Photo by MChe Lee on Unsplash
January 15, 2025
Should REI Be Exiting the Experience Business?
In a cautionary note around experiential retailing, REI Co-op announced plans to shutter its Experiences business, which includes adventure travel, day tours and classes, as the operation remained unprofitable and was taking resources away from its core focus of selling gear and apparel.
Launched in 1987 as REI Adventures, the business was rebranded in 2022 to REI Experiences as the outdoor chain hoped the new name would be less intimidating and encourage more participants.
In 2022, REI said the Experiences platform was offering 124 multiday adventure travel trips supporting hiking, backpacking, cycling, paddling, climbing and snowshoeing treks across the U.S. and led by local guides. In addition, the Experiences team was supporting day tours and educational programming in 14 cities.
Significant investments continued in recent years. In February 2024, REI purchased 20 acres of land south of Grand Canyon National Park to create its fourth Signature Camp.
REI Experiences Never Reached Profitability
In a letter Tuesday to REI employees and past REI Experiences customers, however, REI President and CEO Eric Artz noted that Experiences division last year served only 40,000 customers, or fewer than 0.4% of all co-op customers. It also never reached profitability over its more than four decades, including its peak year in 2019.
“When we look at the all-up costs of running this business, including costs like marketing and technology, we are losing millions of dollars every year and subsidizing Experiences with profits from other parts of the business,” he wrote.
He added, “Every path to profitability we explored would have required us to invest more time, effort, and focus away from parts of the business that reach significantly more customers, drive more positive financial outcomes, and have greater impact on our mission to get people outside.”
Artz further noted that with the help of a focus on full-price selling, REI will be near breakeven for both operating income before dividends and free cash flow following steep losses in 2023 and 2022. He added, “At the same time, we still have more work to do to return the co-op to sustainable, profitable growth.”
REI Closure of Experiences Means Layoffs
The closing of the Experiences business, effective this week, will result in the layoff of 180 full-time and 248 part-time employees, including guides. Any current reservations will be refunded.
Artz said REI is forming a small team to “reexamine” how REI delivers classes and education at the local level. Local marketing teams will be combined with corporate teams to unify customer-facing work.
The CEO said REI is reinvesting resources into three core areas to “drive healthy, profitable growth” in the future including investments in priority activities (Camp and Backpack, Run, and Hike and Outside Life) that reach most customers, in tools to better manage inventory to improve in-stocks and profitability, and in personalization and visual merchandising to elevate the consumer experience.
Artz said, “Our roots are in the gear and apparel we sell and the outdoor moments they enable. This has been the core of our business for 86 years — and I believe when we stay focused on what we do best, we can and will succeed.”
Reddit Reacts to REI Experiences Closure
A Reddit post on the closure found some commenters sympathizing with REI’s decision. One user lamented, “Low margin business that does not support core operations and is likely a distraction. Feel bad for those involved but likely made a lot of sense to shore up the balance sheet.”
However, the discussion largely ran negative, with some believing REI failed to raise awareness of the programs that they saw introducing many to the outdoors. Many saw the program as potentially a key differentiator for REI, with some expecting to see the closing of in-store bike and ski maintenance departments.
One commenter stated, “Seems obvious to me REI really missed an opportunity with Experiences to become the guiding and planned outdoor adventure company in the U.S., and couple that with sales/outfitting, as well as in-store classes, to drive a complete, holistic outdoor company for customers, beyond one that mimics other big box stores that just sells clothing and some gear.”
One alleged worker who was among those being laid off stated, “This is truly a sad day for a coop who’s going all in on corporate. I really hope this leaves room for small outdoor companies to start operating again and put this box store into the category it belongs.”
Discussion Questions
Was the closing the Experiences business likely necessary for REI, or is it a misstep?
Is REI losing its differentiation?
Poll
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Bob Amster
Principal, Retail Technology Group
Brad Halverson
Principal, Clearbrand CX
John Lietsch
CEO/Founder, Align Business Consulting
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The experience business was a nice addition to the REI proposition and helped to underline its expertise in all things outdoors. It was also very popular among those that attended. The problem is that it did not turn a profit. With overall financials at REI in a pretty weak state, the company simply cannot afford to carry the loss-making business, hence the decision to close it. What REI should have done quite some time ago is partner with a proper hotel or hospitality company like Hyatt to make these more financially sustainable and visible to a wider audience.
Great point about potentially partnering with hotel or hospitality companies to help cover the expenses of the REI Experiences. Partnerships are a great way to maximize margin. Another area of partnership opportunities would have been sporting gear and apparel manufacturers that could have been promoted during the experiences. As a 30+ year REI member and avid outdoor enthusiast, I never participated in one of their adventures or experiences. While it may seem sad to see the closer of the experiences, it strategically makes sense.
Like David notes, I also agree partnerships with another company, even several, would have reduced burden and risk. It’s too bad REI’s programming mix and marketing of Experiences didn’t resonate, because the idea is still additive distancing against competition.
I always thought the name REI Adventures was great and the addition had great potential to the business. I would have thought that they would tie this into their REI loyalty program and partner with other businesses to help shore the investment. Sorry to see this, but I think they could revisit this with more thought.
