The REI Ecosystem

The outdoor specialty chain that wrote the playbook on retailer sustainability remains true to its core following while planting the seeds to grow its own consumer base. By Leslie Shiers
etailers focusing on the outdoor category face a lot of different threatsnot only are greenhouse gases and global warming impacting their products main venue, but TV, video games and team sports compete for everyones precious little free time. Nevertheless, the Outdoor Industry Foundation has encouraging reports that 75 percent of all Americans participate in an outdoor recreational sport each year, and footwear retailers claim the outdoor niche has grown into a full-blown lifestyle category, with athletic sales cooling as customers increasingly choose rugged, trail-friendly styles. Yet one outdoor category leader is going beyond the retail transaction and current fashion trends to encourage people to get outside, smartly laying the seeds for its business own future. With 85 stores in 25 states, Recreational Equipment, Inc. (REI)the largest U.S. consumer co-opis gearing up more consumers than ever for hiking, biking, kayaking, climbing, camping and whatever else gets people to play outside. We consider REI to be a gateway to the outdoors, says the Kent, WA-based companys CEO, Sally Jewell. We have a core purposeboiled down from hundreds of employeesto inspire, educate
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theyre using and how they can improve manufacturing techniques to reduce their carbon imprint. While environmental and social responsibility may be a basic part of doing business for any and outfit for a lifetime of outdoor adventure. company these days, REI is helping smaller busiThough the company has grown dramatically since nesses make faster headway by sharing its knowlits founding in 1938, REI has managed to stay true edge. There are lots of small companies who have to its roots by concentrating on the needs of its had wonderful ethics for a long time, states Kevin core customer; providing the best technical and Hagen, REIs corporate social responsibility proinnovative gear on the market; and working to supgram manager. A lot of mom-and-pop shops have port environmental initiatives that will help ensure great consciences. [But] larger organizations are the future of the great outdoorsand that its shopable to bring more of the supply chain on board pers will still have somewhere to use the related more quickly and [can do] deeper homework. products it stocks on its shelves. As REI pays it forward, it also is continually working to improve its own environmental footprint. In 2004, REI was awarded the first Leadership in REI has been at the forefront of companies stepEnergy and Environmental Design (LEED) gold ping up to support environmental causes, improvrating for commercial interiors by the U.S. Green ing its own internal operations as well as extending Building Council for its Portland, OR, store. Starting into its stores communities through grants, volunnext month, it begins renovating its Boulder, CO, teer service projects and educational outreach location, which will result in a prototype of sustainprograms. As an industry leader, Jewell notes, able design and energy efficiency for all REI stores. its very important for us to set Sustainability implemented well a tone, whether it be sustainabilis very much in businesses best ity of our resources, the manageinterest, Hagen says. When SHOPPERS ment of our energy, recycling the those two things align, you products we actually produce really get a powerful combinaSALES and making sure that as we tion for change. Plus, chimes in manufacture around the world, Johnson, taking the issue by the we do so in a way thats environhorns is vital to any companys mentally responsible. longevity. I think that most retailers are now environmentally REI also works to educate its SUSTAINABILITY vendors. Rather than seeking awake, she notes. And if they out vendors that are specifically are not, they are not going to green, says Candyce Johnson, REIs director of survive into the future, because the customer base merchandising management, we try to make sure is getting more educated and they are demanding that our current vendor base understands what that their providers be aware. options are open to them to become more Jim Van Dine, CEO of Alameda, CA-based Ahnu eco-friendly. REI is proud of the strides its manuFootwear, a fledgling outdoor vendor that also facturers are making. Sharon Gauding, product values environmental responsibility, admires REIs manager of mens footwear, says, Weve seen big attitude and how it leads by example. Within the improvements in the way most vendors look at outdoor market, he notes, REI is like the timber their packaging, what types of glues and materials companies that replant three trees for every one

The Greater Good

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they cut down. When REI goes into a market, they dont just try to capture the existing business; they try to plant for future business, he says. They try to grow the category with everything they do. Gauding believes REIs efforts resonate with consumers. Our customers really care and are committed. Their expectation for REI is that were doing something. Hagen adds that REIs co-op members count on its management to work hard on environmental and social issuescauses arguably more important to them than growing the business. By putting these [priorities] in the right order, we can achieve better environmental performance, better human rights performance and better business performanceall at the same time, he says. Theyre not mutually exclusive issues but in fact are mutually reinforcing, if we do it right.

REI salespeople can preach what they practice.

