BC Business
Chip Wilson revolutionized the activewear business with Lululemon, only to see the empire he built slip from his grasp. In a cheeky new book, the outspoken billionaire shares his version of what happened
I’m glad I didn’t wear a suit jacket to this interview. On a sunny August morning in Vancouver, Dennis (Chip) Wilson, dressed in sneakers, blue shorts and a white polo shirt, is all tanned arms and legs. A competitive swimmer in his youth, he’s still physically imposing at 63, with piercing pale-blue eyes and a disarming toothy grin.
Our meeting takes place at the airy, sparsely decorated Gastown offices of Hold It All, holding company for the family businesses of Lululemon Athletica founder Wilson; his wife, Shannon Wilson; and their five boys. Those enterprises consist of technical apparel maker Kit and Ace; real estate investment, development and management firm Low Tide Properties; private equity division Wilson Capital; and the Wilson Foundation.
On a shelf in the waiting area sits a selection of books, among them two of Wilson’s favourites: Ayn Rand’s libertarian touchstone Atlas Shrugged and Jim Collins’s Good to Great: Why Some Companies Make the Leap and Others Don’t. Lululemon, launched in 1998, certainly made the leap. The yoga-inspired clothing company invented the athleisure category, but it also got away from its former chair and CEO.
Now, Wilson, who speaks quietly, sometimes pausing to cradle his shaved head with long fingers, is telling his side of the story with Little Black Stretchy Pants. The autobiography details his modest upbringing as a Canadian- American in Calgary, his hard-won success with athletic apparel pioneer Westbeach Snowboard, the rise of Lululemon and the events leading to his ouster as chair before he resigned from the board in 2015. Its cover—a shot of Wilson’s bum clad in, yes, black stretchy pants—is defiant and self-deprecating.
Wilson has peppered the 20th-anniversary book with supportive commentary from former Lululemon colleagues, including Shannon, who served as lead designer. Along the way, he slams the company he left for what he calls missed opportunities, shares his philosophy of life and defends the Landmark personal development program. He also weighs in on his infamous 2013 interview with Bloomberg Television, in which he appeared to blame women’s body types for a problem with Lululemon pants.
But most fascinating is Wilson’s account of how he conceived and built Vancouver-based Lululemon, partly by drawing on his knack for peering into the future. Kit and Ace, which shut all of its international stores last year, hasn’t come close to matching that success. (In late August, the Wilson family sold the company to CEO George Tsogas and several other members of its management team.)
Wilson may knock Lululemon—where he’s the largest individual shareholder, with a 12-percent stake—but the company he took public in 2007 has been very good to him financially. On October 1, he stood at No. 483 in Forbes magazine’s real-time ranking of the world’s richest people, with a net worth of US$4.3 billion, way up from US$2.6 billion this past March.
Lululemon, whose revenue in fiscal 2017 topped US$2.6 billion, now employs some 13,000 people and operates 415 stores worldwide. The company’s stock closed at almost US$162 on October 1, more than double its value at the start of the year. Calvin McDonald, previously a senior executive with cosmetics retailer Sephora, recently took over as CEO; he replaces Laurent Potdevin, who stepped down in February over alleged misconduct.
Why did you write this book?We started Lululemon, and we didn’t even have a chance to take photographs; they’re very sparse. And there was not one single moment when we could sit down and write the story of it. It was important, because I think as a Canadian, there was never that self-promotion behind it.
And so as life went on and the social media thing started to come on, somewhere around 2006, because we never documented anything about Lululemon, the world started creating the story for Lululemon. I think it became important, probably for me from a psychological point of view, to document the true origins of it and the feeling behind it and the reason it was created in the first place, to counteract stories people made up.Because there’s been a perception out there that I’m a wildcard to work with, a bunch of other things, I’ve had to reset the story.
You call the time you spent on Westbeach your 18-year MBA. What advice do you have for young entrepreneurs who want to educate themselves?I love this line: there’s no performance without action. When an opportunity presents itself, take it, no matter where it is. I say to my kids, “You’re going to fail miserably 15 times in your life. You’re going to have four terrible relationships with girls. This is just the way it goes.” And it’s really important that those failures come, and there’s learnings from them.
