Lessons from America's Oldest Co-op

In 1938, Seattle climbers Lloyd and Mary Anderson and 21 friends made a simple decision that would become a milestone in American business history.

On that day the Andersons created a mechanism to help local climbers access quality European gear. In form and structure, they created a co-operative, or co-op. Each paid $1 for membership.

They were not business strategists, consultants, MBA’s, venture capitalists or tech entrepreneurs. They were climbers. Until the 1960’s, the Anderson’s ran REI from their homes. Mary Anderson coordinated shipments and stitched tents, among other duties. Their first employee packaged food in their basement. Lloyd hand-typed their first catalog.

Thus began one of the great stories in American business, rooted in the mountainous Pacific Northwest. Those climbers humbly laid the foundation for REI, today the largest and oldest consumer co-op in America, a community that has grown from 23 climbers to more than 23M members and become synonymous with purpose-driven business.

Earlier this year, Forbes ranked the co-op the world’s number one brand for social impact. (Forbes 2024 Best Brands For Social Impact List). Forbes also named REI the number four brand in customer service. The Anderson’s successors -- REI’s guides, agents and green vests -- carry out their vision today by helping millions of Americans enjoy the outdoors.

A member for two decades, I had the privilege of working for five years at the co-op, alternately as Chief Digital Officer, Chief Experience Officer and Chief People Officer. In that time, I gained a more profound appreciation for what the Andersons created. Every day, I sought to understand and serve Lloyd and Mary’s vision and the spirit of what those 23 friends created. In this post, I’ll share a little more about the co-op’s story of shared purpose, community, customer-centricity and resilience.

To do that, I’ve enlisted the help of John Junke, an 18-year REI employee who has served co-op members as a green vest (store employee) in Boston, Seattle and Fairbanks, Alaska. John’s official title is Employee Recognition Program Specialist. John is a teller of sacred stories, an ambassador of green vest culture and a keeper of forgotten history.

“When those 23 climbers chose to create a co-op, that singular decision sealed our fate for the rest of history,” Junke said recently. “For 80-plus years, we have supported co-op values while also running a business. They bound us to that.”

I believe there are many lessons leaders and mission-driven organizations can learn from Lloyd and Mary’s singular decision and the epic journey that ensued, enough to fill a book. Today we’ll start small. With John’s help, I highlight three lessons.

Lesson 1: A Consumer Co-operative

Every organization says it is customer obsessed. The Andersons took this a step further and built customer-centricity into their business model. From REI’s origin in the Anderson’s home to the shelves of Seattle’s Richfield gas station in the 1940s to more than 180 stores today, the co-op has consistently listened to and focused on its members.

The mechanics are simple and far-reaching. The co-op is not owned by shareholders, banks or private equity. Its shareholders are effectively its members, consistent with the principles of the 23 founding members. Its employees also are members, creating a strong alignment between employees and customers. REI’s stores are effectively a place for members to serve members, united by a passion for being outside.

Members pay a $30 one-time fee and get an annual 10% dividend based on their purchases. They vote to elect board members, as shareholders would in a public company. They get a variety of other discounts and member-only benefits. The co-op also donates money on their behalf to non-profits in the outdoor industry.

The implications of this structure are profound. It enables the co-op to balance short-term needs with long-term planning in service of the co-op’s mission. It enables it to embrace a quadruple bottom line: Members, Employees, Community, Business.

John joined the co-op as a member in 2002, four years before he became an employee.

“I was a kid working on a farm who never set up a tent in his life,” Junke said. “When I walked into REI, it was the only place that consistently met me where I was. Without fail I got excellent customer service.”

John describes the experience many of us have at the co-op. Forbes ranked REI the fourth best customer service brand in America this year. Its outdoor experiences program (which I led for several years) consistently receives satisfaction scores in the high 90’s. I saw this every day in my time leading customer service and outdoor experiences, among other areas. When I was with REI’s guides, customer service agents and green vests, I felt closest to the co-op’s mission.

Lloyd Anderson said it best: “The business of REI is the people.” ?The people are its members and employees.

Lesson 2: Community

REI came from humble origins in the outdoors community, literally born out of the Anderson’s home. One of its early CEO’s, Jim Whitaker, was the first American to summit Mt. Everest. (More about Jim’s remarkable story in A Life on the Edge: Memoirs of Everest and Beyond.) There is a lesson here for any organization about being authentically grounded in and connected to the community it serves.

In my time at REI, this came to life in so many ways. When we held the co-op’s annual leadership conference, we met in a giant tent in a field with forest around us. When we gathered as a team, we cleared trails, carried rocks and removed trash from local parks. When we celebrated Anderson Award winners (the company’s highest honor), we hiked, kayaked, ran, climbed and cycled together.

At pivotal moments in the co-ops’ history, it has supported its community and the community has supported the co-op.

A great example of this is the Lake Melakwa clean up in 1973. CEO Jim Whitaker wanted to clean up the outdoor places its members hold dear. The response exceeded expectations. So many members showed up that they filled several buses. From this experience, and consistent feedback from members, REI became one of the first organizations to focus on protecting the outdoors, following the interests of their members.

This has manifested over the years in more formal structures. The co-op formed a charity in 2021 called the Co-operative Action Fund to make the outdoors accessible to more people. That year it also created Path Ahead Ventures to support and invest in founders of color across Black, Indigenous, Latina/o/x, and AAPI communities in the outdoor industry.

Lesson 3: The Never-Ending Experiment

The co-op is a never-ending experiment that has responded to the changing needs of its members and community for more than 80 years. In my time there, I viewed Lloyd and Mary’s founding idea as a North Star that we were endlessly striving toward.

When we faced a difficult choice, a colleague and friend of mine often asked: “What would Lloyd and Mary do?”

This path is not linear and has been filled with missteps, discoveries and innovations. Over its 86 years, the co-op has sold refrigerators, men’s suits, tennis racquets and lederhosen, among other things. It even opened a short-lived store in Japan. It spent the first 20 years with no storefront and then expanded to a retail store, a catalog and, eventually, a web site and mobile app. It was an early adopter of self-service stores and private label goods.

A great example of the never-ending experiment is the Flood Sale of 1962. That year was an exciting time year for Seattle as it hosted the World’s Fair, and launched the Space Needle, Seattle Center, and International Fountain. To raise the height of the fountain, the city increased water pressure, which burst a pipe in the REI’s basement warehouse. The co-op’s entire inventory was buried in 7 feet of water and mud.

This could have put the co-op out of business. But the staff cleaned and dried the gear and sold it at a discount in what became known as the Flood Sale. It was a massive success, so much so that it inspired the co-op’s legendary Garage Sales of used items. This in turn evolved into REI’s used gear business for members, called Re/Supply.

Another example is its decision to close its stores on Black Friday, one of the biggest days of the year for retailers, encouraging employees and members to go outside instead. Other retailers have since adopted this approach.

Says Junke: “Over 86 years, the co-op has endured through smooth and rough seas by staying true to its values and staying focused on helping our members live their best lives outdoors.”

In 1938, 23 Seattle climbers made a pragmatic decision to support their community and, in doing so, launched one of the most unique and inspiring stories in American business history. The story of the co-op provides lessons for all organizations around customer-centricity, investing in our communities and thinking of business as a never-ending experiment. I hope you take inspiration from the co-op’s story for your own organization!