Co-op, A Crunchy Business Model?
Posted by Jon Knoll, VP Sales and Service, Credit Union Resources, Inc on 2/20/2017

Spring fever has set in; I am ready for winter to be done and some consistency in our Texas weather.  Recently, I have been looking to purchase a fishing kayak to help with the fever.  Several friends bought their fishing kayaks last year, and apparently the fish just jump in the boat.  I guess I will try it out.

Buying a kayak these days is tough business.  I was surprised by all of the options, brands, accessories, and the trend of kayak fishing is going through the roof.  It has been a challenging task to buy a kayak, taking a full month to figure out which kind of fishing kayak is the best for my purposes.

Recently, I found myself in the Plano, TX REI outdoor store, hoping they could special order a kayak that did not appear on their website or in their store.  I haven’t set foot in an REI store since, well, I can’t remember.

I guess I did not pay attention to the “signage” before walking in.  It had changed since the last time I was there.   In fact, it had changed in 2014 and 2015 during their major re-branding campaign.  The signage now shows REI CO-OP. 

The Plano store is beautiful, with amazing displays of mountain bikes, shoes, clothing, accessories for hiking, paddling, optics, camping gear, and the list goes on and on.  I also kept seeing signs for “membership” and special “membership offers”.   I finally realized that REI is a CO-OP, an unexpected surprise.  I researched further.  I asked one of the employees about becoming a member.  His face lit up, he became excited, and let me know that for $20 I can become a lifetime member.  I will have special access to outdoor education, trips, and can receive a dividend every year based on how much I spend online or at the store.  He did a great job sharing that many of their profits go back into the outdoor community and conservation.  And just think, all I wanted was a kayak, but I could also save a stream, river, and lake.  Sound familiar?

I decided to look further into their business model, and I felt like I was looking at a credit union, although it is an outdoor store with a mission of helping consumers explore the outdoors.  One of the company’s goals is to create a sustainable operation, which means to them that they will be “green”, and no waste by 2020.  There is more to their sustainable operations goal, here is a link to their “who we are” section of the website:  https://www.rei.com/about-rei.html.  They are not shy about this goal.  They made this a big part of their rebranding strategy.  I can’t recall the number of credit unions I have walked into over the years that have just gone to an optical storage system, and have went through great strides to become paperless.  These efforts were to save money, save space, save the environment, and “save trees” as I have used many times in discussions with credit unions.  A great lesson, we can be sharing our goals and successes about our operations with our membership/future members. 

Since I didn’t recall REI being a CO-OP, I “googled”, when did REI become a CO-OP?  The answer, when they were founded in 1938.  What?  1938?  This store has been around since near the credit union act?  At some point in their history, they dropped CO-OP from their name. (a source said in the 1970s).  Since the rebranding, here are results as posted on their website.  2016 numbers are not available, likely released in March 2017.

  • Membership, grew by 1M in 2015, and ended the year at 6M plus.
  • In 2015, 72% of profits went back to their members, employees, and nonprofit partners
  • In 2015, the co-op had record annual sales revenue of 2.4B, 7% growth in stores, and 23% growth digitally
  • At close of 2015, REI had 143 stores and 12,000 employees
  • Consistently top 100 places to work, Fortune Magazine.
  • Closed on black Friday so that employees and customers can enjoy the outdoors (they actually promote state and national parks events in coordination with state and national park agencies)
  • REI also has a CO-OP line of clothing that has been really popular
  • Began a popular travel and event portal for members, providing outdoor destination trips and education events

Takeaways:

  • Profits and Growth is not the company’s priority
  •  They strive:
    • For the outdoor community
    • Promote outdoor stewardship
    • Believe being a great place to work for their employees
    •  Provide member dividends
    • The REI CO-OP Difference, 100% Satisfaction, Gear and Advice you can Trust, and 10% Member Dividend

A Bloomberg article I read began by stating that the co-op business model is Crunchy, Old School, a Farming Community model, a business model better suited in 1938 than 2017. 

Here is the nicely done Bloomberg article, lots of buried treasure and insight to a co-op and REI's rebranding strategy:  https://www.bloomberg.com/news/articles/2015-03-27/rei-s-crunchy-business-model-is-crushing-retail-competitors

In summary, I didn’t buy the kayak from REI CO-OP, but it will definitely be a place for the paddling/fishing journey I will embark upon.  Isn’t that interesting?  I started the article that I wanted to buy a kayak, now it is a paddling/fishing journey, and REI is a part of it.  The trip to REI CO-OP breathed life into my view of our co-op experience, the credit union movement.  They found success in reinvigorating their co-op business model, and outpace many retailers in the country.  They did this by the philosophy we live for in credit unions:

  • Helping members achieve financial success
  • Helping members achieve financial literacy
  • Giving back to the communities in which we serve
  • And providing a great place to work for our employees.   
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