by Jack Santos | October 27, 2015 | Comments Off on Our Digital Future: What’s Really Behind REI’s #OptOutside
REI took a bold move yesterday. They announced they are closing their stores on Black Friday – the biggest shopping day of the year – to let their employees play outside.
Now, let it be known that I am an REI member, and do my fair share of playing outside. I admire the relatively new REI CEO for taking this bold step against commercialism. But as an analyst, I immediately wondered “Cui bono?” Who REALLY Profits? Just how much will REI lose, if anything?
OK – here are the possibilities:
- REI management is totally altruistic. They have their employees’ health in mind (but why just black Friday?) and are making a statement about our priorities in society and American culture ( not just American – I saw Black Friday sales in London – and they don’t even celebrate Thanksgiving!)
- Branding. REI is doing well, but it’s still regarded as a west coast retailer. This gets them attention, gives them a brand – makes them stand out from their competitors. A bigger stage, more publicity (and free at that!). They’re a private company, so the stock market isn’t breathing down their neck and any short term losses can be rationalized with long term gain. It’s a gamble, but potentially a very profitable one. Or my fav…
- It’s not about bricks and mortar anymore. Street side stores are becoming window dressing for large national retailers – just table stakes to establish a brand and reputation. Particularly true for merchandise that is not integral to day to day living – REI doesn’t sell groceries or material for home repairs. They focus on discretionary purchases – like sleeping bags and kayak paddles. Physical stores become a place for service questions, or to spend some time strolling, and possibly holding the product, but making the purchase online (or you can just order and send it back if you don’t like it). A distribution center. Online sales is where all the action is – and growth (nationally and internationally) will come online. If true, this does not bode well for retail jobs. That floor clerk maybe playing outside a lot more, if this really is the trend. Or working a warehouse, a call center, or driving a delivery truck.After all, last year retailers saw a 7% decline in customer visits, while online shopping was up 10% – and that was just for Black Friday (National Retail Federation). Take into account prior years, and this relatively nascent trend is clear.
But I am not a retail shopping analyst – I study technology, particularly its implications on people. What I see here are important guideposts for Our Digital Future. More online capacity, more data centers, more analytics, more ALGORITHMS.
A smart move by REI, especially if all 3 points are part of their motivation. Digital has huge implication for all businesses, and radical readjustment may be in order. That will of course, mean radical readjustment of jobs, of what employees do within a company. Change or die. This may be just the start of the retail shift. The “Internet of Things” will affect a lot more.
REI isnt doing this without observing others. Who? Amazon. They had a 24% increase in online sales on Black Friday last year, and just this week announced blockbuster earnings: 30% increase in North American sales. Amazingly, they have both ends of this game – chalking up a 78% increase in web services sales (ostensibly for a lot of retail online websites).
Fellow analyst Robert Hetu had a good comment on this trend in his post last year on just this topic. He sees it being more about pricing strategy, less about a change to bricks and mortar strategy.
So maybe REI sees the handwriting on the digital wall…and is positioning itself to be the Amazon of recreational products. Maybe. If so, #OptOutside would be a good start.
For the normal American sitting on a coach or enjoying their cancer causing bacon and eggs on Black Friday morning, it will be less about #OptOutside, and more about #OptOnline.
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