Have you ever shopped for outdoor gear at an REI (Recreational Equipment Incorporated) store? If so, you might have been surprised if a salesclerk asked if you were a member. A member? What do you mean a member? You soon realize that REI might not be your typical store. In fact, there’s a lot about REI that makes it different.
REI is a consumer cooperative, or “co-op” for short. To fi gure out what that means, consider this quote from the company’s annual stewardship report:
As a cooperative, the Company is owned by its members. Each member is entitled to one vote in the election of the Company’s Board of Directors. Since January 1, 2008, the nonrefundable, nontransferable, one-time membership fee has been 20 dollars. As of December 31, 2010, there were approximately 10.8 million members.
Voting rights? Now that’s something you don’t get from shopping at Wal-Mart. REI members get other benefi ts as well, including sharing in the company’s profi ts through a dividend at the end of the year, which can be used for purchases at REI stores during the next two years. The more you spend, the bigger your dividend.
Since REI is a co-op, you might also wonder whether management’s incentives might be a little different than at other stores. For example, is management still concerned about making a profi t? The answer is yes, as it ensures the long-term viability of the company. At the same time, REI’s members want the company to be run effi ciently, so that prices remain low. In order for its members to evaluate just how well management is doing, REI publishes an audited annual report, just like publicly traded companies do. So, while profi t maximization might not be the ultimate goal for REI, the accounting and reporting issues are similar to those of a typical corporation.
How well is this business model working for REI? Well, it has consistently been rated as one of the best places to work in the United States by Fortune magazine. It is one of only fi ve companies named each year since the list was created in 1998. Also, REI had sustainable business practices long before social responsibility became popular at other companies. The CEO’s stewardship report states “we reduced the absolute amount of energy we use despite opening four new stores and growing our business; we grew the amount of FSC-certifi ed paper we use to 58.4 percent of our total paper footprint— including our cash register receipt paper; we facilitated 2.2 million volunteer hours and we provided $3.7 million to more than 330 conservation and recreation nonprofi ts.”
So, while REI, like other retailers, closely monitors its fi nancial results, it also strives to succeed in other areas. And, with over 10 million votes at stake, REI’s management knows that it has to deliver..
