REI’s secrets to sustaining a beloved brand and touching grass

Sponsors and intro

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1:42The biggest thing at stake, I think, is making sure we can be around for another 88 years. How do we create a long-term sustainable co-op that is healthy, that continues to leverage our strength and our heritage, doesn't lose sight of our mission and values? It is a tricky equation, but what's so amazing about REI is just the passion of the people. And that just gives me the faith that we will get to that really healthy place again and do so much good for the world as well.

Meet Mary Beth Lawton

2:16That's Mary Beth Lawton, CEO of iconic outdoor goods retailer REI. MB, as she's known, came over from Nike in early 2025, tasked with reviving a business plagued by post-pandemic losses and internal discontent. MB talks with me about her priorities in riding the ship, including REI's unusual structure as a cooperative tasked with serving members rather than shareholders. She also talks about

2:48steps she's taken to publicly distance REI from the Trump White House and lessons she's applying from her previous executive roles at Nike, Athleta, and Sephora. So let's get to it. I'm Bob Safian, and this is Rapid Response. I'm Bob Safian. I'm here with Mary Beth Lawton, president and CEO of REI. MB, welcome to the show. Thanks, Bob. So great to be here. I was in Soho in Manhattan just a few days

3:20ago, and I walked past where the REI store used to be. It was kind of sad not to see it there. Yeah. I'd heard that there was a symbolic funeral ceremony for the store. Yeah. People put post-it signs on the windows. I think there was just a lot of love for that store, but obviously for REI overall. I think a lot of people liked the bathrooms in that store, I heard.

3:42The bathrooms, very important in a New York City location. Clean bathrooms. That's right. That was a great store. Yeah. I mean, REI is a company built around getting people into the outdoors. Are you an outdoorsy person yourself? Have you always been? Oh, yes. Very much so. Since I was a little kid, just running around the neighborhood, being outside has always been something that's really freeing for me and centers and grounds me. And I just feel kind of just really myself when I'm outside. So these days I spend time hiking a lot. Living in the Pacific Northwest is great for that.

4:18I was a city kid. I grew up in New York, you know, and I've lived here my whole life. And I like to be outside, but my time in the great outdoors these days is largely near my Brooklyn apartment in Prospect Park. Do folks like me stack up against like true outdoorsmen and women as customers? Oh, for sure. Yeah. I mean, we welcome everybody who loves the outdoors. We want to be part of your outdoor life, whether you're, you know, climbing a 14er or you're at your local urban park, right? Climbing a 14er. See, this is not an expression I'm used to.

4:52Are you a climber? No, no. But I appreciate people who are. Well, I mean, these days being in nature, right, is in a lot of ways more important than ever in the world of screens and tech. We've actually partnered with some different organizations on health studies of the outdoors. And what we found is that even 20 minutes outside a day can help really, you know, center people, give them mental and physical health benefits. And so it's just,

5:23it's really, really important that people find some time to just get outside when they can. You came over to REI from Nike, where the mission is around sport. And I know if you've got a body, you're an athlete. That's right. Part of the rap there. But it's not about the product, but it's about what we do with it. Does REI have an analogous mission or approach? Yeah. I mean, we definitely are trying to just connect people to the power of the outdoors is

5:55our mission. We want to help you, you know, get geared up for that. And what's so great about REI, right, is our green vests. If you've been in our stores. Green vests are your employees. They're wearing green vests. They are wearing green vests. I wear mine too when I go into stores sometimes. I mean, they're one of our, you know, just most special aspects of the co-op. And they really do want to help people just find the gear that they're looking for whatever activity and whatever your circumstances are. It's part of our secret sauce.

