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.
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Lululemon Athletica: Chip Wilson

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Lululemon Athletica: Chip Wilson

Lululemon Athletica: Chip Wilson

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GUY RAZ, HOST:

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 1, in Boulder, Colo. 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 1. For tickets, go to nprpresents.org. And hope to see you in Boulder.

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RAZ: People were just naked in front of the store?

CHIP WILSON: (Laughter) 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.

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RAZ: From NPR, it's HOW I BUILT THIS, a show about innovators, entrepreneurs, idealists and the stories behind the movements they built.

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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.

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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. 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. 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.

WILSON: She lived for it. It's what her 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, you know, if I wanted to spend time with my mom, it had to be at her foot in the sewing room.

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

WILSON: (Laughter) Yeah. I can definitely sew - but more so, I think it was working with the Butterick patterns and watching my mom lay them down on the fabric 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 50 to 100 layers of fabric down, when you can save even 5, 6, 7 inches of fabric, it can mean thousands of dollars.

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 cash?

WILSON: Well, interesting - in today's dollars, probably about 600,000.

RAZ: What?

WILSON: And I think back then, it was about 175,000 American. Yeah.

RAZ: That was...

WILSON: It was amazing.

RAZ: ...Amazing. You were, like, 19.

WILSON: Yeah.

RAZ: 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.

WILSON: Right. And, you know, but I - 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, you work. So I always wonder, you know, if everyone got that opportunity, would they have made the same thing out of it I did?

RAZ: That's pretty good. You're 18 or 19 or 20...

WILSON: Yeah.

RAZ: ...With a bunch of cash. So what did you do with the money?

WILSON: Well, I'd always had three goals in Alaska. One 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 I did. I bought a house, and then I finished up my degree, and I worked for an oil company.

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

WILSON: Right. Right.

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.

WILSON: Yeah. Because I didn't - you know, you have to get it - 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...

RAZ: Sure.

WILSON: ...From the late '70s...

RAZ: Yeah.

WILSON: ...To get that kind of picture. 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.

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

WILSON: Yeah. Exactly. But, you know, you have to see it in a context that there was nothing like that before. Everything else was that era of browned rust, off-color okra, yellow, like, solid colors. There was no brightness in the world at all at that time, so that was a radical look. So I had started - because I couldn't get loud flowered prints in 2,000 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 of black fabric. And then I realized I had reversable shorts. So not only were 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.

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

WILSON: 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.

RAZ: Where, in Calgary?

WILSON: In the downtown mall in Calgary. And I had a partner, a girlfriend at the time. And so we did that together. And, 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, $120 at the oil company. So it wasn't tough to figure out the math of that.

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?

WILSON: Well, these particular shorts, you know, I couldn't really - it was tough in the oil business of conservative Calgary, where people wore 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.

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

WILSON: (Laughter) Yeah, 40 days max.

RAZ: Forty days. You 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 at the same time, you were still working for this oil company on the side. Or you were doing this on the side and work...

WILSON: Right.

RAZ: And how long before you quit the oil company?

WILSON: Well, I had my goal of quitting, being in my own business by 30. So I worked for the oil company for five years and quit on my birthday.

RAZ: Your 30th birthday.

WILSON: Exactly.

RAZ: Did you create a brand around the barbecue shorts?

WILSON: Yeah. I called it Westbeach, 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. My...

RAZ: When you were a little kid.

WILSON: 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.

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

WILSON: 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.

RAZ: And by the - sort of that time - the mid- to late '80s - what were you selling?

WILSON: 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 - starting in '83 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.

RAZ: And who was designing the apparel that Westbeach was selling?

WILSON: 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. And 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 I was driven through both those.

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

WILSON: 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, then wholesaled it to somebody else.

RAZ: Right.

WILSON: 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.

RAZ: 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?

WILSON: 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.

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

WILSON: Sure. I mean, in a - Japan had just exploded, so it was about 30 percent of all snowboarders' 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 going to 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. 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.

RAZ: So you decide to sell.

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

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

WILSON: 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, 800,000. And then you've got to - you know, I had paid myself probably $30,000 to $40,000...

