Lululemon, now a $US55b behemoth, wants you to wear activewear all day

On the face of it, Lululemon is not so different from the company founded by Chip Wilson in Vancouver in 1998. Wilson, an apparel entrepreneur, saw an opportunity to market to cashed-up young women after reading that for the first time, female college graduates would outnumber males in Canada in the late 1990s. He also noticed that yoga was becoming popular, and decided to use his manufacturing nous (he had, at the time, recently sold a snowboarding clothing brand) to make yoga leggings that felt great, could stretch without being damaged and – crucially – look good.

Wilson was onto something. Athleisure wasn’t exactly new – Nike had been making apparel since 1979, after all, and the aerobics boom of the 1980s had given rise to the leotard (sales of which made the then-new Lycra a sensation). In Australia, Lorna Jane Clarkson had opened her first store in Brisbane in 1990 and just a few years later, Princess Diana was stepping out of the Chelsea Harbour Club in bike shorts, making it more normal for women to wear workout gear outside the gym.

Luxury fashion got involved, too: 1997 brought the debut of Prada Sport. Designer Miuccia Prada told The New York Times at the time that: “our idea is to mix technology with normal dressing. You don’t need to disguise yourself as a champion to practise a sport. In the long term, I see formal dressing for special occasions and an increasing number of people wearing sportswear almost all day long.” How prescient that has proven to be.

Wilson made leggings that looked and felt great, aided by the lavish purchase of four $40,000 Japanese flat seam machines, which enabled him to make seamless pieces that sat flush against the skin. Lululemon developed fabrics such as Luon, which it patented in 2005, and is famed for a buttery soft feel. (Others have followed, including Luxtreme, with moisture-wicking properties and four-way stretch, and Silverescent, which claims to reduce sweat odours.)

The company scaled quickly, the first stores in Vancouver and Santa Monica followed by Melbourne (there are now 32 stores in Australia, the fourth-highest number globally). In 2005, it raised money via private equity and was valued at $US225 million. Two years later it went public, listing on the Nasdaq at $US18 a share, swiftly raising
$US327.6 million in the process.

And the world came along with Wilson and Lululemon. By 2018, Bloomberg was reporting that America had become “a nation of yoga pants” – even denim manufacturers like Levi’s were forced to adapt to this stretchy new era by adding Lycra to its jeans.

Wellness became a commodity, sold by celebrities such as Gwyneth Paltrow and Oprah Winfrey (a big Lululemon fan, as it happens, whose unpaid endorsement raised the share price when she named their workout pants one of her “favourite things” in 2010) and co-opted by corporations keen to retain staff with lunchtime yoga classes and healthy kitchen snacks. Lululemon wasn’t behind all of this, but with 670 stores and more than 34,000 employees worldwide, it has certainly pushed the foam roller.

At the heart of Lululemon’s appeal is the carefully calibrated way it vibes with younger generations. To listen to Neuburger talk about the brand is to enter a world that’s not about winning (Adidas’ “impossible is nothing”) or being the best (Nike’s “just do it”). It’s about great products, with no expectation that you have to be great.

“Athletes hold a lot of influence but they’re not always super-relatable,” says Neuburger. “Lululemon is more about taking space for yourself, it’s about persevering, powering through. That resonates with young customers.”

Indeed, Gen Z is a powerful group of “guests”. Lululemon is frequently named one of the top-performing brands for Gen Z (those born in the mid-90s to the early 2000s) and Gen Alpha (those born from 2010), according to research company Piper Sandler. Emily Taylor, former brand strategist at M&C Saatchi, thinks the connection might be an effect of body positivity among this cohort.

“Lululemon lets you show off your midriff,” she says, “and this generation feels good about itself.” Neuburger says it’s more about the brand’s authenticity, a buzzword so synonymous with Gen Z it feels almost lazy to mention it here. No matter, she says: it’s true.

“Customers don’t buy clothing,” says Macquarie Business School marketing professor Jana Bowden. “They buy dreams and aspirations. Lululemon is a global star but it manages to feel small because it’s about wellness, and what I call ‘well-becoming’.” Taylor concurs. “This is a generation for whom wellness is like a language they speak as natives. It is completely natural for Gen Z and younger customers to talk about self-care, mental health days, all of that. That’s why they love Lululemon.” That, she says, “and the leggings”.

Creating a brand identity involves thousands upon thousands of tiny little touchpoints – the models you cast, the windows you merchandise, the way your social team responds to comments on Instagram. Which is why, for a brand that trumpets “feel great about being yourself” as a core virtue, the occasional interventions of its founder are singularly unhelpful.

Even though Wilson resigned as CEO when the company went public in 2007, and left his post as chairman of the board in 2013, his controversies continue to plague the brand. Company culture was scrutinised in 2011 after it was revealed Wilson, an avowed Ayn Rand fan, encouraged employees to attend cult-like self-help conferences. In 2015, a New York Times profile likened him to “the airhead fashion model Ben Stiller plays in Zoolander”.

