Outdoors 2.0
THE A TEAM
Alexander Swick| Angie Tang | Anderson Tien | Amy Zhuo
2
Roadmap
We will present our understanding, framework, key recommendations, and feasibility analysis
Alex
Amy
Anderson
Angie
Outdoors 2.0:
Gear Exchange
Understanding
& Framework
Outdoors 2.0:
EnvironMentor
Feasibility &
Implications
3
Our Understanding
The sharing economy provides an opportunity for increased environmental sustainability
INTERNAL
FACTORS
EXTERNAL
FACTORS
Historically strong
brand in outdoors
sporting equipment
New sharing economy
presents opportunity
for enhanced
value creation
Environmental
sustainability drives
company values
Demand for
authenticity in
bridging sustainability
values and business
actions
Understanding
Framework
Recommendations
EXISTING REI
ENVIRONMENTAL INITATIVES
•  Non-profit partnerships focused on
protecting the environment
•  Sustainable operations – reducing
carbon emissions, zero landfill waste by
2020
•  Creation of Outdoor Industry
Association Fair Labor Toolkit
•  Accountability and stewardship reports
•  Shift from “random acts of
kindness” to “way we do business”
LONG TERM QUESTION
•  How can the sharing economy be used
to further build on REI’s initiatives,
taking into consideration social goals
and environmental sustainability?
Conclusion
4
What is a sharing economy?
An emerging cultural and technological shift presents additional opportunities for REI
Market Drivers
Access over
ownership
Enabling Technologies
Urban density
•  220 million smartphone users by 2018
•  Rise of social media (191 million social
network users by 2018)
Leverage unused
value
Open data
Trust
Socioeconomic Status
•  Rising income inequality within population
•  Positive feedback of growth: sharing economy
revenue over $3.5 billion in 2013, with annual
growth exceeding 25%
Understanding
Framework
Product
service
systems
Recommendations
Redistributive
markets
Conclusion
Collaborative
lifestyles
5
Framework
Analysis of key issues, opportunities, and support activities drives our customized solution
Future REI Initiatives
Current REI Programming
Harm reduction
•  Quarterly garage sales
•  Volunteer Vacations
•  “Outdoor School” group classes
CURRENT STATUS
Year 0
•  Leverage existing programs and
history of environmental
engagement
•  Tap into existing REI members
and community
Understanding
Maximization of Benefits
Gear Exchange
•  Reutilization of goods
•  Reduce ecological
footprint
IMPLEMENT NEW PROGRAMS
Years 1-3
•  Gear Exchange: developing REI’s sharing
economy, encourage outdoor experiences
•  EnvironMentor: community building to
achieve goals of environmental stewardship
and mentorship
Framework
Recommendations
EnvironMentor
•  Raise awareness
•  Community building
•  Opportunity for action
METRICS AND EVALUATION
Years 4-5
•  Profitability and social impact
•  Increased engagement through
programming
•  Achieve triple bottom line
through sharing economy
Conclusion
6
Key Recommendation – Gear Exchange Platform
A gear exchange platform creates a sharing economy that catalyzes outdoor experiences
Gear Exchange Platform
Focuses on increased utilization of durable assets and development of “sharing economy”
Old Equipment
Sale Back
Used Equipment
Rental & Purchase
Develop Sharing
Economy
Lessen
Environmental
Impact
Understanding
Further Member Engagement
Members will be able to sell back used gear and equipment for store credit,
increasing their loyalty to REI and the recirculation of goods
Expand Access to Outdoor Experiences
Novice explorers will be able to rent and purchase used equipment, allowing for
greater access to outdoor experiences and increased utilization of durable assets
Foster the REI Community
A sharing economy provides opportunities for greater connection between
REI members and non-members, enhancing the overall community
Decrease REI’S Ecological Footprint
The recirculation of goods decreases the amount of gear and equipment
produced and lessens REI’s impact on the environment
Framework
Recommendations
Conclusion
7
Key Recommendation – Gear Exchange Platform
Both REI Members and Non-Members will benefit from the platform’s development
5.3 M
REI Members in 2013
$309
Forecasted average amount spent
per REI Member in 2013
$1.6 B
Projected total amount spent
by REI Members in 2013
How does this platform benefit REI Non-Members?
•
•
•
Provides REI Non-Members with an opportunity to
gain access to premier equipment
Catalyzes outdoor experiences with greater access
Enhancement of national REI community
Understanding
Framework
How does this platform benefit REI Members?
