Did REI Start A Trend Of Businesses Closing On Black Friday? [e235]

November 2, 2015

The guys take this Monday to discuss the motivation behind REI making the decision to close stores and its website on Black Friday. #OPTOUTSIDE

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha and we are welcomed here today with our outdoors expert.

MATT: I’m at expert in everything, according to you, which is fine. Actually, very little things of actual value, but I’m Matt Staub.

NASIR: Being an outdoorsman is definitely a skill.

MATT: If there’s a whole list of boxes I could check and I could check as many as I want to be an expert in certain categories, I’d probably choose outdoor knowledge because you never know. I mean, it’s always good to be able to do things in the outdoors in case a bad situation arises and you get stranded somewhere.

NASIR: I think I would be called an “indoorsman,” actually. I am an expert in all things indoors. No, that’s not true. I actually love the outdoors.

MATT: Coming from the person who probably 90 percent of the time we record this, your lights go off while recording indoors.

NASIR: Yeah.

MATT: But an expert nonetheless.

NASIR: That’s because the motion sensor which I have been too lazy to fix is too far from me so, the place where I record, if I’m too still, then it goes off. That’s part of the effect.

MATT: REI seems like something, a store you would like.

NASIR: I love that store, absolutely, and I found out, I’ve never been to it but, out here in Texas, there’s a store called The Academy or something and I think it’s something similar. I haven’t actually been there but it has a bunch of outdoor stuff and things like that.

MATT: Yeah. You’re probably more of the outdoors expert than I am but I’ve been to REI a handful of times. It’s got some pretty cool stuff. But, if you like stuff like camping or hiking, things like that, then this is right up your alley, if you haven’t been.

NASIR: It is expensive though. I mean, it tends to be sometimes twice as expensive as things that you can get the same thing online and so forth. But it’s quality stuff, obviously,

MATT: I don’t know if “obvious” is the right word. You know, just because something’s expensive doesn’t mean that it’s quality.

NASIR: Well, that’s my rule.

MATT: Well, maybe the reason stuff’s still expensive is because they close down on major shopping days, which is exactly what’s happening here. It might be something that listeners might have heard in the news, I think. Not only are they doing this but they’re pushing this whole marketing campaign – actually, like a full brand redesign over this opt out.

NASIR: Opt outside.

MATT: Opt outside, yeah.

NASIR: You’re talking about, yeah, the hashtag.

MATT: Yeah, it’s interesting. It’d be one thing to close your doors on the Friday after Thanksgiving – which they are – but the interesting thing too is they’re also I believe shutting down sales on their website that Friday which I guess you need people to work for customer service type stuff to run the website but it seems like that would be a lot more personnel than just people in the stores.

NASIR: Well, how often does any online store close? Or does it ever, right? I mean, it’s a pretty unique thing to see and, I just realized, I think I’m actually going to be opting outside to use their marketing lingo and buy into it a little bit this Black Friday because my wife and I are traveling in West Texas and we plan on hiking trails back there so, on that Friday, I’m sure I’m going to be outside. I don’t know how I should celebrate. I guess I should tag them in some social media post so that it can help with their marketing.

MATT: Yeah. Well, we’ll be on the lookout for that. This campaign’s a little bit flawed in the fact that a lot of spots are pretty cold the day after Thanksgiving so I don’t know how many people are necessarily wanting to go outside but…

NASIR: True, very true. Well, I mean, they’re based in Washington and it’s getting cold up there. I mean, depending on where you are, it doesn’t snow everywhere.

MATT: The northwest is a little bit different, I think.

NASIR: Yeah, it is.

MATT: Well, anyways, like I was saying, they’re not opening any stores on that Friday after Thanksgiving. They’re not putting up sales on the site and that’s the whole idea – to try to get people to, in their case, go outside but I think kind of the bigger idea is for people to not have to spend time working – well, this wouldn’t be a holiday but the day after a holiday when you’re presumably gathered with family members, they want people to be able to share that time with their family – in this case, do it outside if you can bear the temperatures, I guess.

