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Outward bound.

REI ventures beyond Seattle base camp in U.S. expansion

By Kimberly Pfaff

REI offers high-end gear for a variety of outdoor activities including kayaking, mountaineering and cycling.

One of its signature elements is a rock-climbing wall.

Known for its interactive features, REI provides an innovative mix of entertainment and education that adds up to a truly unique retail experience. Depending on the store size and location, customers can test all-weather gear in an indoor rain room or compare the warmth factor of parkas in a cold weather chamber (-20 degrees Fahrenheit with the wind-chill factor). There are also backpacking water-filter test stations, stove demonstration areas and footwear test trails. For the truly adventurous, there’s even a travel service offering specialized guided trips for every outdoor interest and skill level.

REI may be oriented to hard-core enthusiasts, but its hands-on approach makes it equally engaging to those whose idea of exercise is a brisk walk through the mall. Who cares if you’ll never really scale Mt. Everest or complete a triathlon? You can still have fun trying some of the gear. And maybe you’ll buy something else in the process.

“I identify REI as one of the hot retail concepts,” said Chris LeTourneur, senior consultant with Thomas Consultants Inc. in Vancouver, B.C. Part of the retailer’s strong appeal, related LeTourneur, is that “it’s immersive and interactive — the ‘try-before-you-buy’ approach to merchandise. Also, there’s an emphasis on learning, from fly-fishing to rock climbing. In the short term, all of that may be an investment by the retailer, but in the long term, the consumer gets caught up in the moment, and they buy.

“REI embraces multichannel marketing,” he added. “Not just bricks and clicks, but also the catalog side. And their buildings are icons unto themselves; they’re flagships. From a distance, when you see that climbing rock, you know it’s REI.”

With its brick-and-mortar business heavily concentrated on the West Coast, the Seattle-based retailer is slowly and selectively extending its reach to other parts of the country. The firm has just opened its 58th store in Missoula, Mont.; plans call for six to 10 more new stores per year to be added over the next five years.

“There are about 28 metropolitan areas we’ve identified at the top of our list,” said Jerry Chevassus, vice president of store development for REI, noting, “We’re leaning more toward the West Coast than the East Coast.”

In fact, while there are two REI stores in Massachusetts, there are none in the other northern New England states. And the firm does not have a retail presence in the deep Southeast, either, venturing only as far as Atlanta.

“Since we’re a consumer cooperative, we use our membership database as our extending arm of marketing research,” explained Chevassus. But REI also employs another, very specialized criteria for site selection: a recreational index, which factors in the potential opportunities for recreational activity in an area. These range from the square miles of open space and national park land to the number of bike paths — even boater registration figures.

“But the key is, what is the potential of a given market?” said Chevassus. Central to the firm’s strategy, he noted, is to open in-fill stores in its existing 58 markets, “to gain on the efficiencies of shipping and receiving.”

This slow, steady approach has worked well. REI’s 1999 sales were $620 million, up from $587 million in 1998. The retailer’s online business recorded 1999 sales of $41 million, an increase of nearly 237% percent over 1998 sales. In April, the firm opened its first international store in Japan.

The company’s demographic remains heavily male — age 25 to 41 — but the female customer base has grown over the last four or five years. “Also growing in almost triple numbers are Generation X and Generation Y,” Chevassus noted. “We’re being very nimble and flexible in offering products for those markets. Scooter sales have been unbelievable.”

As testament to the success of multichannel retailing, REI’s store customers who shopped REI online for the first time spent 22% percent more in the firm’s stores in 1999 than the previous year; 45% of the retailer’s 1999 online customers also shopped either in its stores or by phone or mail.

“They’re one of the most successful retailers in the country at marrying their brick-and-mortar business with their Internet and mail order. One doesn’t cannibalize the other,” noted Rick Meyer, director of investment/development at St. Louis-based Pace Properties, which operates 15 shopping centers throughout southern Illinois and southeast Missouri.

The firm’s Brentwood Town Center in St. Louis, slated to open in summer 2001, will include REI’s first St. Louis-area store, as well as Whole Foods, Circuit City and Borders Books.

“Their real estate program is set up to enhance the business that exists online, and vice versa,” Meyer said. “It’s difficult for a retailer to focus on just one or the other; the tendency is to come in and blitzkrieg a market by opening multiple stores. But REI will come in and look for the premier trade area between a metropolitan area. St. Louis is a market with 2.5 million people, and there aren’t too many retailers that would view that as a one-store market. But REI knows that people will come from long distances to shop there, they know people have heard about them from their catalog and online, and they have a built-in customer base.”

“We make it work together by realizing that REI.com, bricks-and-mortar and mail order are all one umbrella, all one company. We have three ways to shop, and we try to make it as convenient as possible,” said Chevassus.

In fact, the firm’s multichannel marketing has been so successful in building the REI brand, noted LeTourneur, “that developers recognize it as a new generation anchor for new centers, or one that can assist in rehabilitating existing shopping malls.”

In Phoenix, REI bought an outparcel in the Paradise Valley power center, home to Target and CompUSA, and located across the street from a regional mall.

“REI is such a specialty sporting-goods type retailer, they carry many things you can’t get elsewhere, so it brings in shoppers from a long distance, shoppers that we weren’t getting before,” said Mike Treadwell, senior vice president of development for Phoenix-based Westcor Partners, which is currently working with the retailer on additional locations.

The traditional REI store ranges in size from 70,000 square feet to 100,000 square feet; midsize locations average 25,000 square feet. The firm also has four smaller-format stores, ranging from 11,000 square feet to 13,000 square feet, located in markets of 60,000 to 100,000 people.

Wherever possible, REI incorporates its climbing rock into the store design. “That’s a commitment to let people know we’re serious about the hard-goods side of the business,” said Chevassus.

“A lot of our competitors have moved over to emphasize other elements like footwear, but we were started by a climber, and we will always be true to our beginnings.”