REI Looks to Keep Soul and Build Profits
By George Anderson
When Recreational Equipment Inc. (REI) was begun as a co-op n 1938 by some friends in Seattle who enjoyed mountain-climbing, it was never intended to be a retail juggernaut.
Move ahead to 2005 and REI is not only a force in the outside recreation business ($1 billion in sales last year), but many credit it with having virtually created the $18 billion market.
While REI continues to enjoy success and grow, the company has sought to be true to the ideals of its founders: showing respect for nature, its customers, employees and vendors.
It has also tried (some suggest unsuccessfully) to go into areas without hurting smaller independents that serve the same market.
Sally Jewell, CEO at REI, told The Associated Press, “When REI goes into a community, more people play outside. We’re not looking to take business from the little guy. When we go into a market, we’re looking to make that market bigger.”
The real enemy for REI and other retailers in this space, said Ms. Jewell, is the couch. Getting people off of it and outside exercising is the goal and while many are engaging in a variety of outdoor activities, there are many more laying about watching television, playing video games and other even less taxing pursuits, such as napping.
Some today question whether REI can still lay claim to being a co-op.
Michael Hodgson, co-owner of the outdoor retail trade journal Specialty News, told AP, “I would argue vehemently that it’s not a co-op.”
Mr. Hodgson says the limited participation by members in how the company is run and the day-to-day workings of management suggest REI is a corporation and not a co-op.
REI’s Jewell disagreed. “Others may assume you have to be small and a poorly run business to be a co-op. People vote with their dollars.”
To become an REI member, consumers pay a one-time $15 fee. The membership fee entitles them to an annual dividend matching 10 percent of their purchases at the company’s stores or web site. The company currently has 2.8 million members and it paid out more than $50 million in dividends last year.
A few vendors have expressed concern about the influence that REI has in the marketplace.
Fred Hugelmeyer, president of the Outdoor Industry Association, dismissed that view. He said, for example, REI has worked with its vendors to avoid them having to use cheap sweatshop labor to meet the co-op’s needs.
“With their size comes great responsibility. They take that very seriously,” he said.
Moderator’s Comment: Is it possible for companies to maintain their ideals and become hugely successful at the same time? Does having clearly communicated
corporate values (internally and externally) increase, decrease or have little to no impact on a retailer’s bottom line performance? –
George Anderson – Moderator
- REI is king of a very big mountain But the company’s founding vision may not
mesh with the bottom line – The Associated Press/Contra Costa Times (free reg. required)