While most retailers in our industry gave up on the Internet after its initial hype – and sold out their online brand presence to someone else – we are starting to see investments in the category start to pay off for some key retail nameplates.
Recreational Equipment Inc. was the latest to report that its online business is paying big dividends, with CEO Dennis Madsen pointing to double-digit growth in the REI.com unit.
The co-op declared a $38.7 million patronage refund to its active members on 2002 sales of $735 million. 2001 revenues of $740.1 million included sales from Mountain Safety Research and ArcTeryx.
Sales at stores open at least a year inched up 1.0%, but total sales dipped because REI sold its ownership stake in the outdoor-gear subsidiaries in 2001. Comparative sales from ongoing businesses grew 3.0% for the year.
REI will open seven new stores in 2003.
Members of the co-op receive a 10% annual refund on full-price purchases.
REI saw operating income increase 30.1% to $50.1 million and net income more than double from $7.5 million to $16.0 million. Operating and administrative expenses were down 80 bps to 36.2% of sales.
Company officials attribute the profit and sales increases to a sharp focus on REI’s core business of multi-channel retail, above expectation performance of new and relocated retail stores, strong financial management and positive consumer acceptance of REI’s own brand of gear and apparel.
After posting its first-ever loss in 2000, REI executed on a strategy that is focused on three main points: opening new U.S. stores, building Internet sales, and putting more emphasis on designing and selling its own branded gear and outerwear.
Madsen wouldnt reveal yearly sales totals for REI.com, but he told the local Seattle paper that double-digit growth suggests the Web site “was very well worth the investment we made in it over the years.”
“It is now the hub of the multi-channel concept at REI,” Madsen said.
>>> Total direct sales were up just 2.5% signaling a larger contribution from Web sales. Catalogs are soooo 90s
>>> The Internet connection is paying bigger dividends than sales for REI. The database of customers they have built will serve as a very efficient marketing tool for many years to come. Something many companies in our space have missed
