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REI Case Comp

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by

Angela Chase

on 23 February 2015

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Transcript of REI Case Comp

Sharing
Economy
REI
Situation Analysis
REI Overview
How do people
first

experience
the outdoors?
Why is the
social experience
important?
New business opportunities

Future innovation

Community connectivity

Reduction of raw material usage

Access of equipment to
disadvantaged population
For Profit is
WRONG
Approach
Economic profit (maximizing revenues)

Relative value of durable assets

Wall street will not see returns

Industry without values

Rental, retail, used goods marketplaces exist already - P2P is not new
REX
Cost and Return
P2P Example
Snowboard P2P rental example:
NI/* Sales (th) = $19,031/$203,0279 = .009% Profit Margin


K2 Turbo $499 + Burton binding $240 = $739 * 0.009 = $6.65 net income to REI


Rental income of snowboard = $35 * .2 = $7 net income to REI


We project the decline in retail sales to be made up with rental margins
Environmental Impact
Industry leader of high-end outdoor equipment

Member elected: Board of Directors

Strong consumer loyalty: co-op ownership

Sustainability focus: operations/supply chain
Monetary capital investment limited to private investors and membership dues

High Inventory cost

Suppliers = competitors

Expensive prices
P2P market

Engage membership

Increasing outdoor goods market
Competitors: Amazon, Sports Authority

Inexpensive goods from China

Secondary market: Craigslist, Play-it-Again Sports

Hook and bait: Cabela's, Bass ProShop
Collaborative consumption

P2P providers making billions

Catalyst of social connectivity

Examples: transportation, lending, real estate, general goods
Introduced through friends

Borrowing gear

Fall in love and buy equipment

Equipment under utilized
National retail co-op of outdoor equipment

Environmental stewardship

Philanthropy and volunteerism

Outdoor education

Catalyst of adventure: Travel with REI
Why is the
sharing economy
important?
Connect like-minds

Vital to a healthy and happy lifestyle

Total cost = $3.8m
$3.5m advertising
$221k development
$77.5k retail transformation

1st year return = $3.71m
20% of gross P2P rentals
Avg. rental $35
5.3m REI members
3% use (avg. 3 times) = 530,000 rentals
Who is REI?
Authentic experiences
Best interest of members
Natural resources & inspiring scenery
Outdoor life is well lived
GOAL
DNA
REX
Solution

Better Living Consulting
Angela Chase
Derek H. Collins
Robert Velasquez
Wes Carter
REX - Marketplace

P2P equipment sharing
P2P sale of used goods
GeaREXchange

Retail locations to facilitate swaps
Catalyzing Experiences
REX
Marketplace
Gea
REX
change

Reduce use of natural resources

Entertain the sharing economy

Create adventure opportunities
Size and scale
Distribution
Co-op model
Members
Low product control
Emerging tech
Pioneer in market
Benefit members
Environment
Social epicenter
Secondary market
Competitors
Profit marketplace
Quality concerns
Increase durable asset use

Resale of used goods

Increase accessibility

Reduce costs

Increase membership base
Social epicenter for enthusiasts

Increase retail traffic

Safe place for communal exchange

Easy drop-off/pick-up (48 hr limit)

Cost Breakdown
App/Program development
$221k Kinvey.com
$221k/5.3m members = $0.04 per current member

Locker Room space
Stores are 23.5 - 25 k sq.ft. = avg 24.25
Net income $34,484/(24.25sf *132 stores)=$10.77 Income per sq.ft. 30x20 = 600 @ $10.77 = $6,462 per store * 132 = $77,544 total national cost sq.ft. in store

Floor employees can administer
check in/out = cost $0

Marketing plan cost = 5% National marketing $3.5m $0.66 per member

Total cost = 221k+77.5k+3.5m=$3,799k
REI is...
PASSION
GOAL
DNA
WORLDVIEW
Life outdoors is well lived
Authentic experiences
Best interest of members
Natural resources & inspirational places
Projected Income Growth
Millions
REI Overview
NPV of Investment (5yr)
Worst Case - $24.5m
Likely Case - $32.2m
Best Case - $41.9m
REX
Environmental Impact
Q&A
REI
Overview
Gea
REX
change Counter
REX
Mobile App
REX
Website
Catalyzing Experiences
Through
Possible Solutions
Create gear sharing app/program
Locker room trading at retail locations
Used gear sale facilitation through program (Closed Loop System)
Include QR, RFID, barcode on gear to facilitate sharing
End of life exchange/trade
Industry change (use supplier power to influence manufacturers
Design products specifically for sharing
Membership model (Netflix of outdoor gear)
Public plans and blueprints
Custom gear
LocaSourcing
Production sharing
Sharing Economy Overview
80 sharers in the U.S, 35 million U.K, 10 million Canada

$110 billion dollar industry (currently)

Estimated growth by 2025 is $335 billion

Top 5 traditional sharing/rental sectors

Equipment
Lodging
Car
DVD
Book
Full transcript