NASIR: Yeah, and it’s funny. Every single year, I feel like I get the same question like, you know, most people have holidays off but a lot of people that may know people that work or they don’t know people that work on those holidays, they kind of presume that, you know, you’re entitled to some kind of holiday pay or overtime or double time and so forth. In actuality, in most states that I can think of – even in California…

MATT: How many states can you think of?

NASIR: Probably three or four. What’s funny is we operate in four states but I can only think of three states.

MATT: Impressive.

NASIR: But there’s no requirements of actually having paid holiday or paying extra on holidays. No, there’s a lot of employers that do and that’s one of the benefits and so that’s why there’s kind of a mischaracterization of all that. But this is obviously the opposite and they’re giving a paid holiday on the day after Thanksgiving – also known as Black Friday.

MATT: I think that’s the whole philosophy behind this – to build up that company. I mean, that’s the whole idea of paid holidays in the first place – to make your employees happy. They’re kind of going the extra step and a day when people might have to work that, you know, let’s say you’ve worked there ten years and you’ve worked every day after the Friday after Thanksgiving, well, then now you don’t and on top of it you get to be paid for it so it’s definitely a win-win. I mean, I don’t know, there were other companies that have done this or are doing it now perhaps, but this is the first big company I can remember coming out and at least saying they’re doing this.

NASIR: I think it’s the first time I’ve heard of a retail place doing this. I mean, I think people are wondering, there’s no doubt they’re going to lose sales. Now, whether this marketing campaign can compensate for it, you know, that’s another thing. But, with this whole coop thing which we haven’t talked about, it really changes the game on how they approach these kinds of business decisions, right?

MATT: Yeah, I think that’s one of the driving forces behind it – the fact that they are a coop which, prior to hearing this story and seeing their new logo redesign that says “REI” and then “coop” underneath it, I had no idea they were a coop.

NASIR: Yeah, same here.

MATT: I believe it’s been that way for…

NASIR: I looked at their bylaws because I’m a legal geek like that and at least 1973 at the least – maybe even prior to that.

MATT: What this is saying is they launched a new logo, one that includes the word “coop” for the first time since 1983.

NASIR: Okay.

MATT: I guess the logo used to have “coop” in it.

NASIR: Yeah, it used to.

MATT: The point is they’ve been a coop for a long time which, you know, from a legal perspective, when people think of coop, the thing that probably comes to mind is a non-chain grocery store.

NASIR: Yeah, like a Farmers Market kind of deal, right?

MATT: And it’s a situation where they don’t really have anyone that works there on payroll but the idea is it’s a volunteer-based system and everyone’s supposed to volunteer three hours a month or whatever it is to work there. I’m just throwing random numbers out. I don’t know how many would be required but you have a whole group of members and all of the members just agree to volunteer time. That way, you can kind of save cost as a whole. You know, it’s not about – as they would probably say – Corporate America just trying to get as much profit as possible, distribute out to the shareholders, et cetera. This is a group of members, as they call it, all working towards the common goal of making things a little bit cheaper, even if that’s not directly said. You know, the idea is it makes it a little bit cheaper presumably because they don’t have to pay labor expenses and profits get thrown back into the company or distributed among the actual members so it’s a beneficial thing in theory.

NASIR: Yeah, and this is kind of similar to B Corps or benefit corps in a way – not the same but similar. What’s interesting is anyone can become an RAA member of their coop. I mean, you have to basically, I think the membership application is either $20.00 or $40.00 – something very reasonable – and, according to their bylaws, you have to spend at least $1.00 per year and then, every year, through their profits, it’s actually distributed to its members but in a way that’s I think it may go back to rebates and things like that and it’s also based upon how much you buy. You know, I didn’t really dive into all the details.

MATT: I think, if I remember correctly, it was something like the members get a dividend equal to 10 perrcent of their full priced purchases at the end of the year. It’s basically like 10 percent back on full-priced items.

NASIR: Which is not much different than just a regular membership program, right?

