REI – the Outdoor Customer’s Company
“We inspire, educate, and outfit for a lifetime of adventure and stewardship” – REI Employee
Founded in 1938, REI’s first item was an imported ice axe from Austria because the axe the co-founder, Lloyd Anderson, had bought in Seattle, WA broke the first time he used it. While the outdoors is an exciting and beautiful place, it can be dangerous with unreliable equipment protecting you: REI sets out to provide high quality gear through a partnership with its members, building a loyal community of outdoor enthusiasts.
The Co-op Model
From a customer value perspective, the co-op model is a win-win. After a one time membership fee of $20, a member is rewarded with a 10 percent dividend for life on purchases of full-priced items along with other benefits. With the membership, a customer becomes a partial owner of the REI Co-op. As stated by Former CEO Dennis Madsen, “[…] when customers are owners, their interest is not solely about earnings. They’re interested in seeing good products and prices at their stores.” Members and other customers want to ensure what they are purchasing is high quality which is possible through the profit sharing of the co-op model. The annual dividend ritual builds trust within the REI consumer community because of the level of influence members have within the organization.
The benefit does not stop at the members and customers. Having a co-op model brings value to the company because decisions can be made without the fear of the quarterly earnings review. While the company does need to be profitable, the leadership of REI is able to stay focused on its targets of excellent quality and service for the long term instead of focusing on short term wins.
Products
REI provides a wide selection of high quality gear ranging from highly technical equipment for climbing to the causal user’s yoga mat. Within a store, a customer can find a variety of brands for the different items, including REI’s own label. The high quality expectations for all products sold in the store are reinforced through the 100% satisfaction guarantee. If an item doesn’t meet a customer’s high standards, it can be returned for a refund or replacement, even after having used the item (i.e. return sleeping bag after taking it camping). While this seems risky for the company, it build a loyal customer base that continues to come back because the company is putting the customer first.
To further put the customer first and ensure they are making the most of the outdoors, REI offers classes in a variety of activities and skill sets to better prepare its customers for their various adventures. These classes are offered at REI’s Outdoor School, in-store, as well as online. Along with the classes, REI organizes adventures through a portion of its stores, to help the community explore the outdoors in ways they might not have otherwise. These opportunities build the REI community, building loyalty to the organization and transforming REI into a lifestyle brand.
Walking the Walk
A company can provide all the right products and services, but without believing in its mission at its core, it will not thrive. REI is in love with the outdoors and wants to introduce as many people as possible to it. At every level of the company, employees are enthusiastic about the outdoors. Having the staff of the various locations actually using the products sold brings another layer of value to the company and the customer because they have a level of product understanding and insight that goes beyond a technical product summary. Another act of REI’s belief in the outdoors was their “canceling” of Black Friday shopping and saying “Go Outside!”
As the company has grown, it has a larger impact on the environment it values so much merely due to the increase in operations. Sustainability is a core concern of the company as it continues to grow because outdoor gear is not worth much if there is little wilderness to explore.
Conclusion
REI has been able, for the past 75+ years, to bring its love of all things outdoors to the customer by engaging them through products and beyond. Backed up by its operating model, the company’s mission continues to bring value to the customer and to REI.
Sources:
http://www.bloomberg.com/news/articles/2015-03-27/rei-s-crunchy-business-model-is-crushing-retail-competitors
http://www.rei.com/about-rei/business.html
http://rei.jobs/careers/MicroSiteStory
https://en.wikipedia.org/wiki/REI
https://hbr.org/2003/05/gearing-up-at-rei
One of the reasons I paid the membership fee to become a partial owner of the REI Co-op is their superior customer service. They truly believe in keeping their customers for life through quality products and great customer service, and I don’t shop anywhere else for outdoors equipment. Last month I exchanged some hiking shoes that didn’t fit right even after wearing them for multiple hikes; REI just wanted me to have the most comfortable shoes I could! By having the right policies in place, REI does a great job matching their operating model to their business model.
Thanks for sharing, Lauren! It was great to get a better understanding of how the REI we know and love has evolved over the past 75+ years.
One thing that I hadn’t thought about until reading your post is the way that REI interacts with a broad range of consumers to make everyone feel welcome in the store, whether its an ultra-marathoner or someone whose never ridden a bike before. What struck me in watching the youtube clip was that this variety of outdoor experience also seems to exist in their employees. I noticed that they all were in very different places on their “outdoor journeys” when hired to the company— for example, some had never hiked before joining REI while others appeared to be adamant outdoor enthusiasts. I wonder if this helps them to empathize with customers who are going through the process of finding outdoor gear they love for the first time.
I thought that REI’s move to close during Black Friday was also interesting, and brilliantly executed. It was amazing to see the flurry of social media around #optoutside and to watch other companies like Outdoor Research follow suit. Clearly, REI is a pioneer in this space!