Spot the Supply Gap Then Build the Category

“What concepts or inventions could be attributed to you? As a technical designer, there is much that I am proud of having contributed to the world: Triathlete clothing (1979); • Technical apparel vertical retail model (1979); • The “streetnic” movement (1979); • “No smoking” in a retail store (1980); • Reversible shorts (1981); • Long surf shorts (1981); • Dual front chest zippers on jackets to allow for intake-outtake venting and airflow (1989); • Vent zippers on inner thighs in snowboard pants (1990); • Pop-up stores (1991); • Zipper guards at the top of the zipper to solve for neck rashing (1991); • 10 .Gator clips on snowboard pants to solve for powder in boots (1991); • Sleeve thumbholes to solve for sleeves riding up and for warmth (1992); • Chest pockets for cell phones to ensure the wearer could access their phone in two rings (1994); • Free in-store hemming to solve for perfect long pants made for taller girls (1998); • Flat seaming in stretch pants to solve for rashing (1998); • Yoga pant (Groove Pant) featured in the MoMA in 2017 (1998); • Matte look in yoga pants to solve for “lightbulb butt” (1998); • Diamond gusseted crotch in women’s yoga pants to solve for camel toe (1998); • Luon 12 percent Lycra fabric to solve for transparency of women’s tights (1998); • Rip out fabric content labels (1999); Retail stores with half-flush toilets and recycling (2000); • Removal of inner-thigh seams to eliminate rashing in running shorts (2002); • Silver threads sewn into first-layer tops to eliminate bacterial stink (2005); • Mindfulness model for business (2012); • Denser, thinner threads in athletic tights to solve for athletic compression without pilling (2013).”

“The following are a sample of the operating principles (I have over three hundred) that were critical in guiding our rocket ship trajectory. My next book will outline the entire set. Operating Principles Samples OP: Every piece of lululemon clothing must be able to be put through a hot water wash and a hot dryer and continue to look new for five years. WHY? Athletes are busy, and they may want to wear the same clothing the next day. A hot wash and dry is quick and kills all bacteria. As part of our quality guarantee, we promise clothing will not shrink more than 2 percent after being washed hot water and dried in a hot dryer. HISTORY: Before lululemon, people would buy garments one to two sizes too big, so after a wash, the garments would fit. We decided to make clothing that would continue to look exactly the way it did on the day it was purchased five years later. OP: Our store pant and short boxes must carry approximately 60 percent black or black-equivalent pieces at all times. WHY? Our Guests purchase solid black about 80 percent of the time, but we only show 60 percent black in the store boxes, so the Guests see 40 percent of the stock in an item in multiple colours. Most Guests want the perceived freedom to choose a colour, and then buy black. We show enough colour for the customer to have a choice and to make the store vibrant. To keep the black level at 60 percent, the pant wall person needs to be responsible for scanning the pant wall ten times per day and keeping inventory levels perfect. HISTORY: We found that if we didn’t stock 60 percent black, and we didn’t restock throughout the day, we lost sales because we would run out of stock by two o’clock in the afternoon. The entire concept of the boxes is to know exactly what inventory is on the floor in relation to the back room. We may sell 90 percent black, but the Guest wants choice before choosing black. We merchandise to the psyche of the Guests. OP: All invoices are paid in seven days. WHY? With retail stores, the worst thing that can happen to us is not to get delivery of product on time. The first company to pay the factories gets the first delivery, the best seamstresses and tailors, and access to the best technology, all of which is critical to quality-control and innovation. HISTORY: With Westbeach, I never had enough money to pay on time. As a result, I often got delivery last, the least experienced seamstresses and tailors and was the last to be offered innovation. OP: Every dollar a garment is discounted takes $10 off the company’s value. WHY? Guests subconsciously attach more value to full-priced garments and correlate full price to a strong brand. HISTORY: Customers are trained by merchandisers (who are incentivized by short-term bonuses) to wait for sales and these customers psychologically discount the value of the brand. OP: We value our customers’ time as though they are making $100/hour. WHY? We assume our Guests make $100 an hour, and if they are delayed fifteen…”

“Mr. Michele gave inspiration and momentum to the product creation process which took place through four essential phases, tending: 1) to discover the latent needs of the consumer; 2) to transform these needs into product concepts; 3) to concretely realize products capable of satisfying such needs; 4) to finally define new exclusive technologies for large-scale industrial production.”

“"If we imitate the products of the big competitor companies, we will inevitably lose, because they crush us with their strength. They are fighter bombers and we are a small boat. They can wipe us out with a single blow. We must keep our distance. Instead, we must invent new products that they do not have. If we can meet the new needs of consumers, then we have a hope of making it. We must invent a chocolate that kids like. They are known to be fond of it. But this chocolate must also be good for mothers, we have to convince the mothers."”

“At the time, Ctrip’s online bookings were already in the tens of thousands and we were quite familiar with hotel sales across China. Many clients pointed out that Ctrip did not have enough booking options for budget hotels. And, unlike most hotels that seemed to have limitless room supplies, the most popular budget hotel, Xinya Star Hotel, allocated us only a few rooms. The supply-demand situation told us that there was a market gap in budget hotel supply. Our company decided to test the water by investing in budget hotels and appointed me to explore. This later led to the emergence of Home Inns.”

“I struggled for two years then returned to the budget hotel market. I must attribute this change to my friend Wu Jiong. Once he asked me: “How many budget hotel chains can China accommodate in the future?” “At least four or five,” I answered. “Is there anyone else in China who is more familiar with the budget hotel market?” he continued. “I won’t be the only one, but I am definitely one of the people who is familiar with this market,” I replied. So, it was natural for me to return to this market.”