REI's Crunchy Business Model is Crushing Retail Competitors

In this article from Business of Fashion, Bloomberg [2024] dives into REI’s advantages as a co-op and how this consumer-owned business model has proven to be successful, making the company a leading competitor among its retail rivals.

"If Recreational Equipment Inc. were a publicly traded company, it would be the toast of Wall Street. Last year, revenue at the outdoor gear and apparel seller surged 10 percent, to $2.2 billion. Sales at stores open more than a year ticked up 4.2 percent. Of the largest retailers in the U.S., only a handful beat those metrics. L Brands didn’t, nor did Urban Outfitters, Tiffany, Target, Macy’s, or Wal-Mart Stores. Of course, REI shoppers had some extra incentive: They get a chunk of the profits" (Bloomberg, 2024).

"REI is not a traditional company at all; rather, it’s a cooperative. REI’s spoils are split among 5.5 million members, each of whom paid $20 and in return get a 10 percent dividend for life on purchases of full-priced items, among other benefits" (Bloomberg, 2024).

"It's a strange and kind of crunchy way to do business... But in an age of increasingly crafty retail tactics — from dynamic pricing to data mining — co-ops are resonating with weary consumers" (Bloomberg, 2024).

"'The word I would home in on is 'community'', says REI Chief Executive Officer Jerry Stritzke. 'It's inherently local, and it involves trust. You see a trend of companies trying to tap into that, and the truth is, we're really the definition of that'" (Bloomberg, 2024).

"Recently the co-op structure has helped REI become more of a lifestyle brand. With millions of loyal members on its mailing list, the company has started what amounts to a travel agency. Its 'Adventures' are one of the fastest-growing areas of REI’s business, as are its outdoor classes, where novices can learn wilderness medicine or how to paddle a kayak" (Bloomberg, 2024).

"Of course, growth isn’t really the main goal. As a co-op, REI cares just as much about being a good environmental steward, treating employees well, and making sure its current members are happy" (Bloomberg, 2024).

"Shopping these days is a game, an incessant exercise in bartering and brinkmanship driven by data. Consumers frantically mine for the best prices and work to divine when a sale will start or a coupon will hit their in-box. Retailers, meanwhile, spend lavishly to figure out who may be interested in their wares: where they live, what they do for a living, whether they like cat-based Facebook advertising, and how much they’ll be willing to spend" (Bloomberg, 2024).

"All of this us-vs.-them pretext vanishes at a cooperative. REI shoppers know they aren’t getting ripped off (the organization’s net margin is 2 percent). Amazon.com, in comparison, has a similar value proposition; both companies will sell you the latest GoPro for $500. REI members, however, will get $50 of that purchase back at the end of the year" (Bloomberg, 2024).

Review

The aspects of trust and community seem to be an important basis on which the REI Co-op thrives. Not only does the co-op share profits amongst its members and ensures them with quality products, building a foundation of trust and protecting them from retail scams, but also offers classes, demos/tutorials, and guided 'adventures' that keep their most loyal members coming back for more. Members being able to help and learn from one another, along with access to membership-exclusive benefits, promotes a strong sense of community among individuals around the world based on their common interest: outdoor recreation. In the same sense that the co-ops' members share ownership of the company, park-goers share "ownership" of our state parks. It's not just park staff responsible for taking care of them; visitors have a responsibility to protect nature preserves for the sake of keeping ecosystems healthy and ensuring quality outdoor experiences for everyone. How might we use design to foster a sense of mutual ownership visitors have over Ohio state parks?

References

Bloomberg. (2024, July 2). REI’s crunchy business model is crushing retail competitors. The Business of Fashion. https://www.businessoffashion.com/news/retail/reis-crunchy-business-model-crushing-retail-competitors/