1.4 Consumer Coöperatives | R.E.I.

Consumer coöperatives also surround us, especially locally in the food and grocery sector, and they have weathered difficult economic times well. The sports apparel and equipment chain, Recreational Equipment, Inc., better known as R.E.I., is a good illustration. Founded in 1938 by a small group of Pacific Northwest mountaineers who were seeking out quality mountain climbing equipment, R.E.I. is now one of the country’s best-known specialty outdoor retail companies. And it operates fully as a consumer coöperative.81

R.E.I. began back in 1935 when a couple of Seattle-based outdoorspeople, Lloyd and Mary Anderson, were trying to buy quality ice picks and couldn’t find them at the right price at local ski shops. They decided to buy directly from wholesalers in Austria at a price of $3.50 per ice axe, including postage, instead of about $20.82 The Andersons started collecting money from friends who wanted to get in on their discovery, and they built up a wholesale purchasing operation. They officially formed the coöperative with the aid of a lawyer in 1938. The original mission statement from a bulletin published in 1938 reads as follows:

Intent of the founders of this organization was to secure sufficient membership to make group buying possible; to distribute the goods with as little overheads expense as possible, using membership cooperation with the work as much as possible; to gradually build up a reserve of purchasing stock; to have the membership fee ($1.00) so that everyone interested will be financially able to join.83

R.E.I. was modeled in part on the Rochdale Pioneers Society of 1844 in England which is considered one of the first successful consumer coöperatives. Rochdale “established the principles of linking voting rights to persons rather than shares” and first put in place a “dividend on purchases,” basically a patronage refund.84

Membership in R.E.I. is open to all persons who pay the membership fee, which is a single time fee of $20 for lifetime membership with all voting rights in the affairs of R.E.I., including electing its board of directors.85 Members are entitled to dividends, relative to the amount of merchandise an individual member purchases from R.E.I. throughout the year, as well as to member-only discounts.86 Members are sent candidate profiles for the board along with their annual dividend.87 The board of directors is ten to fourteen directors in size; each elected director serves for three years and can have maximum of four consecutive terms.88 As a member, R.E.I. gives back 10% of the price paid on goods purchased through an annual dividend in March.89

Today, R.E.I. operates more than 160 retail stores throughout the United States. It has over 19 million members.90 It had net sales of over $3 billion, according to their last reported financial statements, year-end 2018.91 According to a former CEO of R.E.I., interviewed in The Atlantic, being a coöp allows for the management team—unlike a publicly traded company that has earnings calls that affect stock prices—to take a longer-term perspective and focus on growth over a five or ten year horizon.92