Amid the latest nationwide COVID-19 surge, REI Co-op EVP and chief customer officer Ben Steele spoke with FN by video conference from his Seattle-area home. That’s become a everyday occurrence in the pandemic, but it’s also a hallmark of REI’s new distributed work strategy, which the company adopted after selling its brand-new Washington headquarters in September 2020.
With the sale, REI team members now have the freedom to work from home or from a satellite location (health and safety permitting). “There are days where I can get a lot done sitting in my basement connecting with folks through technology because it’s efficient,” said Steele, who has been intimately involved in the REI consumer experience for nearly a decade. “Other days I’ll be in one of our satellite offices with our CEO and CFO doing strategy work because of the collaborative nature of the meeting. Flexibility is the best option, and we’re learning what the best suite of solutions for us looks like.”
Despite not being in one centralized location, the co-op has been as productive as ever during the COVID era.
On the product front, in 2021 the company launched a size-inclusive initiative offering apparel up to size 20 (with a goal to be in all stores by early 2022), its partnership with Athleta grew to 130 stores and the retail debuted the Co-op Studios content arm.
Meanwhile, last year, REI added to its fleet of stores, opening its first doors in Maine and Wyoming and introducing more locations in California, Pennsylvania, Florida and elsewhere. It also debuted its first small-format neighborhood store to Cambridge, Mass.
For 2022, REI will continue to expand with stores slated to open in Colorado, Georgia and Florida, among other locations.
“We all want a healthy and thriving industry, and a healthy REI is not only important to our employees, our members and the brands we carry. A healthy REI is important to many organizations in the broader outdoor community at the local and national levels. We take this broad responsibility very seriously,” Eric Artz, president and CEO of REI, told FN.
For many years, REI has been the most- dominant force in the outdoor retail space, but in 2021, the company faced increased competition. Dick’s Sporting Goods, for instance, launched its Public Lands banner in September, and e-tailer Backcountry opened two physical stores and launched its community-focused Breaking Trail Program in April.
“Clearly, the outdoor space right now is trendy,” said Matt Powell, senior industry adviser for sports at The NPD Group Inc. “Visits to parks are way up, people feel safer outdoors and we certainly have seen a surge in outdoor product at retail. Because of that, it’s going to garner more competition.” But, he added, “REI is not Public Lands; it is not Backcountry. They’re all different in their own ways. REI will take this competition and use it to make themselves better.”
Artz also believes the increased competition is a testament to the profound moment the outdoors is having.
“If there is a silver lining from COVID, it has caused us all to reconsider what matters most, in life and in our work. The great news for our industry is time outside matters to a lot of people and participation rates in our
core industry activities are at historical highs,” Artz told FN. “A larger pie, changing consumer behaviors and what is sure to be an accelerated innovation cycle creates tremendous opportunity for our industry.”
Below, Steele shares how the COVID-era decisions of REI will impact and direct its future, and reveals the initiatives that will best tell the story of the co-op in 2022.
REI SOLD ITS HEADQUARTERS BEFORE THE EMPLOYEES SPENT A DAY INSIDE. WHAT LED TO THAT DECISION?
BEN STEELE: “As a national retailer, we’ve been operating in a dispersed way for a long time. A campus felt like something nice to have, but not a must-have. A must-have was how do we put more of the assets toward realizing the aspirations of the co-op and being able to flow those dollars to our employees, to our members in terms of a member reward and investing in the business. The decision was also informed by several months of proving we could get a lot done working [away from one office] and wanted to prioritize flexibility against an uncertain future. A year and a half later, the fact that we’re still in the midst of this pandemic, flexibility was a good strategy.”
WHAT HAS THE REACTION BEEN INTERNALLY TO THE DISTRIBUTED WORK MODEL?
BS: “We’ve consistently heard they like the flexibility. Conditions that are extreme on either end aren’t ideal — having to be in the same place every day or never being able to [be in the same place]. We will try to find the sweet spot. One of the things we’re cognizant of, and trying to solve for, is how do you create the right culture and connection when people aren’t together every day? It’s been positive, but it’s not perfect, and we’re still learning and figuring out when we need to come together.”
HOW HAS THE FLEXIBLE MODEL IMPACTED YOUR CORPORATE CULTURE?
BS: “It is forcing us to examine what culture means. It is important to think about the moments that reflect culture: big gatherings, recognitions, something as big as our [peer-based employee recognition program] Anderson Award event or something as small as a happy hour or going for a hike. Also, the outdoor history tends to be insular, and it can be clubby. ‘Hey, let’s get together to talk about the extreme outdoor adventure we have this weekend.’ That’s really cool if that’s what we all do, but if I don’t do that, I don’t feel welcome. Part of what this has enabled us to do is broaden the definition of culture. We spent decades in offices so we’re relatively new to the hybrid and flex model, but making sure we keep people feeling connected and a part of something, that’s the thing we watch most closely to make sure we’re not losing our way.”
