Case Study: A Conscious Capitalist Approach to People, Planet, and Profit
Background
Recreational Equipment, Inc. known as REI, is an American retail and outdoor recreation services corporation. With annual revenue $2.4 billion, REI operates 143 retail stores in 36 states and considered as one of the most powerful forces in outdoor retailing, with over $2 billion in sales in 2014. The company is organized as a consumers’ co-operative—owned and managed by consumers with roughly 5.5 million members who pay a one-time fee for a share of the business and contribute 80 percent of its sales. Jerry Stritzke, REI President and CEO, explains the co-op business model:
Our co-op model allows us to support that passion and to think “beyond profit.” The co-op is passed from one generation of stewards to the next. Each generation is connected by a deep love of being in places full of life and wonder. That’s what it means to steward the oldest and largest outdoor co-op. We are working across generations for the outdoors because it helps us live our lives to the fullest.
Beginning in 2014, with the introduction of the REI Co-Op line of clothing, REI has publicly re-emphasized the cooperative aspect of its business model. In October 2015, the company launched a redesigned logo, which includes the word "co-op" for the first time since 1983.
The core purpose of REI guides the organization: “we all work to inspire, educate and outfit for a lifetime of outdoor adventure and stewardship.” REI supports conservation efforts nationwide and sends teams of volunteers, including members, customers and REI employees, to build trails, clean up beaches, restore local habitants.
REI has been ranked in Fortune magazine’s list of the “100 Best Companies to Work For” in the United States every year since the rankings began in 1998 and earned a place in the Fortune “Hall of Fame.” REI employs more than12,000 people and all employees have access to health care benefits.
Employees receive discounts on merchandise, may be eligible for free or discounted outdoor classes, and also receive a "Yay day" pass, entitling them to spend up to six hours outdoors for pay.
“At REI, we inspire, educate and outfit for a lifetime of outdoor adventure and stewardship.” -Jerry Stritzke
Jerry Stritzke highlights the correlation between conscious practices and profit: “When REI is doing well, we can do more for the outdoor community. As REI grows profitably, we can invest more in our people, in our members and in our nonprofit partners.”
On Black Friday 2015, REI closed all of its stores, halted the processing of orders on its website, and gave all employees a paid day off. Although Black Friday has been one of REI's top 10 days for annual sales, the company abstained from Black Friday and launched an #OptOutside marketing campaign, urging people to spend their time outside. REI is the first major retailer to forgo operations on Black Friday.
The Case: REI’s #OptOutside Campaign
Issue & Course of Action
In October, 2015, REI announced that it would close 143 stores, halt its website operations, and give each of its 12,000 employees a paid day off on Black Friday. REI aimed to start a new Black Friday tradition, encouraging people to forgo shopping to spend time outside instead. With the hashtag #OptOutside, REI also asked people to share what they were doing on Black Friday on social media. The company has built a dedicated #OptOutside website with resources on local hiking trails. Furthermore, REI encouraged other companies to join them in what they describe as a stand against the commercial madness that is characterized the day after Thanksgiving for at least a decade and a half.
For REI, Black Friday has consistently been a top 10 sales day. Stritzke acknowledged the business is taking a risk by closing, but he was more concerned with the message the company sends to consumers:
The thing that is powerful to me is this clearly is not a financially self-serving act. It's an act where we're really making a very clear statement about a set of values.
As such, according to CEO Jerry Stritzke, this new move aligns with REI's mission that "being outside makes our lives better.”
Taking such a stand is a bold step toward making REI visibly authentic as well. REI reported that 1 million Americans have participated in “opt outside” activities on Black Friday, many of them pledging to attend some of the 300 outdoor events listed as part of the campaign.
Furthermore, the #OptOutside campaign generated publicity and nationwide media coverage. USA Today praised the company for its bold step: “REI is taking direct aim at the frenzied consumerism that dominates the holidays with a message to do the exact opposite of what Black Friday demands. Forbes announced the news with the headline: “REI Shocks Retail World By Closing For Black Friday, Paying 12,000 Employees to Opt Outside” and noted that the company challenged “the shopping frenzy of, as their CEO puts it, ‘fighting it out in the aisle’.”
The next year in 2016, REI expanded the scale of the #OptOutside campaign and turned it into a well-developed movement. The company closed all 149 of its stores on Black Friday, processed no online sales and paid all 12,287 employees to take the day off and spend time outside instead. This time, more than 1.4 million people and 170 organizations joined the movement. The company explained the evolution in its blog Co-Op Journal:
Last year we started a movement for people to reconnect outdoors over the holidays. We closed on one of the most popular shopping days of the year, paid our 12,000+ employees to spend time outside, and invited America to join us. The response was overwhelmingly positive. More than 1.4 million people and 170 organizations chose to #OptOutside.
Consequences
REI continued its social media campaign with the hashtag #OptOutside and circulated a YouTube video. The company also actively asked other companies to join the #OptOutside campaign. In the second year, REI’s call to join the movement attracted both corporate and nonprofit as well as government organizations, including Subaru, Google, and National Park Services.
The #OptOutside campaign has also enhanced REI’s authentic brand voice and was well received by customers and employees. One customer wrote:
Customers expressed that they are getting a social good along with their purchase, in addition to the good and service received. The #OptOutside campaign started a social media conversation with millions of participants. It was praised and criticized alike. More than 275 organizations have joined REI in supporting the idea of going outside instead of shopping on Black Friday. The company announced that its revenue was not affected by the campaign. As conscious capitalists say REI’s #OptOutside movement is a “win-win-win” practice for people, planet, and profit.
Moral of the Story
Conscious capitalism is a useful way to think about the complex relationship between virtue and profits. Conscious business activities are desirable economically, socially, and environmentally, and ethically.
REI’s decision to close on Black Friday is an important test case for conscious capitalism. It is a brave and expensive decision in an industry that highly relies on this day for the bottom line purposes. Although REI has taken an economic risk, the company has made a strong statement about its values and enjoyed positive reaction from customers as well as employees. For many customers the company provides an “ethical and humane” alternative to the typical corporate model. It is important to note that REI is not a typical capitalist company. Because it is a co-op, it is less concerned about the bottom line, and investors, than its corporate publicly traded competitors.
Nevertheless, the decision highly resonates with customers’ desire to support an “authentic” brand whose values align with their own. From an ecosystem approach, Conscious capitalism attempts to philosophically realign free-market principles with progressive business practices by stressing the profit-making potential of responsible, ethical, and sustainable corporate behavior. The test of a truly conscious business is, thus, its ability to learn and grow from past experiences and emerging future, and to emerge even stronger and more committed to a conscious way of being.
Supplemental Visual Materials
REI closing on Black Friday for 1st time in push to #OptOutside. (November 17, 2015). USA Today. http://www.usatoday.com/story/money/2015/10/26/rei-closing-on-black-friday-for-first-time-in-its-history/74627872/
#OptOutside You Tube Video. http://blog.rei.com/news/optoutside-will-you-go-out-with-us/
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