The retail co-op model

6:27You came over as CEO about a year and a half ago, and it's kind of a turbulent moment for retailers all across the board, tariffs, union pressure. Like, what was your focus? Did you know what you wanted to change? Has that shifted at all in the time you've been there? Yeah, I definitely came in during a very turbulent time. And I think I would have done this anyway, but it put even more emphasis to me on the need to just listen and learn at the beginning and really get a grasp of what was going on in the company and in the broader macro environment and

6:58with our employees and our stores across the country, with our vendor partners, and then really worked with the team within my first six months to craft a strategic plan called Peak 28. So... Did you feel like the business was solid, was stable? Were there things that were like, this part of the business has got to change? Yeah, no, there were clear opportunity areas. The co-op certainly had a lot of things going for it and does today. But I also saw there were things like member engagement that were starting to

7:30show signs that we needed to turn things a different direction. Profitability-wise, the co-op hadn't been in a great place for a few years. And then there were just a bunch of retail fundamentals that I came in as someone who's been at different retailers and was really able to narrow in on where we needed to make some changes. You've mentioned a co-op a couple of times. REI has an unconventional structure. It's the largest consumer co-op in the U.S., 26 million members. So how does it work?

8:03Yeah, so it is a very unique structure, right? And I think people interpret it a lot of different ways. But at the highest level, we don't have any shareholders. We are a private company. So we really rely on creating our own profit and our own cash flow. And we've got to be a profitable business and have a strong and healthy business for the model to work. How does that impact your priorities? I mean, does that free you from the short-term pressures that publicly traded companies have? Or is it still there, just in a different wrapper?

8:35It's still there, but I would say not to the same extent, right? We're not doing quarterly earning calls. The board and I are very aligned of making sure we're setting the co-op up for sustainable long-term growth. And it's nice to be able to make some decisions in that regard. It is important that we are creating profit and driving cash flow. Like we still have to maintain success and healthiness as a business because... Yeah, like you're not a non-profit, right? We're not a non-profit. You're still supposed to grow and make money. For sure. We have to make money. And the way we think about it is the more profit we generate,

9:09the more we can put toward our purpose, right? And so it's really important and kind of a great challenge to make sure that we're doing both and they really feed on each other. I'd say the other unique thing is we really are oriented towards our members and their needs. And so we spend a lot of time on, you know, how can we create really great experiences and benefits for our members because they are, even if they're not equity owners, they are part of the co-op and really,

9:39really important to what we do. And the co-op members, do they pay like a membership fee, like my Costco membership? It's a little different. They pay a $30 fee for a lifetime membership. And so we're kind of constantly thinking about what can we help enable for our members, for them to feel like that was a great investment. And that, you know, includes access to things like, you know, classes in our stores. It includes extra benefits, like we just launched a partnership with AllTrails and it's going

10:13to allow our members to have discounted access to that program. And when the business makes money, does it go back to the members? Part of being a member is getting a 10% dividend on your purchases. So that goes back to our members every year and it's a major benefit. So they're getting the proceeds of the success of the business. That's right. That's right. They're not technically shareholders, but they do have such a vested interest.

10:45They hold us to a really high bar. REI has values around community and sustainability and conservation. And recently we've seen cuts to national park staff and government proposals for selling public lands. You may not want to be political, but customers and employees and members may expect you to advocate for REI's values. How do you think about that? Because that is a challenge for a lot of business leaders right now. What I love about REI is we have such strong values and a clear mission and we do use it to guide us.

11:20Sometimes that's more overt things we're doing, like giving money to certain organizations. But sometimes it's more of the behind the scenes things we're doing, like working with policymakers or through our cooperative action network. We actually get people to write in letters to policymakers and to the government. And so we're doing things like that kind of constantly to just really support things like public lands that are so core to who we are and what we care about. A lot of business leaders right now are cautious about engaging on topics

11:53that might attract attention from the White House, let's say. I understand that. And we certainly have to navigate that. But at the end of the day, we are a mission driven organization who is going to stand up for the things that we really believe in, like protecting public lands and access to public lands. So we will continue to do that advocacy kind of role. I mean, early in your tenure, you chose to apologize for REI's previous support of Doug Bergman

12:24for Interior Secretary. Yeah. That must have been a tricky calculation or was it not tricky? It was tricky in the sense that I was new and hadn't been part of the decision. And I was kind of coming into it and having to understand what the situation was. But I would say it became clear that the right thing to do was to rescind our support of him because some of the things he supported were just at odds with who we are as a co-op. And, yeah, so I went out publicly and just admitted that we had made the wrong call.

