of uh Salem Oregon, Moral Snowboards. And uh you know we quite honestly could not make payroll on Friday and we sold Wednesday based on brand value only. Wow. You probably walked away with a good chunk of cash.

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 a you know, I had paid myself probably thirty to forty thousand dollars for eighteen years. So I didn't know well yeah, you didn't walk away with a whole lot. No, I needed a car and I needed to uh buy a house of some sort, which was the best thing I ever did living in Vancouver. Okay, so okay, so here you are in your uh early forties and and like y I mean, what were you gonna do? Well actually my goal was to be financially independent by forty, so I failed in that goal. And um you know, was thinking about what I wanted to do and and then I um 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 it seemed um I'd seen an article in the paper about yoga, I'd seen a poster on a you know telephone post with a little ripoff about the yoga class and then I overheard a conversation uh in a coffee shop about yoga and I went, Wow. So I I went to this yoga class, yeah, I

it went from about six to thir in thirty days. I was the only guy in the class. Um 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 uh At the time, the fashion of gyms was to wear your very worst clothing. And mostly because probably ninety percent of people in gym were men, and uh And you 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. So so just to get inside your head here, you're in this yoga class.

And you are observing. What everyone's wearing. You must have been thinking already, I have a business idea. When did you start to add two and two and say, Wait a minute? I can make this this type of clothing. Like h how do how do you go from one yoga class to that thought? Was it instant? Did it take a week? Did it take a month?

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 Surfskate snowboarding. So like I said, it went from six to thirty people in thirty days, and I extrapolated out to five years away and I went, This is gonna be substantial. Now, I didn't think it was gonna be as big as surf skater snowboarding, and I had really no idea at the time it would be a hundred times bigger. This is a big deal, right? This is like you're you're spotting a trend. Like pretty early in nineteen ninety seven.

And 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 some s a part of you just knew that this was gonna be a thing. Yeah, e again I was extrapolating. But

You also have to get us probably the only person in the world thinking about Technical clothing outside of mountain clothing. So You know, the the real question in my mind is do I use this or do I To say

You know, I I called I called my eighteen years at West Beach my eighteen year MBA. And so um You know, do I just leave all that information behind, or do I say, you know, I've got something here and it's and it's worth using. After the break, 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. Hey, welcome back to How I Built This from NPR. So after attending his first yoga class in Vancouver in the late nineteen nineties, Chip Ossen had this idea for his next clothing company.

But it actually took him a while before he acted on it. Yeah. I had to read an article in the paper one day that told me That sixty percent of the graduates at a university were women. In nineteen ninety eight. Then I went, Wow. You know Something really, really big is gonna come out of this, and that is

we're gonna end up with a market that's never occurred before, and that is a twenty two to thirty five year old single professional, well traveled, stylish, athletic woman who kinda owns her own condo and and uh And that's so You know, when I kinda 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.

Did so w did you what did you do? Did you Did you run back from that yoga class and uh go back to your house or wherever you were living and start to sketch out ideas? Yeah, there was a little bit of that, and I talked to of course Fiona Stang, who was the my yoga instructor who had kinda dropped out of the New York financial world to become a yoga instructor in Vancouver.

And like I did in Sir Skating 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 into 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 ninety nine percent woman, and if I was going to do this and I was gonna transfer my knowledge of what I'd learned in snowboarding lycra stretch pants into yoga, then I needed some advice. Alright, so you had

uh some money to play with from from the sale of your other company. Uh, and you knew how to sew, of course, and you knew how to source material. So what what was like what was your first move in starting the business? Well One of my big issues in life has always been about rashing of clothing and

I could never really believe that and 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 five K 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 forty thousand dollars apiece, which was huge at the time. And I uh bought them. A machine to do what? 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.

Basically make Athletic wear that would Eliminate rashes. Yes, and when I was running ten Ks or Trothlons

The rashing was the thing that was always the pain point of what I'd call um high level athletics. And egg again what I because I became a fabric scientist of sorts. I could bring in the wicking. the f 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. No, getting up in the morning, putting it on at work, and then walking down to the yoga class and then walking home. And was the idea to just make athletic gear or yoga clothes, or was it

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

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

Right. Why? Why would you why were you so confident this was gonna work? I think because when I started to do my first design meetings with these ten groups of ten 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. Any like 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 gonna be Unbelievable. All right, so you you bet everything on this. Yeah.

