How REI has managed to lead with its values and still turn a profit

REI

• In many ways, REI is a unique retailer.
• The outdoor co-op closes on Black Friday, pays dividends to its 18 million member-owners, gives more than 70% of its profits back to the outdoor community, is focusing more on selling used rather than brand-new products, and isn't afraid to get political.
• At a time when other large retailers are losing customers and closing doors, REI is posting record sales without sacrificing its values for profits or vice versa.
• Clearly, its mission resonates with customers. It continues to successfully connect people to the outdoors and do what's right for the environment, all while growing profits, membership, and store openings.

On Black Friday in 2015, while lines wrapped in and out of retailers like Best Buy and Target, REI stores across the country remained curiously dark and quiet. Instead of scooping up deals, REI employees and members were encouraged to "#OptOutside" and spend their day outdoors.

Forgoing one of the biggest shopping days of the year and the opportunity to significantly boost sales was a revolutionary act, but it's less shocking than the news reports would suggest. The member-owned outdoor supply co-op has never shied away from flouting the status quo.

Paradoxically, REI's aggressive commitment to its mission of sparking a lifelong love of the outdoors - sometimes at the risk of losing profits and alienating shoppers - has actually helped it succeed in a tumultuous retail world. In 2018, it posted record sales of $2.78 billion and added more than 1 million new members, bringing its total membership to more than 18 million people. It now has more than 150 stores in the US, with new openings in the pipeline.

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The interior of REI's Seattle flagship store.

In order to keep up this success, REI is balancing a delicate juggling act. Beyond selling outdoor gear, it's leaning into the long-untapped potential of rental and used gear; leading outdoor itineraries around the world through its travel company REI Adventures; figuring out how to operate its business more sustainably; and advocating for the preservation of our planet through multiple stewardship projects. The diverse combination of strategies is clearly working and shows retailers they can truly do it all.

But none of these ventures would be possible today if ice axes weren't so difficult to buy in 1935.

Austrian ice axes, 21 of your closest friends, and a $1 membership fee - or, how to start an outdoors co-op

Lloyd and Mary Anderson loved adventuring outside, but in 1935, the means of obtaining quality gear was less than optimal. The best ice axes came from Austria, but they often had to rely on ski shops that overcharged for Austrian goods or sold sub-par, imitation products.

With the help of Mary's German skills, they decided to skip the middleman and they began ordering ice axes directly from Austria. Once friends starting hearing that the Andersons were getting Austrian ice axes delivered to Seattle for just $3.50, compared to the previous $20, they, of course, wanted in on the savings.

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In 1938, the Andersons and 21 other Seattle-based outdoorspeople officially formed the co-op to increase group buying power and lower the overhead of distributing products. The idea was that affordable, better quality gear meant better quality adventures and memories with their friends. Lifetime membership cost $1.

REI stores now, with their rows of offerings and mock camp set-ups, feel a universe away from the REI of early days, when members shopped a singular shelf of products tucked into a local grocery store and the Anderson's attic served as the storage space. The simple spirit of convenient access to a life lived outdoors, however, has manifested itself in many different ways throughout REI's 81-year-old history.

How REI's membership model works today, and why it resonates so strongly

Sadly, you won't be able to get an REI membership for only $1 anymore, but it's still pretty affordable at $20 for a lifetime of various benefits. If you spend at least $10 a year at REI, you'll get a share of it back (usually 10%) every March. Members also enjoy special pricing on classes, events, rentals, and REI Adventures trips, as well as access to exclusive events.

As a member, you have a direct stake in the future of the company. Each active member has one vote during REI Board elections and can submit an item of business for consideration at the board's annual meeting.

With all these perks, it's no wonder that REI's membership is growing rapidly. More than the financial and stakeholder benefits is the unquantifiable feeling of belonging to a community of like-minded people and a company that is mission-driven rather than profit-driven.

In 2008, REI had 3.7 million members. Ten years later, the number has quintupled and continues to balloon as environmental pressures threaten the very ecosystem that first brought members together.

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REI's steadfast commitment to environmental advocacy proves it's more than your average outdoor gear store

In a recent letter to members, President and CEO Eric Artz said, "My job is to steward the co-op, and the outdoors, on your behalf - and on behalf of the generations who follow us...As a single company, our impact is limited, but as a community, we can drive change that powers meaningful action beyond our walls."