12:56And I think, you know, as much as people were still angry with us that we had even gotten involved in that, I think they appreciated the transparency and the vulnerability of, hey, we're not going to get it right every time. And, you know, I think one thing it taught us is that we need to listen to our members and avoid doing things that are at odds with our values. You know, you talk about the outdoors as a place where people can come together. And this is at a time where we're increasingly divided.

13:28So access to public spaces and public lands, that's sort of an antidote to that division? Totally. It's a totally nonpartisan way to just come together and community is so important to us at REI. We spend a lot of our efforts of, like, how do we create the right bridges and the right access points for people into the outdoors to really, you know, help their mental health, their emotional health, you know, their physical health. It really is a shared experience.

13:58And I think that's why people love, you know, doing it in community, too, and having the conversations with our green vests and our stores, because they have shared a lot of those experiences. And the emotion that comes with being outdoors is just really powerful.

14:16First public action as CEO? Break ties with the Trump administration cabinet secretary. MB knows that given REI's co-op structure, she can't follow the classic playbook. So how is she resetting REI's retail priorities? And what's the deal with union bargaining that sparked a boycott earlier this year? We'll talk about that and more after the break. Stay with us.

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Digital retail and AI

16:28Before the break, REI's Marybeth Lawton talked about how the company's unusual co-op structure provides a long-term advantage. Now she talks about the near-term challenges in today's retail marketplace, what was behind a union-led boycott earlier this year, and how that squares with her priority on REI's in-store green vest staffers. Plus, lessons she's applying from her time at Sephora, Athleta, and Nike.

17:00Let's jump back in.

17:03I'm mindful that in our discussion so far, it could almost sound like REI is a public service organization or something like that. But you're in the retail business. Oh, we're in the retail business, yeah. So tell me, what are you seeing in sort of where the retail business is now? What's hard about it? What's changing about it? You know, how are consumers right now? Yeah, what I'm seeing in the retail space is, you know, consumers these days are loving both channels, right?

17:36They still are coming into our stores. They love the human interaction. And we've got to keep making that service really, really special and differentiated, especially in a, you know, a digital world where people are on their phones a lot and shopping online. We have 200 stores in the U.S. You know, on the digital side, I feel like we're really finding ways to make that experience not just transactional. I think consumers really want the digital experience to feel more akin to the store experience

18:06and be emotional and be personal. And actually bringing our green vest kind of recommendations onto our site and making that feel really seamless is something we're focused on, too. If REI's advantage is its human expertise, which you keep going back to with the green vests, in the digital world, and particularly as AI starts to maybe change how we shop via AI agents, like does that change that emphasis or just change the way it shows up?

18:37Yeah, I mean, I think it does. It is something we want to make sure that we are bringing to our customer wherever they're shopping with us. So, you know, things like our green vests now do videos of the products, really showcasing the product, talking about why they love it authentically. And we're showing those on the product pages on our website. And we really see great engagement with that. And I think our customer really loves it. For REI, this is a natural differentiator for us in a very digital world.

19:10And the AI shopping agents you mentioned, like that is something we can really bring that's different. Is promoting your brand or reaching customers different now digitally? Search works differently. You have to deal with chatbots. And, you know, are agents buying things on, you know, REI's site? Or are you, you have your own agents helping customers buy things? Yeah, the way we think about it is like, you know, we want REI to be kind of top of mind wherever customers are.

19:45So if they are on, you know, one of the chatbots, we want to be discoverable there, right? We want REI to show up and be in the consideration set. And so we are spending a lot of time of like, how do we make sure that that happens so that we're still in that conversation? And a lot of people are asking that question, how do I make sure that happens? Because it's hard to do. It's hard to do. And a lot of it is how do you make sure your expertise and data are set up in the right way to be captured and be elevated in those experiences?