WHAT IS REI’S BRICK-AND-MORTAR STRATEGY HEADING INTO 2022?
BS: “We believe physical stores in different varieties — including the small footprint format we have in Massachusetts, which is a very different than a typical REI — are a huge part of our future. That said, the wall between digital and physical needs to go away. What COVID has shown us is people want the ability to move seamlessly between all aspects of the omni experience. I want to go on your website, see what you’ve got and decide how I want to get it. Physical is important, but it’s only half of a tightly integrated equation. What the customer wants is to have their needs served. Retailers have made that hard in the past. We’ve got to get the friction out of the system and make sure we’re enabling customers’ desire.”
MORE RETAILERS ARE GROWING IN THE OUTDOOR CATEGORY. HOW DOES REI VIEW THE INCREASED COMPETITION?
BS: “We take it seriously, always. We were having a lot of conversations about Amazon in the past, we had a lot of conversations about Walmart. But our biggest competitor is the customer and [their phone], by which I mean unless we’re taking the friction out of the system, unless it’s easier for the customer to get what they need from REI, unless REI is adding benefits, we’re losing. That’s not about Dick’s, Backcountry, Huckberry or the DTC brands that through Shopify now have powerful digital platforms. We have to provide a benefit by bringing together all the goodness of the co-op, and if we’re not, then we’re not competitive. It’s an ever-faster moving race, and as more people come into the mix, you’ve got to raise your game.
WHAT SEPARATES REI FROM THE COMPETITION?
BS: “The co-op was created to help people get gear and apparel they couldn’t get. That’s not the primary problem for the customer today. If you want something, it can be at your house in two hours. The co-op has to be about more than that. That could be 70 cents of every dollar spent going back to the outdoors or ‘I love my dividend’ or ‘There’s a bunch of new innovation inside of membership.’ You have to have a mix of those things for the customer you have — and the customer you want.”
WHERE DO YOU SEE THE GREATEST OPPORTUNITIES FOR THE OUTDOOR INDUSTRY?
BS: “We’ve been blown away with the increased participation in the outdoors, and every company needs to think hard about accelerating your innovation and understanding the customer’s needs. You can go out on a trail and see a lot of people who are having a good time hiking without specialized gear. You can either say, ‘That’s a problem, I need to get those people in a high boot and a backpack,’ or you can say, ‘What do I need to learn?’ Because they seem to have this figured out and are enjoying the outdoors. So do I need to change what I offer to help them enjoy the outdoors?”
HOW ARE YOU NAVIGATING PRICING AMID INCREASED INFLATION?
BS: “Every brand is approaching this differently. We’re meeting with our partner brands to understand how they’re thinking about it. There are impacts that hit companies in different categories differently, so we’re trying to understand what the cumulative approach of our partners looks like. At the same time, we’re spending a lot of time trying to understand transitory inflation. We’ve been talking about it for a while now, and we’re trying to figure out what does that means for our price points.”
REI HAS TAKEN A FIRM STANCE ON BEING ANTI-RACIST AND FULLY INCLUSIVE. WHAT MESSAGE DOES THIS SEND TO CONSUMERS?
BS: “Our hope is that it sends two messages: One, there’s no place for exclusion in this community. It’s a place that is about coming together and being welcome. Equally, it sends a message to folks who haven’t always felt welcome or safe in the outdoors that this is a place for them, this is a community that welcomes them.”
REI PUBLICLY APPLAUDS POLITICAL WINS WHEN THE OUTDOORS BENEFIT. WITH TODAY’S POLITICAL DIVIDE, WHY IS IT IMPORTANT TO TAKE A STAND?
BS: “We talk a lot about the idea of cooperative action, and that manifests in different ways. Cooperative action could be taking a stand when we see a place that’s threatened, or celebrating when we see something like the Great American Outdoors Act. It could be the Cooperative Action Fund, which is how my dollars contribute to protecting places that I care about. If you’re not willing to stand up for your values, then they’re not really your values. That doesn’t mean you need to seek out fights. It also doesn’t mean you need to lower yourself to a fight. We’re not going to have a conversation around climate change as a political issue because it’s not a political issue. It’s a scientific issue. Similarly, when we talk about being an anti-racist organization, systemic racism is a part of this country’s history. That’s not a debate. It’s a fact. We’re interested in having the difficult conversations about how we have failed each other and can do better for each other.”
WHAT WILL BE THE STORY OF 2022 FOR REI?
BS: “We are committed to membership as the center of value and innovation for the co-op, and the story will be the way in which membership has gone from a part of the co-op experience to the center of it. For 2022, it will be the rebirth of the membership and what it means to be a member.”