Recreational Equipment Incorporated: SWOT Analysis

Introduction

Recreational Equipment Incorporated, more commonly known as REI, is a consumer cooperative outdoor recreation retail corporation. They sell clothing, travel equipment, sporting goods, and camping gear. REI was founded in Seattle, Washington by Lloyd and Mary Anderson, in 1938. It all started when Lloyd and Mary decided that they needed a better way to purchase gear. At the time they were in pursuit of a new ice axe, and the best price they could find was twenty dollars. Twenty dollars in 1935 was a large sum of money.

To get better prices they started to go to local ski shops, but they still had to rely on middlemen who charged a premium, only to receive an overpriced, imitation good when it was all said and done.

Frustrated by how difficult it was to get an ice axe, Lloyd decided to start ordering quality goods from Austria himself. Mary was able to translate the catalogs because of her skills in German, and they ended up getting goods delivered to Seattle at a small cost of $3.50, including postage. Once word started to spread that they were able to get quality and affordable gear, others wanted to get involved. Lloyd and Mary started to collect money, so they could buy more and end up charging less for everyone. Thus, the co-op was born.

It was official in 1938, when a lawyer friend helped Lloyd, Mary and twenty-one other adventurers legally create the co-op. They each joined with a $1 lifetime membership fee. The gear was sold on one shelf in the local grocery store, and the Anderson’s used their attic for storage. Though a lot has changed, REI has stayed a co-op that is rooted in the people. As they have grown and evolved they have stayed true to the vision Lloyd and Mary shared of putting their members first, and supplying quality goods at a fair price. Eighty years later, REI has 154 stores in 36 states, 17 Million members, and 12,000 employees.

Mission Statement

REI’s mission statement is this: “At REI, we inspire, educate and outfit for a lifetime of outdoor adventure and stewardship.” REI’s mission statement focuses on inspiring, educating, and outfitting. Upon more research, one discovers that this expresses the purpose of the organization very effectively. REI inspires by putting purpose before profits. They engage with the community and encourage members to do the same. Their Stewardship Report shows what they did in the previous year to get more people outside, operate more sustainably, as well as protecting and creating access to outdoor places.

According to the Stewardship Report, REI Co-op invests in the future of the outdoors by giving back nearly 70% of their profits to the outdoor community. Their goal is that as the community grows, they become more able to inspire and connect more people to a life well lived in the outdoors. Some of the highlights posted on the Stewardship Report include, $2.62 billion in co-op sales in the last year, 17 million members, $8.8 million invested in 400+ nonprofits, and $196.3 million distributed in member dividends. In addition, they put importance on inspiring people to come together to make great things happen. The four projects that sought to rally the outdoor community in 2017 included: Product sustainability, Force of Nature, Public lands, and OptOutside.

Product Sustainability are the high standards that were set for every piece of gear and clothing due to the awareness that ever thing they make has an environmental and social footprint. They strive to give make the most sustainable products for the members of REI. According to The Stewardship Report, Force of Nature is the commitment to making the outdoors the world’s largest level playing field by putting women front and center their storytelling, their partnership, and their business. REI claims to have hosted over 2,700 events and experiences, reaching 48,000 women, and investing $1 million in 29 nonprofits dedicated to connecting women to the outdoors. Public Lands was an initiative that led hundreds of outdoor companies to defend the public lands of our nation. According to the report, they also inspired and equipped thousands of their members to share their love of these iconic outdoor places directly with the federal government.

OptOutside is a movement created by REI, that has inspired more then 15 million Americans, and hundreds of companies to go outdoors for Black Friday. REI, along with the other companies they have inspired, close their doors for Black Friday and give their employees a paid day off. They want people to start thinking differently about the holidays and enjoy their families in the great outdoors. Besides all one would learn through their great initiatives, REI also strives to educate through their outdoor school, in-door classes and online classes. They have professional instructors to help educate adventurers of all levels learn new things, as well as ensure a safe experience. Each store also hosts educational classes that help members explore and discover new adventures. Online classes also give helpful tips and tricks for hiking, camping, fishing etc.. as well as helping give one advice on the gear needed for a specific adventure. REI, outfits by offering quality goods and equipment for every type of adventure possible. They strive to sell high-quality outdoor equipment, as well as design and develop gear that combines quality, performance, style, and functionality to meet outdoor recreational needs. REI’s mission statement is very appropriate and effective in representing their company. It goes above and beyond in inspiration, education, outfitting, and stewardship.