20:16We want people to see us as part of that conversation, even if they're not on REI.com. But then at the same time, we also are doing a lot to make sure we're top of mind for customers, have them want to come to REI.com or into one of our stores or on our app directly versus have to always be in the chatbot world. So we're trying to make sure we have optionality across both and just be wherever customers want to be. Yeah, I keep thinking with the AI bots, like it's so tricky because, you know, if you have too many of those bots hitting your site all the time, it's like it's a cost and it slows things down.

20:56And yet at the same time, if you don't let them come, they won't be able to surface you in the things that they're showing. No, that's right. It is a new world and we've got to embrace it and not just keep fighting against it. You know, I think of AI as just a transformative thing that's happening. It's not like a technology rollout that's going to kind of stop and start. It's really going to affect everything we do in the coming years. And we've been talking internally of we need to find ways to embrace it. Our competition is using it.

21:28Our consumers are using it. We've got to be part of that. Of course, being REI, we've got to do it in a really responsible way and make sure we're thinking through the potential risks of it and being cautious in some ways. But I don't think we have a choice but to really be part of this movement. It seems akin to me, similar to the dot-com boom, you know, back in late 90s, early 2000s, where people were worried about how that was really going to take hold and dominate everything.

22:00And I think the brands that really embraced it and got ahead of it ended up being, you know, more successful. And I feel like we're in a similar time right now. And if that costs you something in the near term, that's just the cost of doing business these days. It is. I mean, we'll do what we can to help ourselves there. But I think there is an element of that. It's a cost of doing business these days. And if we put our head in the sand, we're just going to be left behind, you know.

Labor and union bargaining

22:29I mean, it also ends up for a lot of folks raising new questions about the cost of human talent. I know earlier this year there was a boycott of, you know, of some of your goods by 70,000 REI co-op members at the request of union members. Can you explain what that's about and where that came from and maybe where it's going? Yeah, I mean, you know, we're in bargaining with our unions and have been, and that's just a difficult and emotional situation.

23:02We certainly are continuing to bargain in good faith. I can't speak to what's happening at the table. That's what's happening there. But what I will say is that, you know, we continue to show up and listen and we'll continue to do that. But these types of things like the boycott are unfortunate because in that case, they were trying to boycott our sale, which actually helps put dollars in our employees' pockets, right? When we do better as a business, we give higher bonuses. And so it kind of was counterintuitive and it's just unfortunate.

23:35But I know there's a lot of emotion involved with it. Do you feel like because you're a co-op, your members hold REI to a different standard maybe than they would a different kind of company? I do think so. I do think so. You know, part of my job or an important part of my job, I feel like, is helping listen to those members and really understand what they're saying. We can't always give members everything they want, right? Because we do have to run a business. We do need to be healthy.

24:06We need to be profitable. And sometimes that means making some difficult choices to enable the co-op to live for another 88 years, you know, or 88 years old this year. So part of it is listening. Part of it is just being transparent around what we are able to do and what we aren't able to do and having that conversation with members. Because I do think they understandably, you know, ask a lot of us. They feel really invested in the co-op, which is such a great thing overall. But isn't it always easy?

24:37But it's not always easy. It's not always easy. No, for sure. The retail landscape has been dominated over the last couple decades. It's like, how do we make shopping frictionless? Make it easier and easier and easier. And yet sometimes, I don't know, the human element. I guess I wonder whether in some ways Ari is trying to keep some of that friction in, that there's value in some of that friction? I don't know if I'd characterize it as friction that we're trying to keep in, because we actually spent a lot of time and effort of, like, how do we remove friction for our customer?

25:12Because at the end of the day, they want it to be easy. They want it to be intuitive. But to the human point, I do think that to most of our customers is such a benefit because it feels different than, you know, a lot of retail these days. And so it is something we continue to focus on. There's some things that AI just can't do, right? And one of them is, like, the lived experience of our green vest. Like, they have actually climbed a mountain or gone on a hike. You know, AI hasn't done that.

25:43And that's something that's really, really special that we want to hold on to and feel like will really help us going forward.