Feet First

While footwear makes up just one segment of REIs sales floor, its an important part of its mix. Says Gauding, Footwear has been a big percentage of what our total REI business is. Johnson adds that shoes are the first thing people seek when trying a new activity. As REI encourages customers to try new outdoor sportswith the help of its expert staff, who often participate in the activities themselves and can provide guidance its shoe sales have grown as well. Today people of all ages seek gear suitable for multiple pursuits. The activities theyre enjoying are becoming less niche and more all-encompassing, Gauding says. REI shelves more than 30 footwear brands, including Keen, Merrell, Chaco and Vasquesome of its top performers in 2006. Mens shoes currently make up the majority of REIs footwear selection, but according to Angela Owen, vice

president of merchandising, vendors additions of womens lasts, more kids styles and genderspecific accessories (like socks specifically proportioned for women) have helped REI significantly increase sales in these segments. REI execs acknowledge that some people may be shopping its stores to achieve an outdoorsy aesthetic rather than to get geared up for actual backwoods fun, but its buyers remain focused on authenticity, and what the product can do to make outdoor activities more comfortable and enjoyable. We know very well that our customers are enjoying that outdoor look not just when taking a trail run, but [also] in an urban environment, Gauding says. Still, the intended end use is what matters. Our customers demand performance, Owen says. We want to make sure they have a great experience in the outdoors. To help, REI offers interactive areas and test trails within each store that allow customers to try before they buy. The company takes care, however, to not alienate the less-hardcore. While the product it offers can stand up to great challenges, Jewell notes that only 10 percent of REI customers are doing extreme sports. More important, she says, is encouraging people to try new things. We dont want the products to feel exclusive or intimidating, the CEO adds.

REI Saves the World

Communicating the importance of environmental responsibility and promoting the outdoors has been a part of REIs culture since its inception. Here are a few of the initiatives it supported in the last year alone.

Providing Carbon-Neutral Travel

$1 Million Given to U.S. Parks

After experiencing a year of record-setting sales, REI announced in February it would donate $1 million to 100 community parks throughout the United States for volunteer programs aimed at preservation. The contribution topped off the $3 million the company had already set aside for outdoor recreation programs and conservation efforts.

REI Adventures, which offers travel packages incorporating climbing, rafting, skiing and other sports, announced a partnership with the Bonneville Environmental Foundation in October that will offset greenhouse gas emissions that result from the air travel and other transportation used during its sponsored trips. In 2007, the company expects to compensate for more than 36,000 tons of carbon dioxidea major contributor to global warmingat no additional cost to program participants. While other companies offer carbon-neutral travel, REI is the first to provide it for free.

Encouraging Families to Hike

Last summer, REI launched a Passport to Adventure program to promote outdoor recreation. We invited parents and their children who had not been hiking before to go on family-friendly, kid-sized hikes, says company spokesman Randy Hurlow. REI employees pinpointed local trails suitable for kids and provided driving directions, hiking tips and trail journals. Nearly 11,000 kids participated in 2006.

Outreach and Education

After a few REI employees filled a backpack with child-friendly lesson plans and activities for volunteers to grab for use in community outreach, it proved so popular that the company incorporated it into its official PEAK program (Promoting Environmental Awareness to Kids). Today each store location keeps a pack on hand, using it to encourage kids to become stewards of the environment at a young age.

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 Hiking has always been REIs core, but its sandal, water shoe, trail-running and multi-sport categories are also increasing in importance. The company seeks out innovative brands and technologies that will benefit the wearer on the trail or river. Gauding says manufacturers close attention to construction and the materials they use have resulted in todays lighter, faster designs, as well as improved breathability and waterproofing. Ultimately, function trumps trends: You could be the coolest brand out there, she notes, but if you dont have the right product for us, than its not the right partnership.

Communication and Collaboration

Although REI is choosy about the footwear it places in its stores, it also works in collaboration with its vendors to help create better product. We listen carefully to their product needs and strive to incorporate their feedback into our product, notes Tim Bartels, vice president of sales for Keen in Portland, OR. They communicate their needs and give us direct product feedback. Theres an open communication there, which sometimes gets lost in other retail channels, says Seth Cobb, product manager of Merrells outdoor category. They understand it behooves them to give us information whats selling, whats trending. Furthermore, Cobb adds, REI listens closely to comments from its staff, from the ground level upa factor that may
REI views kids as the Earths future.

contribute to the companys inclusion on Fortunes 100 Best Companies to Work for in America list every year since the list began in 1998. Some of [Merrells] biggest ideas have come from floor associates they have a voice at REI, Cobb continues. When someone suggested that Merrell use less paper in its packaging, the Rockford, MI-based division of Wolverine World Wide listened and made substantial changes. As a result, Cobb says, Weve moved to more efficient packaging and redesigned our boxes to use recycled materials. REI also has a track record of helping innovative brands get started in the industry, such as Ahnu, which it has provided with a seed investment. But beyond REIs interest in Ahnus unique product, the partnership is a result of gelling philosophiesas part of their contractual agreement, REI will donate any profits from the Ahnu venture to a mutually chosen outdoor charity. As Cobb notes, REI is ready to take a chance to move the category forward. But, more importantly, it is sustaining its own industry. From the top (donating profits to environmental initiatives) on down (REI employees pitching in on volunteer projects, aka sweat equity), REI is promising itselfand its consumersa future outdoors.

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