How do you account for your ability to spot athletic trends years in advance, as you did with Westbeach and surf, skateboard and snowboard wear, and with Lululemon and yoga?I couldn’t fit into a lot of athletic clothing originally, so I started thinking about apparel. I noticed at a young age—I was a pretty good swimmer, so whatever I started wearing, other people started wearing. So I started seeing in competitive swimming how stuff that would end up on the deck in the swimming pool ended up being something that other swimmers started wearing to school. And then I started seeing that whole Nike sponsorship thing occur.
From the age of 10 until about 25, I was a big, big reader—three or four newspapers a day, magazines, audio [books], anything. And I started extrapolating and going, Oh, I see something’s happening here. I wonder how that will show up five, six, seven years in the future?
Whenever I saw three things come together really quickly—it could have been something from a magazine, or a conversation, but it would be a brand-new thing I never heard about before, and bang, in a very short time it happened. Then I’d go, Oh, I bet you that’s gonna be something. Something is going to occur out of this, and it’s going to happen in the future; we can’t see it yet.
That happened so often in my life that I started going, Oh, this is me being what I was brought in the world to do. This is my expertise.
What does leadership mean to you now?A leader creates leaders. It’s somebody from Good to Great who develops people who are under them to be better than they are, and they can be totally secure that the better they develop people, the more opportunity they’re going to have in life. I think what happens is that people get scared to develop people under them that are better because their survival techniques kick in and they think they’re going to lose their job if they do.
How did you develop the vertical retail model used by Lululemon, and why was it so important?Something incredible like that happens by accident. There’s no way you wake up one day and go, OK, I’m going to do vertical retailing. I laugh at it and go, We didn’t even know what we had [at what became Westbeach] when I made those three or four hundred pairs of shorts and I went to sell them at the Bay and Eaton’s at the time and they wouldn’t have anything to do with them. And so, classic business, you have an inventory problem. Usually you’d sell them on discount, but nobody knew what the product was.
And so by setting up what I call a lemonade stand and selling it, I was actually designing and manufacturing, so I had the manufacturing margin, then I had the general profit margin from selling it, then I had the retail margin. So I had these three profit centres that were usually split between three different companies, and suddenly I had them all together. It seemed like such an unbelievably easy way to make money.
But we didn’t know what we had. We knew that every five years, we’d look at it and go, Oh, God, our retail stores make so much more money than our wholesale business. But the going thing was that everyone does wholesale; that’s where all the money was. But you had to be global to make that happen, or be on a big, big scale. But selling Westbeach and going, God, these two retail stores make a million dollars and this international wholesale business loses a million dollars—there was a golden nugget in there.
You identified the ideal Lululemon customer, the Super Girls, and held focus groups so they could help create your product. Companies say they listen to their customers, but how many of them really do?I’d say close to none. In retrospect, the power in companies happens so much with the buyer, who’s incentivized on a one-year bonus system. So the drive to buy what they sold last year and do little bit better is phenomenal. Because finance in a bigger company gets so much power, and they’re the ones setting up the bonus system for the buyer. And so there’s nothing to break out of that system, unless you have a design-driven company, where the designer has the last say on what gets produced, not the numbers person. Otherwise you become the Gap.
You write that you “refused to allow algorithms or metrics to run Lululemon.” What do you say to businesspeople who believe data is king?It’s not king; it’s more like the next step down. If we were a fully digital world, how would we find the information that we see by actually engaging with the customers when they’re buying? Because when a person comes in looking for particular shade of purple and we don’t have that purple, it doesn’t show up on metrics anywhere. When they’re looking for a size 9 but we only sell size 8-10, there’s nowhere in big data that those numbers show up. So you can’t actually drive the future. Because the people who are asking those questions, by their eyes or their body language, they’re telling you something about the future. And it just doesn’t show up in numbers.
At Lululemon stores, you succeeded partly by breaking several rules of retail—rarely answering the phone, for example, so you could focus on inperson customers. What can other businesses learn from that?That which matters the least should never give way to that which matters the most. What I noticed in the 32-year-old Super Girl who came into the store was that the most important thing for her was time. She calculated every minute that she was in the store against what else she could be doing, or against her salary. So when she couldn’t get what she wanted in a speedy way, then it’s actually costing her money, and she was adding her time onto whatever she was paying for the garment.
A lot of people look at retailing as cutting expenses on every level they can, where I looked at where do I need to increase expenses to lower her time in-store getting exactly what she wants, because she sees more value in that.
What’s one thing that every entrepreneur should know about money?There’s the business of the business, which makes money. And then there’s the business of governance and finance, which makes money. These are two entirely different things. And the entrepreneur, before they take on money from the people who make money from finance, they’ve got to understand they need a hell of a lot of education before they sign a deal to make the bridge between the two.