SWOT Analysis Strengths

Some significant strengths of REI include that they have over 7 million co-op members, stewardship, the benefits given to employees, and wide product selection. Having 7 million members makes them the largest co-op in the nation. According to REI’s Financial Statement, $196.3 million was distributed in dividends in the year of 2017. This creates a sense of loyalty in the members of the co-op, and so does REI’s emphasis on stewardship. Many of the opportunities and activities discussed in the previous section of the paper, prove how REI has bettered the community and environment. Customers want to support businesses that make a difference and care, and REI is very strong in this area. They believe they have a responsibility to their costumers and to their environment to provide the best products possible and give back in all the ways they can. Another strength is the benefits given to the employees at REI.

FORTUNE magazine has awarded REI with being “One of the Best Companies to Work for in America” for 19 years in a row. One of the benefits they have for employees is Yay Day. Each employee gets two Yay Day’s a year, in with they are paid to be excused from work and go enjoy the outdoors. Other benefits include the employee discount program, challenge grants, training to be qualified in areas of the outdoors, and tuition reimbursement. The last strength to be discussed they large variety of products offered by REI. They supply goods for every sport imaginable, and they also supply every level of outdoorsman, from beginner to expert. REI also has free shipping for all purchases over $50.

Weaknesses

Weaknesses of REI include product selection, global presence, and employee pay and hours. REI has a wide variety of products, but they don’t have a very deep selection. They only carry a certain number of brands, and experts often have very specific tools they desire. Most of the time they end up going elsewhere to purchase outdoor merchandise. Another weakness is that REI doesn’t have a global presence, and this limits the amount of growth in the company. They once tried to open a store in Japan but had to close it 14 months later. The last weakness to be discusses is the employees pay and hours. It is unclear what the majority employee opinion is on this matter, but enough employees have complained about pay for it to be a weakness. Many state that REI spends too much on expansion and philanthropy and not enough on payment of employees. This is a weakness if employees begin to leave to search for other jobs.

Opportunities

REI has the opportunity to personalize customer experience and expand social media presence. Technology is always developing and within business there is a growing opportunity to change customer experiences. Some of these expected changes are to have customer accounts with history preferences, recommendations, and shipment tracking. At this point REI has a great start in their media presence with their #optoutside campaign, but there is still room to get younger generations interested in the outdoors.

If given more effort they could become the leading business in the outdoor social community. They could also push to continue the #optout movement considering it has already made a significant impact in the business and social world. Also, REI does have strong international interest according to their catalog sales. International business can be take place at many different levels. REI has a great opportunity to export goods to other countries at a higher capacity, if they developed websites that accommodated each country. Just because a direct investment didn’t work for REI doesn’t mean they shouldn’t reevaluate other international opportunities.

Threats

Outside threats that can affect REI is online shopping, competitors, low fitness and outdoor interest of younger generations. Online shopping has taken the world by storm and completely changed the business world. It is a threat to all retail business and REI is not an exception.

Consumers are not going to buy something in a store that they can buy for much less online. Also, there is a larger variety online. This is what causes a threat to REI, more options in products and cost. Another obvious threat is competitors. Some examples of outdoor retail stores are Rock Creek, Bass Pro, Cabela’s, Sportsman Warehouse, etc.. Competitors can offer products REI doesn’t have like guns and boats. Also prices of the competitors and more convenient locations of stores can be threats to REI’s business.

A less obvious threat, but still very significant, is low fitness and outdoor interest of younger generations. Even if millennials are interested in the outdoors, they have low interest in name-brand products that are higher in cost. Expensive gear that is offered by REI is a concern because it can be a turn-off to a large portion of available consumers. Younger generations either can’t afford it, or they don’t see why a jacket that is $300 is worth it. Conclusion In light of these observations, REI has a great opportunity to grow their social media presence, expand their retail, and exploit international business opportunities. In order to accomplish these things, REI must capitalize on their strengths, reduce their weakness, take advantage of opportunities, and guard against their threats.

When reviewing Porter’s Generic Strategies, it seems that the most beneficial strategy for REI would be differentiation and focus. Not only do they sell quality goods that are long lasting and efficient, but they also attract a specific group of buyers that care greatly for the environment and community. REI is unique because they give over 70% of the profits back to society in some way. This is what sets them apart and they should continue to spread awareness through a stronger social media platform. People ae more willing to spend money when it is also for a cause and REI needs to keep playing on that strength. 

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