How Lululemon Won Athleisure | Mirror, Mirror | 2

0:09It's November 5th, 2013. Lululemon's founder and chairman, Chip Wilson, is talking to a journalist for the Bloomberg TV program, StreetSmart. Wilson's come on the show to do damage control. Back in March, complaints started flooding in about their iconic yoga pans. Customers said they became see-through whenever they moved or stretched in them. The company issued a recall of 17 % of its pans, offering customers a full refund. The debacle led to a roughly$2 billion loss in market value, and a$67 million loss in revenue. Nine months later, Lululemon is still fighting to regain trust from both investors and customers.

0:52Wilson is supposed to explain what happened and offer a sense of transparency. But before long, the interview goes off the rails. There have always been pilling. The thing is, is that women will wear seatbelts that don't work, or they'll wear a purse that doesn't work, or quite frankly, some women's bodies just actually don't work for it. The female journalist across from Wilson looks shocked. He just blamed the problem on women's bodies, women who dominate his customer base. And then he doubles down. It's, you know, really about the rubbing through the thighs, how much pressure is there. In trying to dig Lululemon out of a scandal, Wilson has just started a new one.

1:35His comments make international headlines and launch a backlash. Commentators offer their own critiques of Wilson, like this one from Bloomberg TV. The reality is, when you run a company like that and your main consumer is this female audience, you just can't say stuff like that. You just can't. Female customers are furious at the suggestion that their bodies are to blame for Lululemon's quality control issues. Chip Wilson has been making inflammatory comments to the press ever since he founded Lululemon in the late 1990s. But while those statements were once quickly forgotten, now they're sticking.

2:17The company has grown too big to have a figurehead this unpredictable and brash. This time, Wilson may have gone too far.

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4:18From Wondery, I'm David Brown, and this is Business Wars.

4:46In our last episode, Chip Wilson discovered an untapped market. Young women willing to buy high-end yoga apparel. Wilson founded Lululemon, building it into a hugely successful brand with hundreds of locations across North America. But now there's increasing chatter from investors and the media that Lululemon has outgrown the man who started it. As the company tries to part ways with Wilson, it will also face competition from new players in an increasingly saturated market. because while Lululemon had virtually no competitors when it started back in 1998, by the 2010s, rivals are poised to cash in on the yoga pants craze.

5:30Big companies like Nike, Adidas, and The Gap are making their own yoga clothing while new athletic wear brands are gaining traction. Lululemon will have to fight to stay relevant in a changing market without losing brand identity along the way. This is Episode 2, Mirror Mirror.

5:57It's November 2013, just a few days after Wilson's controversial statements in his Bloomberg TV interview. Women are speaking out, saying they feel like Wilson blamed their body shape instead of owning the company's quality issues. So Wilson is, once again, in damage control mode. He films an apology video, standing in front of a white wall and speaking directly to the camera. I'm sad. I'm really sad. I'm sad for the repercussions of my actions. I'm sad for the people of Lululemon who I care so much about. Lululemon posts the minute-long video online. But viewers point out it's missing something.

6:37At no point does Wilson apologize to the customers he's offended. Instead, he exclusively apologizes to Lululemon employees, saying he regrets causing so much backlash for the company. This non-apology supercharges the Lululemon hate storm. ABC News surmises it might be the worst corporate apology of all time. This so-called apology is this morning making Lululemon's problems worse. And it starts out so well. Just a note here. transparency and owning up to mistakes that's one thing but a bad apology well that can be worse than no apology at all customers don't want to hear that you're sad for yourself or your employees they want acknowledgement as much as accountability a rule of thumb say what you did wrong who had heard and how you'll fix it corporate apologies are a bit like yoga poses awkward if you force it graceful when you're grounded in sincerity.

7:40This one fell flat on its face. It's particularly bad timing for the company. Just a few months ago, Lululemon CEO Christine Day announced she was resigning. She's staying on as acting CEO until the company hires a replacement, but her resignation is a big blow for Lululemon. Day has had a wildly successful five-year tenure, during which she tripled revenues and quadrupled the number of stores. Her departure is chalked up to her tension with Wilson, who constantly questioned her leadership skills. Lululemon is in a tender state as it tries to find a replacement CEO while recovering from months of endless controversy.

8:25But the more Wilson tries to help, the more he adds fuel to the fire. Up until now, Wilson's offensive comments have largely flown under the radar. But after his repeated blunders surrounding the sheer pants saga, journalists and consumers look into past missteps. Listicles start getting published with titles like Eight Outrageous Remarks by Lululemon Founder Chip Wilson and Lululemon Founder Chip Wilson's Five Most Controversial Quotes. The lists include the fact that Wilson spent the early 2000s repeatedly telling journalists he put so many L's in the company's name because he thought it was funny to hear Japanese people try to pronounce it.