And even now, in 2024, he continues to be “off brand” for the very brand he created. As recently as January, he told Forbes that “this whole diversity and inclusion thing that they have become” was disappointing to him. The 68-year-old went on to say: “you’ve got to be clear that you don’t want certain customers coming in.” It blew up, making headlines globally. McDonald was forced to address the drama himself in an exclusive interview with Fast Company, saying the company has moved “well beyond” Wilson.

Neuburger, too, is unequivocal about the company’s position, saying that Wilson is “misguided and misinformed in his views”. “Chip hasn’t been part of the organisation in a decade. He hasn’t been CEO for [nearly] 20 years. He might have started the organisation but he has not built the company. If you look at the revenue when he left and what it is today, it’s very different.”

He is a shareholder – in fact, the biggest individual shareholder, with an 8.75 per cent stake – “but anyone can be a shareholder”. “He has no idea what is going on in the organisation,” Neuburger goes on. “And he certainly has no control over it. He holds no seat on the board, he does not make decisions.”

Part of the mystery of Lululemon is how it has managed to skirt dramas like these – in 2021, an employee resigned after it was revealed the company instructed staff to create an “All lives matter” website banner – and still come out on top.

Neuburger thinks it’s because the company doesn’t mind admitting when it has got it wrong. Peloton is a good example. The at-home fitness company entered a sales partnership with Lululemon in 2014, with all Peloton instructors wearing co-branded apparel. But in 2021, Peloton ended the arrangement and began to market its own clothing. Lululemon launched legal action, saying Peloton’s designs and fabrics were too similar to its own; the case was settled in 2022, Peloton agreeing to phase out “certain designs”.

By the following year, the companies were in business once more: Peloton is now the exclusive at-home fitness content provider for Lululemon’s Studio subscribers, and Lululemon will make all Peloton apparel.

“It’s a roller coaster,” concedes Neuburger of the flip-flop approach. She acknowledges that not every business would go back into a partnership following legal action. And to be fair, it seems like a better deal for the struggling Peloton (the share price of which increased after the announcement) than for Lululemon. “Ultimately, we believe that what is best for our guest is best for our business.”

It would be remiss, in a feature on Lululemon, to not talk about the leggings. Everyone I speak to – even seasoned marketing professionals whose job is to understand the brand engineering that goes on behind the scenes of major global companies like Lululemon – says that one thing this company excels at is actually delivering on its products. The leggings are “buttery”. They fit “like a second skin”.

“What we do well,” McDonald tells The Australian Financial Review Magazine, “is meet unmet needs, even in a crowded marketplace.” The design brief begins with what he terms the four Fs: “function, feel, fabric, fit. Fashion really comes last,” he says.

So what’s next for Lululemon? How can it possibly grow even further? The brand has recently launched men’s and women’s footwear, in what McDonald calls “a hotly contested space with a lot of players”. What the company found was that usually women’s athletic shoes are simply smaller version of men’s, without considering other factors that might affect movement, such as shock absorption. “And that was very exciting for us to hear because that is a great opportunity,” he says. “Unmet needs. That’s what we do.”

And of course, a Lululemon shoe can’t be just like any other shoe – dupe shoppers take note! In the company’s headquarters, in Portland, the footwear team has spent four years scanning a million feet, testing the biomechanics of movement and essentially trying to make the comfiest, best-performing shoes on the market.

“The scan takes a 3D picture of the outside of the foot,” says Susan Sokolowski, vice president of footwear innovation. “We look at everything – the girth, length, where the foot flexes, how long the toes are.”

Men and women strike their heels at different points, she says, so absorption is located in different places. Women have more flexible feet and require more flexible shoes. Biomechanics is just the beginning; there’s also a material lab and a testing centre. “I could nerd out forever on the details,” says Sokolowski.

There’s menswear too. It wasn’t until 2014 that Lululemon went into the men’s market. This, too, says Neuburger, is part of the company’s success. “We started with women,” she says, “and men’s apparel came much later. We really focused on those [female] customers, knowing what they wanted.” She notes that a lot of athletic apparel companies do the reverse, trying to capture the lucrative female market after they’ve conquered the men’s.

“I think largely we are still seen as a women’s apparel brand focused on yoga,” she says. “Lots of people would still describe it that way. But we are really committed to adding to that. From North America focused, to global. From women’s, to a brand where everyone can find something they love.”

And though yoga remains a central part of the business, it has expanded and evolved. During the pandemic, it debuted a hybrid work-from-home collection called On the Move, with trousers made from quick-drying, breathable “Warpstreme” fabric. Last year it introduced a Play category, capitalising on the growth of sports like tennis, golf and pickleball.

It’s all part of a broader evolution for the company, which might have made nearly $10 billion out of activewear, but actually sees a bigger opportunity elsewhere. Menswear, footwear, and now, every . . . wear.

People are only in the gym for an hour a day, says Neuburger. “We want to clothe them for the other 23.”

The April issue of AFR Magazine is out on Friday, March 22 inside The Australian Financial Review. Follow AFR Mag on Instagram.