Lessons from past roles

25:51I mentioned early on that you were a leader at Nike before you came over. You've been the CEO of Athleta. You're senior leader at Sephora. Are there different lessons from each of those experiences that you draw on? I do feel like I've taken away so much from each place I've been. I was at Sephora during kind of the 2012 to 20-ish range. And that was during the height of YouTube taking off and the makeup category exploding.

26:25I was running the digital business at the time. And when I came in, it was like $250 million business. And we grew it to over a billion during the time I was there. We were really ahead of the curve from an innovation standpoint. We got, you know, ahead of the mobile kind of curve and really started shifting resources from desktop over to mobile a lot sooner than some of our competitors and some other brands. And I think I learned a lot about how important it is to kind of see around the corner of where the customer is going and not necessarily have to be kind of leading edge on everything.

27:06You can be a fast follower, but you have to be in the game enough so that you're not left behind. And I think that's helping me even today as we were talking about with this whole AI transformation. You don't have to be a first mover, but you've got to get in the game when you see it moving. You've got to get in the game. And you've got to move quickly on certain things and not just drag your, you know, your heels on everything because you'll be left behind. And then Athleta, I would say the biggest thing there is I really loved how mission-driven Athleta was.

27:38It's a B Corp and really clear in its mission and values. And I learned how to be a leader who can both drive high growth. So we drove a ton of growth during the time I was there. It was during COVID. But also stay true to your mission and values and that it's not a trade-off, one or the other. They really can coexist. And I've taken a lot away from that that's really applied, obviously, at REI. I talked to a CEO at one point who said, you know, your missions and values, like, you only really know them when you sacrifice making money in order to stay true to them.

28:16That otherwise, it's just a preference. It's not really a value. Were there choices like that that you found you had to make at Athleta? There definitely were. One is we put a big effort around inclusive sizing at our stores and through our digital channels. And just as a business, we really embraced that because we were really around inclusivity was a core value. And even though that increased our product costs, we didn't change the price to the customer. And that was a conscious choice that we made. I think overall what I've learned is that, you know, if you stick to your values as a company and a brand, people really do appreciate that.

28:56And that pays off in dividends and other ways with their loyalty and their engagement with the brand. Yeah, it's harder to track maybe on a traditional P&L KPI basis, but that doesn't mean it doesn't pay off in the long run. That's right. And I think it helps preserve the brand and what makes it special for the long run, which is so important. And so then you went over to Nike, which is a very different kind of place. Yes, very, very different. I had actually spent almost 10 years at Nike at the beginning of my career.

29:28What I really took away from both times I was at Nike is just that you're preserving what makes the brand special. And I think Nike has learned some lessons about when that slips, right? So you've got that Nike experience and Athleta and Sephora. Now you're sort of bringing them all together. What's at stake right now for REI? You know, the biggest thing at stake, I think, is making sure we can be around for another 88 years. How do we recreate a long-term sustainable co-op that is healthy, that is, you know, continues to leverage our strength and our heritage around serving members, doesn't lose sight of our mission and values.

30:12It is a tricky equation, but I think, you know, what's so amazing about REI is just the passion of the people, whether it's our employees or our members. And that just gives me the faith that we will get to that really healthy place again financially and do so much good for the world as well.

Outro and credits

30:33Well, this was great. Thanks so much for doing it. Thanks, Bob. I may not know what climbing a 14er is, but it's pretty clear listening to Envy that she knows the trail ahead won't be easy. She's got to rally the business financially and to rally the REI team of in-store green vests that's core to her strategy. Her experiences at Nike and Sephora are on point. Nike is struggling to refine its momentum. Sephora thrived during Envy's time there in part because it embraced new mobile tech, as we all need to today with AI.

31:08But it's the Athleta experience that keeps coming back to me, the focus on mission and values as a differentiator. REI has lasted 88 years because its co-op structure provides clarity of purpose. In a world where things are changing so fast, that clarity is a secret weapon, helping us to identify what to react to and how, when the road ahead just keeps getting steeper. I'm Bob Safian. Thanks for listening. Every business hits the same wall the moment your business outgrows the systems that got you here.

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