And then you open a store, right? Yeah, but it's uh you know, I can only get a store on the second floor in the right area on the right street in Vancouver, which is Probably got more athletic stores than any place in the world. 'Cause of you know, the type of environment we have. But I can't you know, it's really hard to get people up to the top floor.

So the only way I can I figure out how to do it is to 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 in to yoga but also see what our clothing was and then it kinda moved from there. So your first store was essentially a yoga studio

with a like a boutique inside. Correct. Okay, so you have Uh you have this this company which uh which you decide to call uh Lululemon uh and but by the way, w where where did that name come from? Yeah, I probably get a

Once a day. And so When I had West Beach, I had bought a Skateboard brand called homeless. And with homeless I started to uh sell that to the Europeans and the Japanese.

And it has started to occur to me that the five big trading companies in Japan We're 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 in it is more authentic North American. It's not like a a Japanese knockoff, so it had real value to them. So I started go, Oh wow, that's really a neat idea. So I over the next couple of years I just started doing alliterations in my mind and with L's But it was a pretty risky name at the time because Lemon was really connected with uh Really bad quality Detroit cars.

Right, a lemon, yeah. But I actually came up with about twenty names and uh twenty logos. What were some of the other names? Um well the only one I can remember right now is called Athletically Hip. Okay. Oh. What a horrible name.

Well, that's what the girls thought too, because I had ten focus groups of ten 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's it was a stylized A from the athletic. So h here's here's a uh a question for you chip, because I'm curious. I'm I'm a as you know A man like you? And you you are f selling A product primarily to women.

In a you know, a sport that yoga uh or an exercise that you weren't really an expert in. You were not like some yogi guru. You weren't um you're a big guy. You're like a football player type of guy. And є trying to create a a market.

and and sell a product to to to to young women. How did you do it? Did you sort of step back and and Have Other women.

Kind of sell the product. For you? Yeah, I mean I had the When in between West Beach and Lulemon, I'd I'd really decided that I only wanted to work with people I love 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 two hundred thousand dollar loan. Wait, because the f the first time you ran out of money you were uh you were running West Beach, right? Right. And I got m West Beach, my old company moved back from 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're I didn't want to advertise. I wanted word of mouth to of the quality of our clothing to be the branding niche because I 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 with uh l using stretch clothing. And within about two weeks I After hiring her I I left her in charge of Lou Lemon as the CO for a year and I went back and ran West Beach. And that's how you were able to make some cash. That's how I was able to make more cash. Exactly.

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

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 five to six hundred 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 and 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. Um I was only a couple weeks away from the end of it. Um we had just decided to move across the street from our second floor into a f uh store on the main floor on Fourth Avenue at ten dollars a square foot because it was an old Beat up electronics store. And then um the another thing from heaven came and it was they fired me at West Beach. Well, and I use that loosely, but they combined with Sim Skateboards and the CEO of Sim Skateboards became the the CEO, so they They let me go with a um a severance fee of fifty thousand dollars and if it wasn't for that fifty thousand dollars we never would have been able to finish our store. Wow.

Just before Christmas time. This is in two thousand. Yeah, this is in two thousand. And even though we had this great Yoga pant and tops uh 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 they mostly bought the yoga pants'cause they could you know, we were in a position then to educate

They were a customer for life. And if you were taking a yoga class in Vancouver at that time Presumably you would have seen The label'cause the label was like right on the outside Of the waistband, right?

Yeah, I put it there because I was Very clear that I that I 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 kinda corporate logoing. You know, it's always there on the left chest. So um I d I decided the logo small, I wanted to be discreet and in a place that nobody could see. So you I guess around two thousand two you opened your first store outside of Vancouver. This is in Toronto.

Or Toronto, as they say in Toronto. Yeah, so we had um in my second floor, you know, in Vancouver was a really a pop up store in them, 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 Lou Lemon business model, so We would go into every city in the future.

set up a store in the back alley or in a side street and develop our market, invite yoga instructors in before we spent, you know, six hundred to a million dollars on a store. And then you know, again created word of mouth, which was, you know, my favorite type of marketing is breakeven marketing. 'Cause I never had any money for marketing, so that was a given. Well you did I mean you guys did some some stunts right? Like in when you opened your shop in Vancouver You said the first thirty people who show up naked get a free outfit. Well it was worse than that, I actually put my first ad in is anyone that shows up gets a free outfit. And then I realized it was in Vancouver and I was gonna 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 thirty. And did did that happen?