RAZ: Wow.

WILSON: ...For 18 years, so I...

RAZ: You did not - yeah, you didn't walk away with a whole lot.

WILSON: 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.

RAZ: And - OK. OK. So here you are in your early 40s and, like - I mean, what were you going to do?

WILSON: Well, actually, my goal was to be financially independent by 40, so I failed in that goal. And, you know, I was thinking about what I wanted to do. And then I had this thing - I have always believed in this three times thing. So when I see something three times, then I move, and I move really quickly. So I'd seen an article in the paper about yoga. I'd seen a poster on a, you know, telephone post with a little rip-off about the yoga class. And then I overheard a conversation in a coffee shop about yoga. And I went wow.

So I went to this yoga class. You know, it went from about 6 to 30 people in 30 days. I was the only guy in the class. 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 90 percent of people in gyms were men. And, you know, you knew you were going to sweat in it, you were going to get ugly in it, and you just wanted to throw it in the wash afterwards. So nobody thought about athletic clothing being nice.

RAZ: So just to get inside your head here, you're in the 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, how do you go from one yoga class to that thought? Was it instant? Did it take a week? Did it take a month?

WILSON: 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 a hundred times bigger.

RAZ: That's a big deal, right? This is - like, you're spotting a trend, like, really 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 - some - a part of you just knew that this was going to be a thing.

WILSON: Yeah. Again, I was extrapolating. But you also have to get I was possibly 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 Westbeach 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?

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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.

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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.

WILSON: Yeah. I had to read an article in the paper one day that told me that 60 percent of the graduates at a university were women in 1998. Then 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, and 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.

RAZ: Did - so did you - what did you do? Did you run back from the yoga class and, like, go back to your house or wherever you were living and start to sketch out ideas?

WILSON: Yeah, there was a little bit of that. And I talked to of course Fiona Stang, who was the - 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 and knew exactly what was going on, I obviously wasn't a woman. And I could see that yoga at that time anyway was 99 percent 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.

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 - like, what was your first move in starting the business?

WILSON: 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 5k, and I 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 a piece, which was huge at the time, and I bought four of them.

RAZ: A machine to do what?

WILSON: They were flat seams. So it was 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.

RAZ: So the idea was to basically make athletic wear that would eliminate rashes.

WILSON: Yes. And when I was running 10ks or triathlons, the rashing was the thing that was always the pain point of what I call high-level athletics. And again, what I - 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, you know, getting up in the morning, putting it on at work and then walking down to the yoga class and then walking home.

RAZ: And was the idea to just make athletic gear or yoga clothes, or was it to make fashionable, you know, apparel?

WILSON: Well, I think I was just, you know, the right person to be putting, like I said, the two together. I mean, my drive and what differentiated Lululemon from everybody else is I came at it from function and then put fashion into it.

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 a - you pretty much bet everything you had.

WILSON: Right.

RAZ: Why? Why would you have - why were you so confident this was going to work?

WILSON: 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. Like, there 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.

RAZ: All right. So you bet everything on this, and then you open a store, right?

WILSON: Yeah. But it's - you know, 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, 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 combine my business with Fiona Stang, my yoga teachers. And I had all my clothing on rolling racks and would 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 kind of moved from there.

RAZ: So your first store was essentially a yoga studio with a - like, a boutique inside.

WILSON: Correct.

RAZ: OK. So you have this company, which you decide to call Lululemon. And by the way, where did that name come from?

WILSON: (Laughter) Yeah, I probably get asked this once a day. And so when I had Westbeach, I had bought a skateboard brand called Homeless. And with Homeless I started to sell that to the Europeans and the Japanese. 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 in 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 Japanese knockoff. So it had real value to them. So I started to go, oh, now that's really a neat idea. So I - over the next couple 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 really bad quality Detroit cars.

RAZ: Yeah. Right, a lemon. Yeah.

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

RAZ: What were some of the other names?

WILSON: Well, the only one I can remember right now is called Athletically Hip. So - (laughter).