How do you feel toward the people who pushed you out of the company you founded?I don’t think they knew what was going on. When you end up with management that have three-year options, they kind of work from survival mode, like, I’m going to hit the jackpot if I just do this. And you get executives that have been really good at playing the corporate Machiavellian game, and they’re good at strategy not just for the company but for themselves, too.
I didn’t realize how management, so to speak, was manipulating the situation, and that the board didn’t understand that they were manipulating the situation for their own personal gain. So when I went to the board and said that you’re not taking care of the company for the long term and I think you need to go—because the board hires and fires the CEO—so we can have a long-term-driven CEO in here, they didn’t like that.
Is it their fault? I don’t think it’s their fault, because they made decisions based on bad information. Because they’d only come in once every quarter, they didn’t have insight as to what was really going on. Someone like myself, or maybe two or three of the top management who weren’t under the CEO, could see what was happening from a totally different point of view. But if you’ve got a Machiavellian CEO, they’ve got a strategy for making sure that my voice or the voices of people who had been there a while would not get heard.
You’ve had a few skirmishes with the media. How do you think you were treated unfairly?I don’t think I’ve been treated unfairly. I look at it and go, Why did that happen? To me, it’s so obvious we’ve moved from 10 media outlets in 1995 or something to, I don’t know, a billion.
So I know what happens when you have a product like, let’s say, snowboarding, and you start off with three companies and you go to 500. It’s no longer based on product and price. Sometimes it’s based on sensationalism— how to get your name out there.
I started to feel sorry for the media because to create advertising dollars, they needed to get hits. To get hits, they needed to create sensationalism. Much of the time, it wasn’t the writer, or in the Bloomberg [Television] case, I don’t even think it was the woman who was interviewing me. I think it was the businesspeople behind the scenes trying to make money.
What new social and lifestyle trends do you see emerging in the next few years?How much of those do I want to give away?
With technology, wars will not be the way they were before, and men and women will become more and more alike. This is probably what I think about more than anything, because my premise at Lululemon was that [in 1998, 60 percent of university graduates were women]. Because of divorces, girls got really clear they needed an education. But because a lot of boys were being raised by single mothers, they didn’t have a template for how to become a man.
What does that really mean to how men and women are interacting in the workforce now, and how has it come up in the whole #MeToo thing? And where does #MeToo come from and why, and is it a pendulum swing? These are the things that I’m mostly thinking about, and then I go, Where’s the business opportunity in that?
What is your outlook for Vancouver, and for B.C.?I’ve been doing production in Asia for 35 years, or something like that. Every time I would come from Tokyo or Singapore or Hong Kong and I’d land in Vancouver, I’d go, Buy land, Chip, buy land; they’re coming, they’re coming. We are just in the start of something massive. So many Asians are going to come here, I think that what we see now and what it will be like in 50 years, you won’t even recognize it.
I think we’re in a very interesting time right now where we have three very left governments in Vancouver. And from what I hear and I know even about myself, all business has stopped. Nobody’s investing; nobody’s doing anything.
With no investment, there’s no turnover of that money and multiple people making money down the line. It just seems to be a reincarnation of what we see over and over again. I think it’s going to be very, very disastrous in business over the next 10 years.
What is your biggest regret?I can’t regret anything. Even when I went public, I went, Gee, I want to go public in case any of my children do; I want to have all that knowledge because I came from a phys-ed-teacher father and a mother who didn’t know anything about business. I felt I had to learn for the next generation.
I know that there are 100 regrets everyone’s going to have in their life, and that’s just what life is. It’s just that regret holds onto people, and it stops them from being powerful and moving forward. Seeing something as a failure to be learned from gives opportunity to build a future that would otherwise never have occurred.
What’s next for you?I’m really, really enjoying buying real estate in Vancouver, and doing what I was doing with Lululemon, focusing on that single 32-year-old professional—where they want to live, where do they want to work, how do they think. I love that. We’re moving a lot of our investment down to Seattle to diversify.
At my age, I have five boys, and they’re all at a stage where I could do a lot of different things. But ultimately, I’m a family guy, and I want to see my children be good citizens. And we have a large foundation; we have a really interesting idea for it that I don’t want to say yet, but I want my children to follow up on that through future generations. I think it’s going to be incredible for Vancouver and B.C.
This interview has been edited