9:07They also include his pro-child labor commentary, his negative opinion of plus-sized clothing, and his belief that the birth control pill and women smoking led to higher divorce rates, just to name a few. Higher-ups at Lululemon finally start to acknowledge Wilson is weighing down a company that should be setting itself up for the future.

9:33It's December of 2013 at the Lululemon headquarters in Vancouver, Canada. The board is gathered for a meeting, and Wilson notices that acting CEO Christine Day has added a last-minute item on the agenda. She wants to discuss the Bloomberg interview. Day has limited time left with the company, and she wants to use it to address the elephant in the room, Wilson. Day uses the meeting to make her case against him. Wilson fights back, arguing that she and the board are treating him like a scapegoat, blaming him instead of the real issue, bad governance. He's convinced the board will side with him and agree that Day is blowing things out of proportion.

10:17But Wilson has made yet another miscalculation. He's overestimated the board's loyalty towards him. There's an important lesson here. Let's call it the founder's dilemma. There comes a point where the skills that build a company aren't the same ones needed to run it. Founders often mistake vision for entitlement, thinking, Without me, this brand doesn't exist. At one time, that may have been true enough. But as we've seen time and again, growth or even survival depends on letting others evolve the company. Boards exist to protect shareholders from a founder's blind spots. The lesson? Don't confuse ownership with stewardship.

11:01Many founders are reluctant to accept this, but there's almost always a time for a change, even at the very top. And for Lululemon, well, that time has come. The meeting ends with a vote, and the executives come to a decision. Wilson can stay on the board, but he will be removed as chairman. On December 10th, Lululemon announces the change, though they say Wilson willfully resigned. On the same day, they also announce Day's replacement, Laurent Padovin. He's chosen for his track record in apparel. He was previously CEO at Burton Snowboards and president at Tom's Shoes. During his tenure at Tom's, he led the company through a massive global expansion.

11:49Wilson is convinced the board is making a huge mistake. He thinks people only love Lululemon because of the company culture, a culture that he created. Now, Lululemon will have to prove they can survive without him.

12:12It's April of 2014, four months after Wilson stepped down and Padovin was announced as CEO. At the Royal Opera House in London, 400 people have gathered for a giant yoga class. As they follow the instructor into a downward dog pose, a 24-piece live orchestra plays. This free event is part of Lululemon's attempt to introduce itself to a brand new international market. The company just opened a 3 ,000-square-foot store in a touristy London neighborhood, marking its first-ever expansion into Europe. Throughout the rest of 2014, Padovin plans to open 42 more locations across Europe and Asia. Women in Canada and the U.S.

12:56have started wearing Lululemon's trademark black leggings everywhere, not just to the gym. Padovin is hopeful these new European markets will similarly embrace athleisure, fueling further growth for the company. Women overseas aren't the only customers Padovin has in his sights. For a long time, targeting only women was seen as enough. But if they want to be an apparel powerhouse on par with brands like Nike, Padovin knows Lululemon needs to expand its product offerings. In 2014, for the first time, Lululemon launches a clothing line for men. The company has been testing the waters with men's items for a little while, but this is the first line devoted to menswear.

13:44And it's not just yoga clothing either. The new line includes running shorts and gym pants. And it's a hit. By mid-2015, more than one in every$7 spent at Lululemon is on men's items. You know, the challenge here is, how do you expand your circle without breaking it, right? Lululemon proved that you can move into men's apparel without alienating the yoga core women who built the brand. But you've heard the phrase, timing is everything. Well, one good rule might be this. Expand after your base is strong enough to absorb a misstep. Too soon, and you look unfocused. Too late, and someone else gets to eat the opportunity that might have been yours.

14:30If you're an entrepreneur, you might ask yourself this question. What adjacent market would my core customers cheer me on for entering? When Wilson was at the helm he was convinced that Lululemon needed to stick to its founding culture to survive and set itself apart through a singular focus on yoga clothing for women But the strong revenue from the menswear line proves that the company can expand its horizons while keeping its base happy And as the competition heats up Lululemon will need this more than ever

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17:25It's September 2014 at New York Fashion Week. The Gap is premiering its 2015 spring collection for Athleta, the athletic wear brand it acquired back in 2008 after a failed attempt to buy Lululemon. Athleta started off as mostly a yoga clothing brand, but now, like Lululemon, it's also expanding into other kinds of sporty clothing. On the runway, Athleta-clad models do ballet and hip-hop routines, while others jog and do parkour. The message is clear. Athleta is not just a yoga brand. The Gap has been struggling for a while with its core brands Old Navy and Banana Republic floundering. It hopes that by betting big on the growing athletic wear market, it can save itself.

