SEATTLE – REI's business acumen has taken it to lofty heights rarely seen by a retail cooperative.
But as a record-low turnout in the latest annual election shows, REI's original democratic fervor seems to have stayed at base camp. Members these days engage more via Twitter, Facebook or e-mail.
They behave more like customers than co-owners, underscoring how rapid growth has radically altered the relationship between members and a Seattle-based retailer that's finding new ways to stick to its co-op cred and keep them engaged.
Founded in 1938, the outdoor-gear purveyor is the nation's largest consumer-owned retail co-op, with the twin mandates of taking care of its members and spreading the love for the outdoors.
It has recently re-emphasized its roots by launching a line of clothing marked with an "REI Co-Op" logo resurrected from the 1970s. In November, REI put its money where its mouth is by paying its employees to go outside on Black Friday, while most U.S. merchants started their annual holiday frenzy.
But REI is also a retail juggernaut that last year had a half-billion bucks in the bank, more dough than many shareholder-owned rivals.
How a member-owned co-op became such a national retail force puzzles some business experts.
"It's like biologists looking at male peacocks. Anything we know about survival doesn't make sense," says Jonathan Karpoff, a professor of finance at the University of Washington's Foster School of Business.
Its very success at attracting new members — they now top 5.5 million — and expanding nationally since the 1980s has diluted the involvement of its membership in the running of the co-op's affairs.
In 2015, fewer than 1 percent bothered to vote in its annual election of board members. At PCC Natural Markets, another Seattle-area co-op with more than 50,000 members, turnout was close to 4 percent.
REI says that the poor turnout in the latest election is due to its switch last year to online voting, and this year it's working on making it easier.
But REI also contends that the way people get involved with the co-op has changed fundamentally from a time when there were no smartphones or Internet, and there was only one local store.
Last year the co-op received 1.4 million calls, chats and e-mails from members asking about products or about the co-op's programs.
"That spirit is still alive," says CEO Jerry Stritzke, who pointed to the rapid response by members to a fundraising blitz after the Nepal earthquake last year. "Literally within 24 hours we raised over $260,000 for the earthquake. Four thousand people giving money just from a note." Ultimately more than $820,000 was raised, REI says.
Mike Beall, former CEO of the National Business Cooperative Association, said that in a large co-op like REI, people who are "passionate and interested" as well as qualified end up in the driver's seat. Most members, on the other hand, "are voting with their feet."
Some experts say the co-op essence has been critical to REI's success in a sector beset by volatility. At a time when many retailers have trouble distinguishing themselves from the pack, REI members are drawn in by a brand they perceive as "genuine, sincere, knowledgeable," says Neil Stern, a Chicago-based retail expert with McMillanDoolittle.
It also helps employee buy-in. At the co-op's wood-paneled headquarters, an employee-run dog day care and the throngs of staffers biking or doing yoga at lunch hour give REI a pleasant, laid-back vibe. In 2014 REI introduced so-called "Yay Days," giving employees two paid days off annually so they can go play outdoors or volunteer.
"I get to bike to work," says Chief Operating Officer Eric Artz, who took a 38 percent pay cut to jump from Urban Outfitters to REI in 2013.
Since 1998, the co-op has been on Fortune's best places to work list every year. Overall turnover is at a relatively low 33.7 percent, well below the 60-plus percentage rates seen by many retailers.
Successful growth, executives and board members say, gives REI the firepower to get good deals from suppliers and pursue an ever-growing philanthropic agenda. (The co-op lobbies for environment-friendly policies in Washington, D.C., and its outreach efforts are deployed nationwide.)
By the measurements it publishes for its members' benefit, the co-op is doing enviably well. Sales reached $2.2 billion in 2014, up 9.9 percent from the previous year (and two-and-a-half times its revenue from a decade ago).
The co-op last March also paid record dividends of $168 million to its members for 2014. A lifetime membership costs $20, while entitling members to an annual 10 percent refund, or dividend based on what they spend; members plow a lot of that money back into further REI purchases every year.