Oh yeah, and it created global uh media. Everybody showed up. There was T V trucks all up and down the street and People were just naked in front of the store. Well, they showed up. It was uh October morning. It was uh 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 went to open the store. I went out with my wife and put my arm around her and then we um we said thanks for coming and everyone dropped their

Trench coats and went running into the stores. This is and like nobody nobody was arrested,'cause like this is not normally allowed in most uh cities. Well, especially in two thousand and two, 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 Yeah, 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. So around 2002, glue lemon really starts to grow. Two thousand three you opened a s your first store in the US in Santa Monica, which I obviously you chose that because that was sort of

Right, the center of the Yoga culture in the US, I guess. Yeah, I think probably the big thing that happened after we opened up Toronto and the uh the second store in Vancouver is um you know, I asked my lovely wife to marry me, she said yes, and so it was April twentieth, uh Saturday when we were to get married, and uh I'm working in the store and really I became um almost a traffic cop because the the number of people coming in the store was something that we'd never seen before. I think it went from A ten thousand dollar Saturday to a thirty thousand dollar Saturday.

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. Um, but you but you still uh uh did you s did I'm assuming you didn't have enough cash flow to really scale the business at that point.

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 was owning manufacturing right to the retail store. I mean I was taking triple the profit of most people.

I mean I guess It was two thousand five that you went out and And saw it outside investors. uh who then'cause'cause at that point you'd owned a hundred percent of the company. So you sold

Uh I guess about half of the company and then Step down as a CEO. Why did you do that? Wha was that the only way you could Like you could expand and scale? 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 I even though it was making so much money, I'd never taken any money out. My wife and I neither of us came for money and we were all was 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 yourselves every morning. Yeah. And then um and I wanted advisors. I wanted people around me that could make sure that I wasn't gonna run into roadblocks.

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

Right, and it allowed me to sit in the middle of the design department. which is my love is innovation and quality and uh and athletics. 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 I ended up p with a lot of money, um you know, Chip Wilson's a businessman, but nothing really could have been further from the truth. Uh Just a passionate product guy. So he it's interesting because

Even though you were still the biggest shareholder, you all of a sudden had outside investors Who came in and uh had their ideas for how this company should be run. So I have to imagine starting in two thousand five, even though you're no longer CEO, There is some tension that begins. Well, yes, I think my my mistake happened, uh when I was at West Beach and I brought in private equity. We had uh 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 gonna be another wonderful experience. Yeah. 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 Lou Lemon and they had quite a short term vision for Lou Lemon. So we went uh we ended up going

Public way too quickly. Right, but when you guys went public, uh Uh like in two thousand seven, this was a hot stock. Right. Yeah. And you actually sold a a chunk of stock pretty early on, right? 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 want to sell thirty percent of the stock to the private equity guys, but I ended up selling forty eight, 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, um you know, the advice I got was, hey Chip, you should sell more of your shares in the marketplace'cause the more shar 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 participate and kind of move into the background and not have the power, so to speak, to control a board. Um And that's really

what I lost and it it's it's my own fault and but that's what I ended up with. But this company just like went took off, right? I mean through the t early two thousands and to the two thousands and then It just it was on fire, right? I mean th the the b Lulemon was g was everywhere and and was is is today, but I mean that Despite the Challenges.

That you faced. It did. Explode in growth. You gotta admit that, right? Oh, it was unbelievable. I mean we you know, uh okay, so things happen 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 Lou Lemon and um you know, and those things never kinda work out perfectly, but all in all, I mean you'd have to admit that what

Occurred. And what has happened is made me incredibly happy and incredibly wealthy. So In two thousand eleven

Lulemon uh U land. On the list of Canada's Billionaires. Which I mean means you achieved your goal, financial uh security and more. Um was that like a a marker for you? Was that important for you or did you did you think did you not really care?

I I could I really didn't care because I Again, my drives were family. And my my absolute Passion for athletic clothing. And

I think my wife and I Again, we just always so scared of losing it all. You know, like we could still go to s you know the store and only buy one tube of toothpaste. You know, we couldn't like s we couldn't see ourselves buying three. You know, to save time. Yeah. I could do it in my business, but I couldn't do it at home.

