How long can REI survive before they go bankrupt?

my friend who works in store and has been laid off for a month is starting to be a customer service person this week remotely.

Just some relevant info to go along with the nature of the post

Robert Hernandez wrote:

I am not bitching and moaning, I understand the situation perfectly, capitalist forces made REI,  now they might be hurting REI, and that makes me laugh. You on the other hand sound quite like a bitxh and your moaning was a rambling emotional outburst with no useful information.  What got your panties in such a bunch? Additionally,  going to Disney land exposes your idiocy much more than rambling sentences with little to no punctuation. 

well maybe rei can close down, then you can open up a new store, just like your parents did. then we'll just wait a few years until another company comes into town and you have to shut down, just like your parents. there are plenty of small shops around, they are still around because they offer something rei does not. your parents didn't seem to get that. 

Is REI still gonna let me return anything within 365 days for a full refund??

Their small business competitors will fail and REI will have 0 competition in a year. I think they'll do just fine.

REI is an Essential, long before going to Beach in Florida is. It is Essential to buy gear when not climbing. Everybody knows that. 

Robert Hernandez wrote:

Yea right you clueless imbecile. Backcountry and others will dominate this market soon and any specialty items will be sold in climbing gyms. REI will continue us to sell women’s clothing because that’s how they make their largest margins.  Getting out of retail in the early 2000’s was the best decision my parents ever made. They sold the building for ten times the purchase price and  now live on a permanent holiday. 

For all of your talk about economics you don’t seem to understand the driving forces very well. Of course, going to Disneyland can have that effect on people. A certain dumbing down effect. 

Didnt you just go from complaining that REI ran your parents out of town, to now praising REI for being there so they could sell their business and retire?

Rich kids are weird.

Yuri Rodea wrote:

Didnt you just go from complaining that REI ran your parents out of town, to now praising REI for being there so they could sell their business and retire?

Rich kids are weird.

YeH really

Robert Hernandez wrote:

Getting out of retail in the early 2000’s was the best decision my parents ever made. They sold the building for ten times the purchase price and  now live on a permanent holiday.

Hey Robert, up stream I asked about your parents store and what they sold and how REI policies affected them. Your initial post did not quite makes to me and my post was probably lost in the noise. Truly interested in the location and what all happened. That said, more often than not buying the retail space is often the best investment for a small business.

Yoga pants will help keep REI in business for sure, the outdoor "look" is also pretty big these days. Soon they will start selling pre-worn looking clothes for those that truly want the outdoorsy dirtbag look.

Robert Hernandez wrote:

 In the 1980's and d1990's many outdoor shops would actually send back defective gear to the manufactures free of charge for the customer. It was the only way we could convince people to buy a NorthFace Jacket in 1990. Customers had never seen performance gear and heard of lifetime warranties at this point, so our assurance in the return process was a success as far as pushing plastic. I remember sending back lots of the original Gortex that delaminated 5 years into the products life.  Companies always honored an actual defect and they still will. But we made it easier to return the product because we did the RO# and paid the shipping. I remember answering dozens of calls from as much as three hours away asking if we would match the REI return policy. We couldn't, obviously, and eventually REI dominated the market.  

Thanks, I sent a lot stuff back to North Face and got new gear. My joke was that every five years I got a new jacket because it delaminated. The best was when I crash on a bike and sent it to NF myself for repair. They said before repairing it they would test the waterproofness, it failed, so they sent me a new jacket. Sounds like your store did what many would expect - be between the customer and the mfg.

Robert Hernandez wrote:

Nope, soft goods always have a higher margin than hard goods, and women buy more soft goods then men. Basic industry knowledge. 

I think both of your statements are true in isolation (soft goods have higher margins; women buy more soft goods). I'm not so confident that that statement is true for the outdoor industry-- eg, I wouldn't be surprised if REI sold more male soft goods than female soft goods. 

On the other hand, outdoor clothing has become general streetwear, so maybe REI's sales look no different that a normal clothing retailer? 