RAZ: Ooh, what a horrible name.

WILSON: 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 Lululemon. But the logo actually came from Athletically Hip. So it's - it was a stylized A from the athletic.

RAZ: So here's a question for you, Chip, 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...

WILSON: Right.

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

WILSON: Yeah. I mean, I had to - when - in between Westbeach and Lululemon, I had 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 money for my second time - I had taken another $200,000 loan...

RAZ: Wait; because the first time you ran out of money you were in Westbeach, right?

WILSON: ...Right. And I got - Westbeach, 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 to - 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 (ph) was her name. The first person I'd ever seen that had a design portfolio with - using stretch clothing. And within about two weeks, I - after hiring her, I left her in charge of Lululemon as the CEO for a year, and I went back and ran Westbeach.

RAZ: And that's how you were able to make some cash.

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

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.

WILSON: (Laughter).

RAZ: She's your wife.

WILSON: Yeah.

RAZ: 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?

WILSON: It was very slow burn. And then it was so slow that even when I left for - to run Westbeach, we were running out of money. I had a lot of inventory because I needed to make at least five 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 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 weeks away from the end of it.

We had just decided to move across the street from our second floor into a store on the main floor on 4th Avenue at $10 a square foot because it was an old, beat-up electronics store. And then the - another thing from heaven came, and it was, they fired me at Westbeach. Well - and I use that loosely. But they combined with Sims Skateboards, and the CEO of Sims 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've been able to finish our store...

RAZ: Wow.

WILSON: ...Just before Christmastime.

RAZ: This is in 2000.

WILSON: 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.

RAZ: And if you were taking a yoga class in Vancouver at that time, presumably, you would've seen the label because the label was like, right on the outside of the waistband, right?

WILSON: Yeah. I put it there because I was very clear that I didn't want big logoing (ph). 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.

RAZ: So you - I guess, around 2002, you open your first store outside of Vancouver. This is in Toronto - or Toronno (ph), as they say, in Toronto.

WILSON: Yeah. So we had - in my second floor, you know, when Vancouver was really a pop-up store, 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.

RAZ: Yeah.

WILSON: So that was a given.

RAZ: Well, you did. I mean, you guys did some stunts, right? Like, in - when you opened your shop in Vancouver...

WILSON: (Laughter).

RAZ: ...You said the first 30 people who show up naked get a free outfit.

WILSON: 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. And in fact...

RAZ: And did that happen?

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

RAZ: People were just be naked in front of the store?

WILSON: Well, they showed up. It was a October morning. It was - you've probably never heard this about Vancouver. It was overcast and drizzly. You know, they all showed up in their trench coats. 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 said, thanks for coming. And everyone dropped their trench coats and went running into the store.

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

WILSON: Well, especially in 2002. But I think 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 Vancouver. I'm very proud of our city and our police for, you know, stepping back and, you know, just observing.

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RAZ: So around 2002, Lululemon really starts to grow. Like, 2003, you open your first store in the U.S. in Santa Monica, which, obviously, you chose that because that was sort of - right? - the center of the yoga culture in the U.S., I guess.

WILSON: 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 20, a 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 that we'd never seen before. I think it went from a $10,000 Saturday to a $30,000 Saturday.

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. But you still - did you - I'm assuming you didn't have enough cash flow to really scale the business at that point.

WILSON: 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.

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 a hundred percent 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?

WILSON: No, no. I mean, because I had built retail stores around the world - I had done global manufacturing. I mean, honest to God, I could've 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.

RAZ: Yeah.

WILSON: And then - and I wanted advisers. I wanted people around me that could make sure that I wasn't going to run into roadblocks.

RAZ: OK. So you've sold about half the company to private investors. A new CEO comes in. You stay on as chairman. And then, I guess, you become, like, chief innovation officer at this point, right?

WILSON: Right. And it allowed me to sit in the middle of the design department, which is - my love is innovation and quality 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 ended up with a lot of money. You know, Chip Wilson's a businessman. But nothing really could've been further from the truth. I'm just a passionate product guy.

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.