Alright, so let's address the one elephant that everyone I say, I'm you know, Chip Bilson's gonna be on the show, everyone says that guy Didn't he once say and this is a this is the let's just give the outline of the story, two thousand thirteen, Lululemon has to recall uh certain pants because um there were concerns that they were too sheer that that that they were see through. And in an interview you gave, um offhand you said, you know, look, some of these pants just don't look good on all women's bodies. Yeah, so 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 on what happened? Well, I think you have to go back and to the end of two twelve. I mean I was quite frustrated with um With the board, I think that you know, the board and I didn't see eye to eye on how the company was being run, so

And then there was everything kinda I I said would happen did happen. There was a huge quality issue. So I went on this uh Program. Um

I think it was N B Cloomberg. Bloomberg, yes. And um I did know From working in the stores that there was definitely something happening to our

Clothing. And I didn't know what. Anyway, the the question was it really about the pilling and I said well when the pilling and the in the when friction happens, the the fabric pills. Right. What was ha you know, you've done that um uh interview with um

Blakely on Spanks. So suddenly Women were coming into the store and not wanting Lou Lemon 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. Then What

Their size was in order to get out of the Garment. What it wasn't made for. So When you stretch

Anything to a limit and then it it You sit on a wooden bench or something like that. Then pilling occurs. So

Anyway, that but I didn't know that'til 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 all women You said you said quite frankly some women's bodies just don't just actually don't work for the other.

Which is a lot different than what you said. Which is that a lot of people thought you said that Overweight women shouldn't wear Little lemon pants. Yeah. I mean what you said is what I think Which is a lot different than what I said, just so we're there. Did you um

Did you get depressed? 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 frontman for the company anymore and I was a liability to Lou Lemon. I mean this is you know after thirty years of doing, you know, thousands of public interviews and You know, I say one thing and and suddenly um I'm a liability.

So w 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 and Did you have some time to reflect on it and to think?

That was just I'm just that was just dumb. Well it was a poor choice of words. Um 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 Lou Lemon. It was the very opposite. But um Um Yes. It was it was

If I could take it back, I certainly would. 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 then all of a sudden everyone jumps it when it starts to take off. You know, right uh success has a million uh fathers and 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 you're no longer in control. Is that Is that weird? Yeah, you know it um

um my vision for Lou Lemon 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 Lou Lemon still I mean I'm the I'm the most informed cheerleader and I think it has, you know, a s a great future still. You have another do you have another business in you? Um Well what I learned is that Um

When I left Lou Lemon you You know, even though it was maybe two billion dollars in sales at the time, my My brain was on Lou Lemon being seven eight billion dollars, and I'd Work so hard. Building a company like

By brick by brick that it was v I don't think I can go back and And be a starter of a company at the age sixty two anymore and uh I've probably got too good a life to want to do that again. And um My my absolute favorite thing I do is my I've got twelve year olds, uh twin boys, and I'm coaching flag football. And nothing could be more fun. Yeah.

Nothing could be more fun. Chip. You've heard the show before. How much of your success is because of your

intelligence and and work and how much i of it is because you were really lucky. I think I was Pure passion. for athletic technical product.

And I would have worked Eighteen 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.

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 and Ace. And please do stick around because in just a moment we're gonna 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. And uh 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. 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.

Yeah, well think about it, I mean f you you have a camera that you carry around all day, every day, but it doesn't even have a lens cap. So Mike figured he would design an iPhone case where you just slide a switch at the top to cover up the camera lens. And on the inside of that lens cover is a fabric lining, and it also wipes the lens clean of any smudges. So a pretty great and simple idea. And around four years ago, when Mike first thought it up, he said, first thing, I gotta patent this. You know, the the most important part of getting a patent is having a good patent attorney. 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. 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. Even close friends were like, This this is a dumb idea. Why are you doing this? 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. Yeah, I'm not one of these. Otterbox or Spec 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 engine, and then it's a lot of back and forth. 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.

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. 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. And there were

A lot of people that came up to me and said Well jeez, I I feel like this should be on the market already. But no, Mike says he was actually the first guy to come out with an iPhone case that has a lens cover and cleaner. Right. And our logo is something I made up of Microsoft Paint. It's a little Phone case that looks like a little pirate. Got an eye patch. That's why I came up with the name, eye patch case, because it covers up the camera's eye. Since he launched the iPatch 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. 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. If you want to find out more about the iPatch case or hear previous episodes, head to our new podcast page, how IbuiltThis.npr.org. And of course, if you want to tell us your story, go to build. NPR.org. 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 hibt at npr.org, and if you want to send us a tweet, it's at how I built this. Our show is produced this week by Janae West, with original music composed by Ramteen Arabli. Thanks also to Noor Kutsi, Sanaz Meshkinpur, Neva Grant, and Jeff Rogers. Our intern is JC Howard. I'm Guy Roz, and you've been listening to how I built this? From NPR.

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