SEATTLE – In 40 years, REI has gone from about $700,000 in sales to almost $900 million by focusing on the customers, not the business, the outdoor retailer’s chief executive said.
“It isn’t about wealth creation,” REI’s Dennis Madsen said. “It’s about providing a product and a service. That’s what our owners expect.”
Madsen, the CEO of America’s largest consumer cooperative, spoke at the University of Washington Business School on Wednesday.
REI was started in 1938 by Lloyd and Mary Anderson, mountaineers who wanted to import high-quality climbing equipment from Europe. Lloyd Anderson had attended the University of Washington in the 1930s, Madsen said, and he was greatly influenced by the socialist ideas en vogue at the time.
As a result, the enterprise he started was organized as a cooperative, Madsen said.
In the decades since, REI has changed and grown. “We’re not that same little co-op some of you may remember up on Capital Hill in the ’60s,” Madsen said.
But REI has “stayed true to Lloyd and Mary’s vision,” he said.
It’s been challenging to hang onto that as the co-op has grown, Madsen said. REI now has 76 stores in 24 states.
“How do you get big and stay small at the same time?” Madsen asked. “If there was one thing that kept me up at night, that was it.”
The solution – “be absolutely uncompromising in who you hire,” he said. The people at REI must share the organization’s core values.
REI has been profitable in 65 of its 66 years, Madsen said. REI has grown and evolved and become the industry leader among outdoor equipment suppliers. “We’re always re-inventing ourselves,” he said. “We’re only as good as what we’re doing this season.”
Part of that success is attributed to the explosion in outdoor recreation’s popularity, Madsen said.
But REI hasn’t exactly cashed in on the boom, he said.
The co-op is “not about profit or earnings per share, the traditional business school topics,” Madsen said.
“We’re not a wealth-creation entity,” he said. “We don’t have stock. We have owners that are customers.”
He criticized companies that focus too heavily on keeping their shareholders happy.
“It isn’t just the stockholder,” Madsen said. “Equity providers are important, but … where is it written that equity providers deserve to get more than their fair share?”
Customers, suppliers and employees are just as important as the shareholders, Madsen said.
In surveys, REI customers say they shop there because the stores have knowledgeable and helpful sales staff, Madsen said. But they also like REI’s community involvement, he said.
That shows the importance of looking beyond the bottom line, he said. REI contributes $2 million a year to volunteer groups and has a set of employment practices that routinely puts it on “Best Companies to Work For” lists.
“We’re about something more than top line and bottom line,” Madsen said. “We’re about community.”
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
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