•
•
•
Allows REI Members to earn back some of their
initial spend on gear and equipment
Provides a trustworthy, reliable platform for commerce
Increases connectivity amongst existing REI Members
1.3 M
Projected REI Non-Members in 2013
$286
Forecasted average amount spent
per REI Non-Member in 2013
$379 M
Projected total amount spent
by REI Non-Members in 2013
Recommendations
Conclusion
8
Key Recommendation – Gear Exchange Platform
REI will be able to use the sharing economy to lessen the community’s overall eco footprint
Developing REI’s
Sharing Economy
Decreasing REI’s
“Eco Footprint”
Catalyzing Outdoor
Experiences
Instead of an outdated Garage
Sale, the Gear Exchange will
increase consumer access to
environmentally conscious gear
Increased access to used gear
will decrease manufacturing of
new products, thus lowering
REI’s “Eco Footprint”
The Gear Exchange Platform
will increase the amount of
unforgettable outdoor
experiences nationwide
The Gear Exchange Platform will fundamentally increase REI’s sustainable
impact for its key stakeholders: members, the community, and the outdoors environment!
Understanding
Framework
Recommendations
Conclusion
9
Key Recommendation – EnvironMentor Program
Connects environmentally focused mentors with customers looking to gain new experiences
REI’s Offerings
Environmentally focused
“Volunteer Vacations”
“EnvironMentor”
Program
Experienced Members: EnvironMentors
Provide expertise through a local experience to receive
REI credit for a specific environmental service adventure
1-on-1
mentorship
“Outdoor School”
local group classes
Inexperienced Members and Non-Members
Go on a local trip with a mentor for a small fee to
subsidize an adventure for their EnvironMentor
What is the mission of the EnvironMentor Program?
The EnvironMentor Program connects REI community members with each other and the environment,
through the promotion of mentorship, outdoors experiences, and environmental stewardship
Understanding
Framework
Recommendations
Conclusion
10
Key Recommendation – EnvironMentor Program
Linking members of the REI community creates opportunities for more outdoor adventures
How will this benefit the REI community?
•  EnvironMentors share their passions and expertise with
their mentees and engage in their community
•  Novice adventurers receive individualized attention &
advice from their EnvironMentor to get started on
something they have always wanted to try
3.0 M
Members/non-members who attend an
introductory workshop at REI every year
150
Members who participate in the five
offered Volunteer Vacations per year
$85
Average price of a Basics
Workshop for Non-Members
Foster Personalized
Mentorship
Catalyze Outdoor
Experiences
Encourage Environmental
Stewardship
Connect passionate individuals with
each other in order to create a
stronger and more supportive REI
and local community
Access to EnvironMentors’ expertise
and companionship encourages
adventurers to try new activities
beyond a “Basics” group class
Support EnvironMentors’ dreams to
go on a Volunteer Vacation and give
back to their environment
Understanding
Framework
Recommendations
Conclusion
11
Key Recommendation – EnvironMentor Program
This shared economy approach supports REI’s social, economic, and environmental goals
REI’s Sustainable Triple Bottom Line
Social
Economic
Environmental
•  Create a supportive community
of outdoors and environmental
enthusiasts
•  Provide greater access to new
local experiences and Volunteer
Vacations
•  Increase retail sales revenue
and gear rentals as a result of
more outdoor trips
•  Improve member conversion
rate, annual profit margin, and
company growth
•  Support environmental service
and awareness through
subsidization of volunteer
trips
•  Encourage exposure to the
outdoors and the appreciation
of nature
Understanding
Framework
Recommendations
Conclusion
12
Implementation
Transforming current resources into growth opportunities leverages REI’s core competencies
Gear Exchange
EnvironMentor Program
Infrequent, in-store “Garage Sale” of goods
captures a small portion of secondary market in
an impersonal and inconvenient way
•  Develop a convenient online
platform for rentals and used gear
•  Promote through current social
media channels
•  Launch and growth using active
members
A systematic platform is integrated with REI’s
online presence to capture the used goods and
rental market in addition to establishing personal
connections with potential new members
Understanding
Framework
Customers are currently limited to explore the
outdoors with REI’s group classes offered
through the “Outdoor School”
•  Generate mentors through existing
Member and Volunteer base
•  Utilize social media and Outdoor
School to market to mentees
•  Create a cycle of membership,
mentorship, and volunteerism