REI accomplishes this task of stewardship while encouraging members to play their part by:

Investing in non-profits that work to create and protect access to the outdoors. In 2018, it contributed $8.4 million (3% of its total sales) in donations and grants to organizations large and small, such as the Appalachian Mountain Club, National Forest Foundation, and Willamette Riverkeeper. Examples of projects that these organizations complete include improving underused urban parks and building new trails. As part of its 2019 #OptOutside campaign, it's asking members to join a nationwide cleanup on Black Friday with partners Leave No Trace and United By Blue.

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Participating in political action. REI also works with partners at the national, state, and local legislative levels to advocate for environmental protection and increased access to the outdoors. Along with other outdoor leaders like Patagonia, it's taking political stances and making its voice heard in ways that could drive away customers - and attract new ones. In 2018, President Donald Trump reduced the size of Bears Ears National Monument in Utah by 85%. After pressuring Utah governor Gary Herbert to change the decision, REI, along with Patagonia and North Face, said it would boycott the annual Outdoor Retailer trade show, a major source of revenue for Salt Lake City.

The company even has a direct connection to the White House. Sally Jewell, CEO of REI from 2005 to 2013, served as the US Secretary of the Interior under former President Barack Obama. Her time in each role shared themes of increasing conservation efforts, access to parks, and renewable energy practices.

Closing the accessibility gap in the outdoors. While outdoor gear brands often wax poetic about an outdoor world that everyone can enjoy, the reality is that women and minorities are still underserved and underrepresented in the outdoors space. Both the audience and employee makeup of outdoor gear companies tend to be homogeneous, but companies like REI are trying to get better and contribute to a slowly diversifying industry.

Women make up 45% of total employees at the company and it has a 90 rating on the Human Rights Campaign's Corporate Equality Index, a national benchmarking tool for LGBTQ+ employees. On the consumer-facing side, REI announced its All In initiative in 2019, which includes supporting national outdoors organizations created for people of color, elevating stories about women in the outdoors and adaptive outdoor life, and investing in research that helps veterans experience the power of the outdoors.

Improving its own operations to manage total energy use, reduce greenhouse gas emissions, and reduce waste. In 2013, REI committed to using 100% renewable energy in its operations. Approaches include using solar technology, running a number of stores with green-power contracts, and installing electric vehicle charging stations in its parking lots. Seven of its facilities are LEED-certified.

REI implemented a goal of achieving zero-waste operations (which it defines as diverting at least 90% of waste from landfills) by 2020, but said it will be unable to meet that goal in every single store. Still, it's working towards reaching this point by the end of 2020, and it also wants to certify its headquarters, all its distribution centers, and at least 10 stores as TRUE Zero Waste facilities by the end of 2021.

Connie Chen/Business Insider

The San Francisco warehouse where REI prepares its Used Gear products.

Expanding its rentals and used gear businesses. Rather than focus on the sales of new products, REI is doubling down on rentals and used gear as part of its participation in the circular economy, which reduces waste and excess by recirculating products and materials. While the company prides itself on using sustainable materials and practices to make its own REI Co-op branded gear and setting product sustainability standards for all brand partners that it sells, it also wants to maximize the life of already used gear. Its newly launched Used Gear website is the online iteration of its highly popular Garage Sales, and it offers both in-house and outsourced repairs and maintenance for your gear and apparel.

There are even more parts to REI that you might not know about.

It currently funds research at the University of Washington studying links between human health and time spent outdoors. It offers free resources like trail mapping, a campsite directory, and expert advice on all outdoor recreation. It has an online forum where members can discuss everything from "What makes a hike spectacular?" to favorite pieces of backpacking gear. And it produces short films that tell the diverse stories of outdoors lovers.

All told, REI is a retailer to watch right now

Any seasoned hiker will tell you to stick to the trail when you're exploring the unknown, but for REI, it's stepping off the well-worn path that has helped differentiate it from the pack and made it a prime case study for the possibilities of a values-driven business. If you care about the outdoors in any capacity, REI is the place to shop - not just for its quality product selection but also for its impassioned engagement with outdoor life outside its stores.

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