Still dealing with the impact of the pandemic, REI Co-op has been trying to tweak the content of its stores to better fit the core of its values-based mission to help all people spend more time outdoors. It’s recently broadened its offerings to appeal to a more diverse population by offering more design and sizing options and lower price points, and sales of used items through its REI Re/Supply are exploding.
Overseeing this retail evolution at REI is Chris Speyer, chief merchandising officer and senior vice president. Amid all this change, Speyer is also overseeing the evolution of new technologies into the mix at REI to help the company keep up with Generation Z and the rest of its 23 million members.
NRF contributor Bruce Horovitz spoke with Speyer about the challenges ahead and why REI approaches the holiday season — particularly Black Friday — differently from most retailers.
What technologies are increasingly important to REI?
Personalization continues to be important. If you visit us digitally, it continues to evolve how that is personalized to your interests and tastes. We work with Adobe in that space. For example, you might receive an email from us if you bought a bike or a running shoe from us. What might you want in repair parts? How can we help you to get ready for the next season? Or, perhaps we make a recommendation for when you might want to invest in a new running shoe for best use. When visiting our website, the home page might be personalized to your interests.
What about artificial intelligence?
That’s still a work in progress for us. I don’t know that we are entirely clear on what it will look like for our business. It will play an important role when we think of replenishment systems for our stores or the logic we use to build our assortments.
Where will REI be in five years with technology and AI?
We’re thinking about how we evolve our forecasting and demand planning and how we use machine learning and AI in the future to help with that work. It’s a three- to five-year undertaking that we are just getting started on. While we can’t share the provider we’re using, I can tell you that almost every retailer should be thinking about how to evolve automation.
How did the pandemic change REI?
March 2020 was like a moment with no playbook. We reacted like many other retailers and closed stores and thought about cash preservation.
As an “outdoor” company, was REI impacted differently than many other retailers?
By July of that year, our customers and most humans simply wanted to get outside and do something because sitting inside was difficult for their mental health. So the outdoors became relevant. We saw a massive surge in demand by July 2020.
Could REI meet that demand?
By early 2021, we discovered the supply chain was so badly impacted by shifts in demand that it was gummed up. We needed to adapt. We asked ourselves: How do we become reliably in stock for consumers?
What happened in 2022?
We got to 2022 and started to see that the consumer was starting to spend their disposable income on things like travel and going out to other places like restaurants. So we had too much inventory at the end of 2022.
And what about 2023?
2023 has largely been a story of changing economic and social conditions. It’s been an incredibly volatile year. There’s a lot of inventory to clear. The year has been more promotional as brands look to move through inventory — so do we. We expect that to continue through the fourth quarter and into 2024.
What are the social conditions you referred to?
Well, the George Floyd incident, for example. REI is a values-based company. An extraordinary set of events took place. What evolved for us was asking ourselves: How do we take seriously our own diversity efforts internally and externally, and invite more diversity into our doors and become more accessible? There will be a lasting impact on how that influences everything from our marketing to our merchandising to where we put our stores.
For example?
We got together with Outdoor Afro founder and CEO Rue Mapp and talked about offerings that matched the needs of the community. We worked together on creating a collection with the fit, color and function, and launched product in 2022 and 2023. We took a nonprofit partnership and turned it into a collaboration.
Check out the winter holiday headquarters and learn about consumer spending this holiday season.
Anything else?
Our Trailmade collection. It’s gear and apparel that appeals to a broader community with its broader sizing options and price points that create more accessible options.
Why is REI closed on Black Friday?
Last year we made a commitment to be permanently closed on Black Friday. It started as an assessment we had internally of all our employees working that day. There is always madness around that time of year in retail. We decided to use Black Friday as an example of values at the co-op. Just getting our employees outside and encouraging customers to get outside was in our best interest. That created a movement for us that connected with suppliers, members and employees. It’s one of the most meaningful things we’ve done in our commitment to get people outside.
How has it impacted REI’s bottom line?
We have found that we see a number of other retailers that have since followed suit — and it created an appreciation for the brand.
That probably appeals to Gen Z. What else is REI doing to appeal to Gen Z?
It probably does appeal to Gen Z. We’ve also been doubling down on running and fitness and e-bikes as things you can do from your front door. We’re trying to make it a little more accessible. We also have new color options and price points you wouldn’t have previously found at REI.
What’s an example of a Gen Z-friendly color or price point?
In the past, it was mostly greens, browns and blacks, but now we offer more vibrant colors and prints, too. For the lower price point, we now sell a $99 sleeping bag.
Does selling used stuff at REI mostly appeal to Gen Z?
Gen Z really appreciates it. REI Re/Supply has been the fastest-growing part of our product offering. It also aligns to our values so that future customers can use a product instead of just a single use.
How has your online versus in-store business changed since the pandemic?
Before the pandemic, it was 65% in-store and 35% online. In 2020 and 2021, online represented about 50% of our business. Now it’s about 40%.
What did you sell during the pandemic that you don’t sell much of anymore?
During the pandemic, we got into things like inline skates and inflatable water play items. Also, backyard fire pits and outdoor pizza ovens were popular during the pandemic.
What do you expect to be big sellers over this holiday season?
Our REI brand and the Vuori clothing brand. We’re amazed at the popularity of Vuori joggers (lightweight jogging pants). I’m sitting in a pair of them right now. We are also a great source for kids’ bikes and e-bikes, which should give us surprisingly good business over the holidays.
Can you surprise me with an item that will be big over holiday at REI?
Tiny tents. They are a remarkably funny thing over the holiday season — people even get them for their cats or hamsters. Tiny tents (used by animals) get lots of social media postings and sell for $25 to $40. They go really well with gift cards.
REI has a pledge for net-zero greenhouse gas by 2050: Why?
We’ve been around for 85 years. We have a foundational principle that time outside is fundamental to a life well-lived. We connect every person to the power of the outdoors and try to engage them in the fight to protect it. So we try to be consistent to our values. With climate change, it’s important for REI to take a position of leadership in this space.
REI posted record sales in 2022 — but lost money. Will 2023’s results be the same?
Our expenses went up precipitously. Among other things, we made a commitment in terms of improved wages and health care coverage for every employee in the co-op. It was a $50 million commitment. Also, our inventory costs went up precipitously and as we cleared inventory it had a significant impact on our margins. So 2022 was extraordinary and 2023 has continued to be extraordinary. Retail is still working its way through the last vestiges of the pandemic.
We’ll find out a lot in the fourth quarter. We’ll continue to do what is right in terms of our values. We’re built for the long haul. As a co-op, we can weather these moments.
Why are so many REI products expensive?
We definitely invest in well-made products that will last multiple seasons. We see others sell at lower price points. We are addressing that largely through Re/Supply. We will always err on the side of making products that are of higher quality. And we can find more creative ways to create more accessible price points.
How do you keep the pulse beat of your customers?
We are a co-op, and we have 23 million members — many with whom we keep great connections. Because we’ve grown the number of younger and more diverse members, we have an excellent data source.
What’s your best tip for other retailers?
Think for the long haul. In this moment we find ourselves in, there is an enormous risk when we become focused on the next three months or six months or year. It’s important to continue to look over the horizon.
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