A new type of community is created, and
emboldened to pay forward their connection to
and love of the outdoors, service to the
environment, and mentorship
Recommendations
Conclusion
13
Feasibility Analysis
Even under our conservative estimates, Outdoors 2.0 makes sense from a financial view as well
Annual Quantity
Total purchases
Purchase per person
Gross margin (%)
Profits per person
Members
$1,638,571,429
$309
43%
$133
Non Members
$378,895,571
$286
43%
$123
Customer Lifetime Value (CLV)
$505
$121
Base Case New Members (2.9% annual growth rate)
Total Members with Outdoors 2.0 (2.9%+1%)
Additional members added
Added Value (Members * CLV)
NPV at Cost of Capital
2013
843,300
843,300
PAST
Incremental Value from Outdoors 2.0
(2015 - 2019)
Understanding
Framework
2014
2015
2016
2017
2018
2019
867,756 892,921 918,815 945,461 972,879 1,001,093
876,189 910,360 945,864 982,753 1,021,080 1,060,902
8,433
17,439
27,049
37,292
48,201
59,809
$3.241 M $6.702 M $10.396M $14.332M $18.525M $22.987M
PAST
$6.560M $9.959M $13.438M $17.001M $20.647M
$67,607,411
Recommendations
Conclusion
14
Triple Bottom Line
Our strategy addresses the three major stakeholders in REI’s operations
Intangible gain
Planet
Tangible gain
Decreased
emissions
People
Trip credit for
EnvironMentors
Increased awareness
(volunteer trip)
Appreciation
of nature
Discounted new
experiences
Sense of
community
Understanding
Decreased excess
waste
REI core
principles
REI
sustainability
goals
Sharing economy
(Gear Exchange)
Revenue from
Gear Exchange
Brand Loyalty
Framework
Recommendations
Profits
High CLV
customer
acquisition
Brand Equity
Conclusion
15
Looking Forward
Our understanding of your values, market, and objectives make our strategy your ideal strategy
•  REI’s Core Principles: Impact, efficiency, integration, collaboration, innovation, credibility and
progress were the building blocks for our recommendations
•  REI’s Environmental Focus: Every initiative promotes sustainability and protecting the natural
environment, which is core to REI’s value proposition
We share
your values
We understand
your market
•  Leverage the sharing economy: Solutions centered around industry-specific insight and foresight
•  Unique member incentives: Personal advantages as well as responsible operations and
community engagement
We recognize
your objectives
•  Encourage outdoors experiences: Connect customers with each other, nature, and REI’s brand
•  Creation of lasting positive impact: Going beyond mere responsibility in order to “shift from
random acts of kindness to the way we do business” – President, CEO Sally Jewell 2009
Sell & Shop at REI
Support & Learn with REI
Gear Exchange Market
EnvironMentor Program
Understanding
Framework
Recommendations
Maximum Impact
Catalyze experiences and
promote sustainability
Conclusion
16
Q&A
17
Appendices
18
Appendix – Works Cited
Below is a list of sources we consulted to develop our strategic recommendations
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Deloitte Analytics. Open data: driving growth, ingenuity and innovation. 2012.
"Financial Information." REI. 2013. Web. 22 Feb. 2015.
Gansky, Lisa (2010). The Mesh: Why the Future of Business is Sharing. Portfolio Hardcover.
Geron, Tomio. "Airbnb And The Unstoppable Rise Of The Share Economy." Forbes Magazine, 11 Feb. 2013.
Web. 22 Feb. 2015.
Gray, Monica, and Heidi White. "Environmental Sustainability: A Way of Life at REI." Business Roundtable
Institute for Corporate. Corporate Ethics, July 2009. Web. 22 Feb. 2015.
Green, Charles. "Trusting and Being Trusted in the Sharing Economy." Forbes Magazine, 2 May 2012. Web. 22
Feb. 2015.
IBIS World Report. “OD4378 – Hiking and Outdoor Equipment Stores.” iExpert Industry Reports. November
2014.
"Number of Social Network Users in the United States 2012-2018 | Statistic." Statista. Web. 22 Feb. 2015.
"Smartphone Users in the U.S. 2010-2018 | Forecast." Statista. Web. 22 Feb. 2015.
Strauss, Steven. "'Welcome' to the Sharing Economy -- Also Known as the Collapse of the American Dream."
The Huffington Post. 28 Feb. 2014. Web. 22 Feb. 2015.
Sundararajan, Arun. "From Zipcar to the Sharing Economy." Harvard Business Review. 03 Jan. 2013. Web. 22 Feb.
2015.
19
Appendix – Calculations & Assumptions
Blue cells denote key assumptions we made in our analysis
Source
2013 FS
2013 FS
2013 FS
2013 FS
2013 FS
bankrate.com
Line Item
Total Sales
Total dividends
Dividends/full priced purchases
% of member purchases that are full priced
Dividends/Total member purchases
Number of members
% of members
Number of nonmembers
Years as an active (purchasing) member
Weighted Average Cost of Capital
LIBOR Rate
Members gained in 2013
Growth rate through 2019
Additional % growth from Outdoors 2.0
Amount
$2,017,467,000
$114,700,000
10%
70%
7%
5,300,000
80%
791,954.02
4
2.17%
0.67%
843,300
2.90%
1%