18:13But Athleta is tiny compared to the towering giant of Lululemon. Despite the controversies that plagued it in the early aughts, by the mid-2010s, Lululemon is dominating the industry. Between 2014 and 2015, sales rise 16 % from$391 million to$453 million. The brand has nearly 400 stores worldwide and is continuing to expand. And as Lululemon grows, so does the entire industry. A 2015 survey finds that teen girls now prefer yoga pants to jeans. Wilson's vision that women would someday wear the same pants they'd pull on for yoga to run errands or grab coffee has become a reality, and one that appears to be here to stay.

19:06The Gap isn't the only company trying to get in on Lululemon's success. Nike moves aggressively into the women's athleisure space, estimating it can grow women's sales by 40%. And brands like Urban Outfitters and Under Armour quickly follow, all hoping to grab a piece of the booming market Lululemon helped create. At the same time, new brands are starting to challenge the established titans. They're targeting younger customers and are using influencers and social media to reach them. Aloe Yoga, founded in California in 2007, is gaining traction. And in 2015, Vuari launches on the West Coast, with a focus on yoga and wellness.

19:48For now, Aloe and Vuari are relatively small, but they're about to become major disruptors. And just as fresh rivals are emerging, one familiar face is back in the news. In February 2015, two years after Wilson was ousted as chairman, he releases a statement saying he's officially leaving Lululemon's board of directors altogether. But the company's leadership troubles are far from over.

20:25It's February of 2018, three years after Chip Wilson resigned, and there's another storm brewing at Lululemon. The company just announced that CEO Laurent Potovan is resigning, effective immediately. Other board members will cover for him while they look for a replacement. Under Potovan, Lululemon had a record-breaking year in 2017, with a net revenue around$2.6 billion. This exceeded expectations, which is why this morning's news is so shocking. In a statement, the company says that Lululemon expects all employees to exemplify the highest levels of integrity and respect for one another, and Mr.

21:08Padovin fell short of these standards of conduct. Over the coming days, more details come to light. Employees allege Padovin had an inappropriate relationship with one of Lululemon's female designers, and he's accused of perpetrating toxic behavior at the company. Many view Lululemon's refusal to say what happened outright as a confusing misstep, especially since the Me Too movement is gaining steam at this time. Lululemon shares tumble more than 3%, but quickly recover. and now the company will have to work through yet another change in leadership.

21:50It's April 2019 and it's Lululemon's Analyst Day in New York City, a chance for the company to update investors and share plans for the future. It's one of the first big events featuring Lululemon's new CEO, Calvin McDonald. He was appointed in August 2018 after the company went six months without a chief executive. McDonald was formerly the CEO at Sephora, the beauty chain that had more than$8 billion in revenue in 2017. At Analyst Day, McDonald outlines the company's aggressive growth plan for the next five years. Lululemon plans to double men's sales and digital sales and to quadruple international sales.

22:30It also plans to start making its own running shoes. As competition in the women's athleisure space heats up, Lululemon wants to stay at the top. So they're shifting from a yoga pants-centered company to a company that does everything. But they'll have to find a way to differentiate themselves from the other catch-all athletic brands and the trendy newcomers that are dominating social media and pushing their celebrity endorsements. A year after this ambitious plan is laid out, COVID hits and it's like rocket fuel for Lululemon's growth.

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25:48It's May of 2020 and Australian fitness influencer Chloe Ting is adding the finishing touches to the workout videos she just made for her YouTube channel. Hey guys, welcome to the 2020 Summer Shred Challenge. Finally she hits post and watches as likes and comments immediately pour in. Soon this video will have over 70 million views. One commenter posts, Okay, but why is no one talking about how cute Chloe's outfits are? The question garners 10 ,000 likes. Other comments pop up asking, Where's she got her cute leggings? Some viewers even go to the Chloe Ting Reddit to debate where certain outfits come from.

26:33Gymshark? Aloe? Lululemon? Now we've entered the era where the endorsement of one influencer can drive a brand's sales exponentially. And the trend is buoyed by COVID lockdowns with people stuck at home and chronically online. Fitness influencers like Chloe Ting have surged in popularity during COVID. People are working out at home. They're purchasing subscriptions to online classes led by influencers and fitness gurus. And they're also buying outfits to match. Sales of athleisure have skyrocketed. Two months earlier, writer David Mack tweeted, quote, My boyfriend has been wearing sweat so much he started calling normal pants hard pants.