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Lululemon: Turning Lemons Into Lemonade

Chapter 12: Lululemon: Turning Lemons into Lemonade: 12-2 Background Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman (kholloman@grantham.edu) © 2019 Cengage Learning, Cengage Learning

12-2 Background

Lululemon was founded by Denis “Chip” Wilson in 1998 in British Colombia, Canada. Prior

to Lululemon, Wilson had spent two decades in the surf, skate, and snowboard business.

He was looking for a change. After attending the first commercial yoga class offered in

Vancouver, Wilson fell in love with the activity and felt incredible during and after the

exercises. With a passion for technical athletic fabrics, Wilson realized that the current

cotton clothing being used for power yoga was inappropriate and unpractical. Movements

required breathability, flexibility, and a stretchiness that an individual could pour sweat into

during exercise. With this in mind, Wilson created a design studio for his new clothing.

Struggling to pay rent, the design studio became a yoga studio during the night hours. Yoga

instructors who taught at the studio were asked to wear the new products and provided

Wilson with useful insight and feedback on the clothing. In order to name the new company,

Wilson surveyed 100 people and offered a list of 20 brand names as well as 20 logos.

Lululemon is a created word that has neither roots nor meaning. It is believed that Wilson

selected this name because he enjoys the sound of the three Ls when the word is spoken.

The logo, which is actually a stylized letter A, was a logo intended for the brand name

Athletically Hip, which was not selected as the company’s name.

The first store opened in November 2000, in the beach area of Vancouver, British Columbia.

The store was intended to be a community-gathering place for individuals to discuss health

topics like dieting, exercise, and cycling. However, the store was so popular and busy that

satisfying the customer became nearly impossible. The business grew quickly as products

were popular among customers and the staff was eager to learn, expand, and challenge

themselves. While the company initially focused on women as the target market, it has

since expanded with products for men. For instance, its ABC pants, short for anti-ball

crushing and made from sweat-wicking and stretchy material, became a top-selling item.

From the beginning, Lululemon had a strong mission that embraced a healthy and active

lifestyle. Inspired by author and philosopher Ayn Rand, Chip Wilson modeled Lululemon

with the intent that involves “elevating the world from mediocrity to greatness.” The

company adopted the following mission statement: “Creating components for people to live

longer, healthier, fun lives.” Lululemon tries to reflect this in its corporate culture. Store

managers, for instance, are provided with much control over the operations of their stores,

and Lululemon operates with a decentralized corporate culture. Lululemon employees are

recruited and hired based on their level of commitment and how well they fit into the

corporate culture. To bring its mission statement to fruition, Lululemon refers to its

employees as “educators” to acknowledge the crucial role they play in helping customers to

obtain a healthy and active lifestyle.

Lululemon stores today are focused heavily on community involvement and interaction with

local enthusiasts. Nearly all stores host in-house events on a nightly or weekly basis, with

classes ranging from beginner and advanced yoga to goal setting and self-defense

workshops. Events and workshops generally occur after store hours on the salesroom floor

after racks and products have been moved.

Unlike many stores, Lululemon does not offer discounts but sells approximately 95 percent

of its products at full price. It also sells its products at higher prices than its competitors,

reflecting the value of Lululemon’s products. Lululemon operates on the concept of scarcity

to encourage customers to buy immediately. Its store shelves often have fewer products

than the shelves can hold, and many products have quick life cycle times such as six-week

life cycles. Customers are therefore encouraged to purchase the product before it is gone,

which is thought to be a major influence in Lululemon’s success. In fact, even secondhand

clothes for Lululemon sell for large amounts of money. Fans are willing to pay hundreds of

dollars over the original store price to acquire limited-edition Lululemon products on sites

like eBay.

In order to anchor its mission statement, Lululemon has adopted seven core values: quality,

product, integrity, balance, entrepreneurship, fun, and greatness. These values serve to

motivate employees and guide their decisions.

Chapter 12: Lululemon: Turning Lemons into Lemonade: 12-2 Background Book Title: Business Ethics: Ethical Decision Making and Cases Printed By: Kennisha Holloman (kholloman@grantham.edu) © 2019 Cengage Learning, Cengage Learning

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