REI is one of the most trusted brands in outdoor, let alone in retail. Quality clothing and equipment working well in the outdoor environs over the years have supported proof of use and performance claims. But operating an experience business on top of the core retail business is time consuming, and has to be done right to make a profit especially if retail sales are soft. I still think there is a need for maintaining a more limited and focused version of an REI Experiences or Adventures, because it helps qualify and differentiate the brand against would be competitors who covet this position but aren’t quite able to pull it off.
I’m not sure I trust REI’s leadership decisions. But discontinuing and unprofitable venture seem smart. Unlike when they create a whole new campus and right when it was ready, decided to walk away from it after Covid. But most recently I wrote about their sustainability initiative about not having bags for customers. A customer of mine we laid her story about shopping for $1000 worth of clothing on a rainy night and having to go out to her car to get her own bags because they didn’t have any. Ridiculous.. https://www.linkedin.com/pulse/disarming-your-own-team-hidden-retail-crisis-bob-phibbs-drfaf
I’m surprised. Technically speaking, since the company is a co-op, you would think they would have asked the “shareholders” to vote.
I don’t think it was a terribly good differentiator for them, mostly because they never put together a marketing message about it. No ads, no sponsorships….they had an opportunity to plant themselves in the middle of the outdoor experience from alpha to omega. So on the execution front, it was bad. A good idea, however. Just didn’t get enough commitment from management.
Ah. That pesky little thing called making money…sounds like dropping this part of the portfolio was inevitable.
This is a tactical move aimed at cutting costs. This decision differs significantly from retailers that reduce their workforces to achieve cost savings. In the case of REI, the entire division is being eliminated because it operates at a loss. By discontinuing this segment, REI aims to restore profitability. This approach contrasts with downsizing staff levels, which can directly impact customer service and subsequent sales. While the loss of jobs is regrettable, the closure of the Experiences arm appears to be a prudent albeit difficult choice. Experiences might have been seen as a “loss leader” to give character to the brand and thus, attract more customers to REI’s stores. But, apparently the looses we too large to make the other – profitable – divisions viable. More jobs were saved by closing Experiences.
We can debate that what led to the closing of an unprofitable division was a misstep or a series of missteps but there’s no argument that unprofitable divisions or programs should not continue to be funded at the risk of the core business, assuming the core business is well defined, accepted and internalized. The only exception is when a company is ginormous and infinitely profitable and it enters a market at a loss just to kill that market (that’s a thing).
As a very loyal, REI customer who looks like a walking, REI billboard on my backpacking treks, I will volunteer that the Experiences division was not the differentiator. The assumption is that the move to Experiences was the right one. Personally, REI Experiences was not a differentiator to me. I believe that there are core strengths to which REI can shift investment that will deliver higher returns and help with differentiation. IF the investment to Experiences was the right one but improperly executed, please ignore this entire paragraph!!!
This strategy is right in their brand wheelhouse. I would love it have seen it work, but ultimately, it didn’t attract enough interest to be profitable. I commend REI for trying it, and for having the courage to walk away from something that was a loss for them, even one that aligned so well with the company’s mission.
This was a good experiment. Unfortunately, the results didn’t work out the way REI hoped they would. The concept seemed like a natural fit. For REI to hang in there (even with the rebrand in 2002) since 1987 proves they were more interested in creating the experiences for its customers and members over making money. But at some point, the dollars do become something to consider. I hope that REI finds a version of the REI Experience that works in the future.
The poll should have an option that was “both” distraction and differentiator. As others have mentioned, I hope they can revisit, refine and relaunch.
Brick & mortar retail has to be experiential on some level. It just has to be. And for a business like REI it’s not as simple as great VM and store ambiance. Venturing into the great outdoors is a little more complicated that buying a new pair of jeans. I read somewhere a long time ago that physical retail is like a dating service between the brand and the customer. This was in 2014 and I liked that analogy, even way back then. OK, so the first date can’t be at a 5-star restaurant. But don’t pass on the date! Find a way to have the first date, and let the relationship grow from there.
Many examples of outfitters & tour operators evolving into goods and retail – Orvis, LL Bean, Bass Pro, etc. But much more difficult to move in the opposite direction. It does seem to be the case in adventure tourism that the corporate mindset is not local / boots-on-the-ground enough and carries too much baggage, both in overhead as well as metaphor.
I may be in the minority, but I think the decision will potentially prove disadvantageous to REI.
Testing this model and allowing it to run its course — less than successfully — could have resulted in an opportunity to adjust/adapt the model. Experiential could have and should have been a key differentiator. Brick and mortar MUST be experiential to create a distinguishable advantage.
REI’s experiential offerings were a great idea that seemed to align well with their core business values. Unfortunately, the planning and execution just wasn’t quite right. I agree with others here – I hope to see them revisit this concept in the future with more thoughtful planning and stronger marketing efforts.
All we hear in the news is that people want experiences. So what should we do, exit the experience business? I agree with some of the comments below that it might have been a lack of focus, commitment, resources and poor execution. The right team could probably lead with experiences and have apparel / retail as an add-on. Just got to find the right team.