Cover Story : REI Treks Ahead

The 71-year-old story of Kent, Wash.-based Recreational Equipment Inc. (REI), which sells camping and hiking equipment through catalogs, stores and the Web to customers who have the option to join its co-op, has taken a deliberate turn into the modern age.

Although the company has and will continue to mail print catalogs while operating its 104 stores and extensive Web business, like many companies rooted in catalogs, REI has spent the past few years changing its thinking about just what kind of company it is.

“If we’re going to survive, we need to realize that we’re not in the ‘catalog’ business; we’re in the ‘selling stuff’ business,” said Mike Bowcut, REI’s director of direct marketing and analytics, during a presentation he gave at the Spring NEMOA Conference in Boston (some details of which were incorporated into this story).

To get a better idea of how its customers shop, which channels they choose and how to market to them in the most effective, integrated way possible, REI is looking well beyond matchbacks. For more than 18 months, REI has undergone a thorough analysis of customer activity to gain a better understanding of how, when and how often to mail catalogs or send e-mail promotions.

Beyond Matchbacks
“Direct mail is perfectly suited for measurement,” according to Bowcut, “because we don’t have to guess at the value that catalog brings us. We don’t rely on matchback analysis.”

At the same time, REI’s unique co-op format remains intact. Although nonmembers always have been able to make purchases through REI catalogs, stores and its Web site, co-op members pay a one-time $20 fee. In return, they receive annual dividends of, typically, 10 percent of their eligible REI purchases from the past year.

Needless to say, the co-op memberships help drive incremental sales. REI paid out $105 million to members last year, and “a lot of those dividends come back to us,” Bowcut says, in the form of new product purchases.

Still, REI has gone to great lengths to determine who its best customers are, in frequency and monetary value, and in which channels they prefer to shop. The company got to this point because of two growing trends: the rising cost of printing and mailing catalogs, and the mounting environmental movement.

“We’re sensitive to the amount of paper we use in our catalogs,” Bowcut says. He notes REI learned that if it were to stack all the catalogs it printed last year, “we’d produce 17 Mount Rainiers. So we questioned that.” At the same time, he says consumers are “used to being in charge” now, “which places pressure on how we use catalogs.”