WILSON: Well, yes. I think my mistake happened when I was at Westbeach, and I brought in private equity. We had a board of directors, but they had no vested interests.

RAZ: Right.

WILSON: 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 advisers with me where we're all on the same page and moving in the same direction was going to be another wonderful experience.

RAZ: Yeah.

WILSON: 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 Lululemon. So we went - we ended up going public way too quickly.

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

WILSON: Right. Yeah.

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

WILSON: Yeah. You know, again, you know, I had advisories 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 percent 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 in the marketplace because the more shares that are out there, 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 have the power, so to speak, to control a board. And that's really what I lost. And it's my own fault. And - but that's what I ended up with.

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

WILSON: Oh, it was unbelievable. I mean, we - you know, OK, 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.

RAZ: So 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?

WILSON: I could - 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 were just always so scared of losing it all. You know, like, we could still go to, you know, the store and only buy one tube of toothpaste. You know, we couldn't - like, we couldn't see ourselves buying three, you know, to save time.

RAZ: Yeah.

WILSON: I could do it in my business, but I couldn't do it at home.

RAZ: All right. So let's address the one elephant that everyone I say, I'm - you know, Chip Wilson's 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?

WILSON: Well, I think you have to go back into the end of 2012. I mean, I was quite frustrated 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 kind of I said would happen did happen. There was a huge quality issue. So I went on this program on - I think it was NBC.

RAZ: I think it was Bloomberg.

WILSON: And - Bloomberg, yes.

RAZ: Bloomberg. Yep.

WILSON: Thank you. And 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 question wasn't really about the pilling. And I said, well...

RAZ: Like, pilling in the - when friction happens, the fabric pills.

WILSON: Right.

RAZ: Right, OK.

WILSON: And 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 in 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. 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 and 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.

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

WILSON: Yeah.

RAZ: ...For Lululemon pants.

WILSON: ...Which is a lot different than what you said.

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

WILSON: 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.

RAZ: Did you get depressed?

WILSON: 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 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 suddenly, I'm a liability.

RAZ: So what - I mean, so how did you kind of - I don't know - 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...

WILSON: Yeah.

RAZ: Did you have some time to reflect on it and to think, how is this - I'm just - that was just dumb?

WILSON: 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 women and for women for Lululemon. It was the very opposite. But, yes. It was - if I could take it back, I certainly would.

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RAZ: It is 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 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 weird?

WILSON: Yeah. I mean, you know, my vision for Lululemon and what it could have been 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 - you know, I'm the most informed cheerleader, and I think it has, you know, a great future still.

RAZ: You have another - do you have another business in you?

WILSON: 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 brain was on Lululemon being seven, $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 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 absolute favorite thing I do is my - I've got 12-year-olds, twin boys, and I'm coaching flag football. (Laughter) And nothing could be more fun.

RAZ: Yeah.

WILSON: Nothing could be more fun.

RAZ: Chip, you've heard the show before.

(LAUGHTER)

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

WILSON: I think I was pure passion for athletic technical product, and I would've 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.

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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 and Ace.

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RAZ: And please do stick around because in just a moment, we're going to hear from you about the things you're building.

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RAZ: 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.

MIKE SORRENTINO: 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.

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

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

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.

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

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

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

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.

SORRENTINO: Even close friends were like, this is a dumb idea (laughter). Why are you doing this?

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.

SORRENTINO: 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 onto the market. Then I've got to go to the Apple store and measure it (laughter) and then send it to the engineer. And then it's a lot of back-and-forth.

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.

SORRENTINO: 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.

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.

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

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.

SORRENTINO: 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 eyepatch. That's why I came up with the name EyePatch Case - because it covers up the camera's eye.

RAZ: Since he launched the EyePatch Case, Mike's 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.

SORRENTINO: I work 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.

RAZ: If you want to find out more about the EyePatch 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.

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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 hibt@npr.org. And if you want to send us a tweet, it's @HowIBuiltThis. Our show was produced this week by Jinae West with original music composed by Ramtin Arablouei. Thanks also to Nour Coudsi, Sanaz Meshkinpour, 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.

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