MATT: Yeah, and it’s interesting, too. I didn’t know this membership thing existed because, like I said, I’ve shopped there before and I’ve also been to a coop grocery. Every time I go to a coop, I never know it. I’ve been to a grocery store before where I bought stuff and I tried to go to the front and they’re like, “What’s your member number?” “I don’t know what that means.” It’s like, “Well, it’s a coop. You have to be a member to shop here. That’s the whole volunteer your time thing.” I was like, “Oh, I had no idea.” They’re like, “Well, we’ll give you one free go-round and then, if you want to come back, you have to sign up.” I was like, “I probably won’t be back.”

NASIR: Yeah, that seems very typical of you. You know, you getting rejected from clubs like we talked about last week and from the grocery store as well.

MATT: Yeah. So, do you think this campaign they’re doing and this whole closing down on Black Friday, you think it’s something that’s going to catch on? You think it’s something that REI is going to do next year as well? It’s hard to predict but…

NASIR: It’s a good question. I really do think it’s something catch-on-able. There are plenty of companies – small and big – that are willing to kind of take these kind of leaps. I wouldn’t even be surprised if it just happens and REI doesn’t even get the credit for it because it’s just something that happens slowly and surely and because, frankly, it kind of makes sense. There’s a lot of companies that want to give their workers off on Friday but there’s just so much pressure from a bottom-line perspective that everyone’s going to shop on that day so you have to do it. For example, we have Cyber Monday and we have things that didn’t exist before where perhaps, instead of that Friday, maybe it’s Saturday or Sunday that ends up being to make up for those sales that you would have received if you were open.

MATT: I think I’m with you on that. I can see this being a trend. I was on their site earlier. I can’t find the exact number now or where I found it but they had the number of people that pledged.

NASIR: Oh, I just looked at it. Yeah, it’s 744,692 but that doesn’t include me so it’s actually 744,693 but that doesn’t also include my wife so just add one more to that.

MATT: Keep adding, yeah. I have to give them credit – whether this works or not. Like you said, they’re definitely going to lose sales, no doubt, even if they gain some between now and then just because people hear this story and like it. Overall, I would assume they’re going to lose money. But, anyways, I’ve got to give them credit for doing it because it’s a unique thing that I haven’t really heard about before and at least it’s going towards something like it’s a common good.

NASIR: Yeah. To your question, I mean, we’ve already seen plenty of other stores go the opposite. I mean, we’ve seen the big chains actually open up early or open up on Thanksgiving night and things like that.

MATT: Yeah.

NASIR: I know a lot of these retails stores have midnight starts or even before midnight and that’s probably going to continue that trend, but that’s going to be the Walmarts of the world, you know, just to pick on them, I don’t know what time they open but it’s going to be those kind of big retail locations compared to some of these more creating a company culture, creating an environment that people are shopping there not just because of their product but also because of their service, because of what they’re doing to society, et cetera, and to their workers.

MATT: Yeah, and it’d be one thing if the people that worked there were depending on making money that day and needed to but that’s, like we said, they’re getting paid for the day off.

NASIR: It’s a paid holiday, yeah, exactly.

MATT: Yeah, so that’s not going to be the issue either and so there’s not a real, if you have another company that’s kind of arguing that the downsides of it to them, there’s really nothing to go after REI for from that perspective.

NASIR: Well, it’s funny, I am going to check this out because I’m sure everyone’s going to go on Instagram and tag this but I have a feeling we’re just going to see a lot of people just out on their lawns taking a picture of themselves because where are they going to go? You know, they live in suburbia.

MATT: Late November. What percentage of the US is even fun to be outside in for longer than thirty minutes? Probably not a huge chunk.

NASIR: Yeah. Well, I’m going to have fun. I’m probably going to go biking too in West Texas somewhere.

MATT: How west? San Antonio?

NASIR: We’ll probably go past San Antonio, I think. I forgot what it’s called. Big Bend or some kind of national park; I can’t remember. No one stalk me there. Don’t even think about it.

MATT: We’ll definitely be looking out for your tagged photo that you have.

NASIR: Yeah, I’ll try to do that.

MATT: I’m anxiously awaiting it.

NASIR: I should just post one now.

MATT: It’s a picture through your window from inside.

NASIR: That’s right. Well, okay, thanks for joining us, everyone!

MATT: Yeah, keep it sound, keep it smart.

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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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