Couple things.... REI is not a public company, so they don't publish any information we can review.  As someone who follows retail analytics for the action sports industry closely it is reasonable to assume:
- softgoods and casual clothing in general make up the vast majority of sales and margins, this is true across all categories globally, and yes women buy a lot more than men
- hard goods have low margins and often small markets but are important to give the store it's 'credibility' among the very important 'core'
- services like repair, events and outings, digital (MP ahem) are both high margin and good marketing
- overall Core hardgood purchases across most categories have been declining as a percentage of sales vs. soft goods, apparel, lifestyle, this has been happening for over a decade.

That is true of pretty much everything in outdoor - bike shops, running shops, skate shops etc

REI made the pivot from specialty retailer to big box store some time ago, they did it smartly and they retained a large segment of the Core buyers as a result.  Their economy of scale and likely strong balance sheet will allow them to survive much better than a small, undercapitalized mom and pop type place.   The really sad part of the pandemic is it will accellerate the retail apocalypse and the winners will almost all be large companies at the expense of the smaller companies.  I agree with the poster above - Gyms will be the point of retail for most basic climbing gear (harnesses, shoes, etc), and REI and Backcountry will dominate the rest.  The independent gear shops will be the big losers.

One way to think about retail, from a consumer's perspective. Look at a store and imagine the floor is blank. You have to pay some $$$/sq. foot in lease, rent. So its import to squeeze as much revenue / sq. foot and gross profit / sq. foot as possible. The idea here is to minimize the sq. footage of low profit or low revenue categories and to maximize the higher profit categories.

With this in mind, gaze out across a typical REI store and take note of the categories of goods and how much space is dedicated to them. You don't even need a computer to understand softgoods get most of REI's space, and certainly most of the coveted center-store locations.

It wouldn't be REI without the perimeter departments like bikes, ski, camping, a small smattering of climbing, etc. but the bulk of the store is given to the merchandising and selling of soft goods. i know its fashionable to bash REI for all sorts of reasons, but if you take the time to google their financial and stewardship reports for 2018 you will see they are not your typical corporation.

REI is fine hahahahah 

Matthew Lee wrote: Couple things.... REI is not a public company, so they don't publish any information we can review.

Actually they do publish year-end financial statements, although Dec 2019 isn't available yet. https://www.rei.com/about-rei/financial-information. But I don't think there's anything there that contradicts your conclusions. As you say, they have a very strong balance sheet - over $500M in cash and short-term securities, no long-term debt (unless you count leases), and almost $1B in members' equity. They have to manage their finances conservatively because they can't raise capital from shareholders.

Matthew Lee wrote: 
- softgoods and casual clothing in general make up the vast majority of sales and margins, this is true across all categories globally, and yes women buy a lot more than men

I always wondered why their advertising was so feminine, compared to say, Big 5 or Dicks. I always thought it was because they were trying to get yuppie women to buy their stuff.  Turns out it's yuppie women who buy their stuff and I'm the coincidental customer.

Isn't that something.

Zach Anatta wrote:

I always wondered why their advertising was so feminine, compared to say, Big 5 or Dicks. I always thought it was because they were trying to get yuppie women to buy their stuff.  Turns out it's yuppie women who buy their stuff and I'm the coincidental customer.

Isn't that something.

I think Big 5, the big draw is a mix of gun sales and youth sports, those categories have a lot of high margin products (i.e. soccer balls, ammo).  Dicks is definitely more of an athletic apparel store that I don't think attracts any real core market.

I think Big 5, the big draw is a mix of gun sales and youth sports, those categories have a lot of high margin products (i.e. soccer balls, ammo).  Dicks is definitely more of an athletic apparel store that I don't think attracts any real core market.

Agree. Big 5 is old school jock sport. Dicks on the other hand is a soulless shopping experience. You walk in there, look around, and then walk out empty handed pondering the abyss.

I went into Dick's a couple of years ago to buy a canister of Jetboil fuel. They asked for an ID. Not only am I clearly old enough (ha ha), but I've never been asked for an ID anywhere else I've bought that. Ludicrous.  Last time I went there!

I've never heard you have to be a certain age to buy fuel. Anyone else hear of that?

Cherokee Nunes wrote: Agree. Big 5 is old school jock sport. Dicks on the other hand is a soulless shopping experience. You walk in there, look around, and then walk out empty handed pondering the abyss.

LOL, I've done this at least three times in the last two years.