Outdoor gear retailer REI has been at the forefront of the nascent recommerce trend, creating a successful channel by viewing returns not as a cost center but a revenue driver and loyalty builder. It’s a way for REI to achieve its sustainability goals while also spurring business growth. In fact, the company sees less reliance on new product sales as a win vs. cannibalization.
We caught up with Matthew Bergerson, REI’s divisional vice president of returns and circular economy, to dive a bit deeper into the company’s thinking on reverse logistics, circularity, sustainability and its customer ethos.
Multichannel Merchant: Do you view recommerce as its own thing, distinct from what had been for years simply known as returns or resale of used goods?
Bergerson: When you think about how to manage returns, the liquidation of used goods, you’re effectively talking about an expense mitigation strategy. When you think of recommerce, it’s more about an intentional sales strategy. We’re actively sourcing goods from customers for resale, like working with a vendor effectively.
Particularly with most goods manufactured overseas, lead times can be months, but lead times from a customer’s closet to us is days. It’s an opportunity to be much more agile in that environment.
The other part that’s important for us is the sustainability aspect. When you think about taking responsibility for your carbon footprint as a business, people over-index to the transportation component. The reality is, a large slice of the pie comes from manufacturing and sourcing of goods. If we can achieve a displacement rate of 50% by keeping goods in circulation for their full useful life, that’s one of the fastest paths to making headway against our sustainability strategy.
MCM: Are REI’s demographics, the core audience, more of a natural fit for recommerce?
Bergerson: There’s some truth in that. They’re an outdoor minded consumer for sure. The other thing that helps is, we sell really high-quality durable goods, with a higher propensity of a significant useful life even after the first owner is finished with the product.
We’re seeing a change among the broader consumer population, even amongst segments of the market not deeply engaged in the outdoors. All our research indicates an increased awareness and sensitivity to the impact of consumption in younger audiences. They may not make a purchase decision based on a sustainable aspect of a retailer. But how feel about them, their propensity to do business again, is very much influenced by the sustainability piece.
MCM: Why is REI considered a leader in the area of recommerce?
Bergerson: It starts with the fact that it’s a very intentional strategy, not reactive. We have a sustainability team that’s thinking about our footprint mitigation strategy. We also have a dedicated team focused on recommerce; how does it show up in the most effective way for our customers? It also flows through a dual focus on designing for the customer, but also creating business outcomes. That intentionality and team builds focus and strategy. If you put smart people on the work, you’re going to get good results.
MCM: Explain REI’s reverse logistics process and network. How is it optimized?
Bergerson: We have a leg up on a number of (pure play) brands in being an omnichannel retailer. Eighty percent of our customers live close to our stores. So, the first mile is the customer bringing goods to us; it’s the majority of our (recommerce) supply intake. That’s our reverse logistics! Then it becomes, what’s the most appropriate point of resale? Is it in that store or somewhere else? We have dedicated used gear stores in Los Angeles and Portland, OR, that we’re seeking to expand in other markets. We do a milk run amongst stores in those markets, picking up supplies from and bringing to the dedicated use store.
That strategy has a couple benefits. The goods sourced within a market are the ones consumers in that market use, so by definition they’re the most locally relevant goods vs. something used by a customer in Alaska or Florida that’s mailed back for return. So, whether we resell within a store or send to a dedicated store, it’s all sourced within a region.
In other cases, we work with Trove and ship goods to them to resell on our used gear website. They operate at every level, from managing intake to condition grading, photography and prepping for the site, as well as fulfillment. They’re also used by Patagonia, Brooks Running and lululemon for their recommerce programs.
MCM: Generative AI seems to be everywhere. What role does AI and machine learning play in your returns, reverse logistics and recommerce processes?
Bergerson: We’re very data driven. But when you move into AI and ML, the reality is, the data in this business is not high enough quality at this stage. There are vendors trying to solve this. Unique item tracking is the crux of the issue. It’s not feasible to do SKU setup at the unit level. I don’t think anyone has cracked this nut yet. It’s definitely something we’re keeping an eye on but it’s far in the future. Unless you’re selling a product with a serial number for tracking, and a system acting against that, we’re several years away from where algorithms are driving the output.
MCM: What is REI’s approach to returns prevention? Do you use internal capabilities or third-party software?
Bergerson: My experience with most of those vendors is, they’re largely recommendation engines that sit atop the data and help you make better business decisions. We have a good stack of data that’s well organized and curated, with a talented group of analysts effective at building internal dashboards to drive to the right business decision, vs. someone else’s front end on our data. So, it’s homemade largely.
MCM: Is there any concern about recommerce cannibalizing the sale of new products?
Bergerson: One the one hand, that’s the strategy, if you believe in displacing the need for new gear and apparel. For that consumer who chooses to buy a used rain jacket, then yeah, we are cannibalizing in our relationship. However, it was probably sourced from another customer, who we issued a credit, and turns around and applies to buy other goods.
If you expand out the spend across customers, they only thing you’re cannibalizing is other market segments. If the outdoor industry is growing, supported by both sales of new and used gear, we’re mitigating the impact of the need for production to support that growth. Instead of growth entirely from new gear, it’s a more balanced portfolio of new and used.
If we end up in a place where goods are so durable and have such a long and useful life, and a contracting need for new goods and apparel, I’d say that’s a good thing. It’s keeping goods out of landfills, reducing carbon and still getting consumer outdoors. There’s so much waste in fast fashion that’s landfilled or sadly, incinerated.