I just got an email from REI telling me my dividend is in the mail. The amount? A measly $25.13. (For those of you who don’t know, you can join REI as a lifetime member for a nominal fee and you earn a dividend on all your purchases that you get refunded in the spring (historically about 9% of what you spent) and there’s typically a 20% discount if you use that dividend on more REI gear. It’s a fantastic, no-brainer deal.)
I remember the heady days when my dividend ran into the hundreds of dollars. If you’re a scrooge you’d be quick to remind me that such a dividend would require spending thousands of dollars. Well yes, but that was part of the fun.
I started backpacking about a year or two too early. Lightweight gear existed but wasn’t yet affordable. A pocket stove cost $150, for example. So I geared up from the ground floor and so did Amy: backpacks, sleeping bags, stove, cook sets, and the other basics. Then the floor dropped out for prices on all the high-tech stuff and slowly, over the course of several years, I began the replacement. The clunky, heavy stove I bought for $45 was replaced by a pocket stove that was one-quarter the weight and now cost $35.
Living in Washington State also necessitated certain purchases, like high-quality rain and snow gear. I was also going backpacking two weekends each month year-round and there’s no doubt superior gear made for easier packing, lighter travel, and more enjoyment overall.
Those days are sadly over. First off, the majority of my gear is top-notch and doesn’t need replacing. Secondly, the only stuff I’d like to upgrade costs too much now that I’m going less often: to get a significant gain in the weight and packability of my sleeping bag would mean a $400 purchase, and I don’t go often enough to justify that. Third, we’re living off half of one income while Amy and are both in school.
The most of the REI dividend this year came from my cross-country skis. Last year, I think it came from Athena’s backpack. Now, I’m looking at $25.13 and 20% off just about any gear and nothing springs to mind when I think of what I might need.
Sad days indeed.
Current Mood: Remembering the Glory Days | 
7 Comments
I blew mine today on a really nice suitcase. Seemed a strange REI purchase, but I’m pretty much in the same boat. Plus you can no longer get away with just one good anything (tent, sleeping bag), oh no, you need several sets for different weather, backpacking vs car camping . . .
Ahh yes. I have a much more dangerous problem: I go out far less than we used to, though my consumption has stayed remarkably high. True, I may wear out relatively more gear than you these days, but it by no means justifies my consumption. It’s a weakness…like shoes.
A nice suitcase is one of those things that you don’t realize how nice it is until you have one; then you wonder how you got by without one.
I just thought of what I need: a new water filter. Why is that I can’t get a filter that lasts more than two seasons?
In the absence of large REI dividend checks in my mailbox, I began reading their financials a few years back whenever they sent their annual balance sheet and income statement. They are a very well run co-op , and there are many public companies these days that would die for their financials. Combining ’05 and ’06, their Net Income (before Taxes & Member Dividends) as a % of sales was 9.5 percent. After their 5% in declared dividends, and then taxes, they are about on par with Dick’s Sporting Goods in terms of net profit margin.
REI could be even better if they can get their SG&A down, as I assume they do a lot of things manually that a company like Dick’s does much more efficiently. Marketing is also an economy of scale in Dick’s favor, with two and a half time the sales revenue as REI.
Sorry for the MBA speak, but I love to watch REI’s books, which one could argue are either less or more cooked than Dick’s. Granted Dick’s isn’t the #1 competitor of REI (LL Bean is), but almost all of the competitors are privately held (LL Bean, Patagonia, Sports Authority, EMS, Bass Pro, and thus have (undis)closed books.
One more thing…85% of dividend dollars get used for additional sales, a great way to get customers back into the store, who inevitably spend much more than the dividend…Mr. Swenson?
Re: water filters.
Because water in the real world sucks. Having to try to clean it up is a messy business that doesn’t take kindly to one-size-fits-all technology packages.
That and carrying a distillation pot around with you would require a bigger backpack.
Dr. Phil
Paul: You are a nerd, my friend – MBA or otherwise.
The thing you neglected to mention is that Dick’s and REI market toward largely different targets, though these obviously overlap to a degree if put on a Venn diagram. As a one-time runner-up candidate to run REI-brand product testing research, I also know a major element of differention is that they are a retailer and a manufacturer. For these reasons, REI has significantly different go-to-market requirements and associated cost structures. I suspect such differences in business models account for your SG&A observation moreso than the efficiencies you surmise. That’s just my guess, though – I could be wrong.
What may interest you is that, at least anecdotally, REI experienced a major change in culture over the course of the last ~5 years. For better or worse, many of the old guard left the company because of the new “corporate” approach. While they still make the top employers lists (or at least had at last I looked a couple of years ago), it will be interesting to see if there are long-term implications to overall employee satisfaction. All I know is that I would have cut off a finger if it would have guaranteed me that job…
Skip:
I realize they have different cost structures, and thought I showed my frustration in finding a suitably close competitor with publicly available financials. Inherent in the fact that Dick’s is a ways down the list of REI competitors is the different business model, different target market, etc.
Re: the corporate mentality. While I can’t specifically speak to REI’s shift toward more centralized decision-making (I’m assuming that’s what you mean by “corporate”), I can say this. As companies grow, centralizing the decisions is the dominant way to stay cost-competitive in a global market. Sure you can have a mixed strategy that incorporates local tastes to some extent, but very few successful examples exist on keeping a large growing company where every store feels like the only one, and the store manager makes buying decisions.
Re: the name calling. I have re-read your comment several times, and find that it adds little to no value. While a lot of my commentary on Trent’s blog may be off-topic, I usually err on the side of adding my thoughts at the time in case others find them interesting. If it was in jest, I’ll take that, but would prefer geek, as it find it less offensive.
Re: the job you didn’t get. That would have been a sweet gig.