Executive Q & A: Sally Jewell, President and CEO of REI

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EXERCISE: I always start the day with a workout. When things get busy, I have to get outside. On [a recent] Saturday, with my husband and dog, I climbed Grand Prospect [on Rattlesnake Mountain]. It feels so nice to get a little mud on your feet, a little mist in your face.

YOUTH: My father was a doctor who came over from England in 1959 when I was 3 to take a teaching fellowship at the UW Medical School. My father asked what people did here. They said, “You join REI, you buy a tent and you go camping.” So that’s what we did. Our first trip was to Mount Rainier National Park.

EDUCATION: It was a different era for women when I graduated from high school in 1973. My college [aptitude] test showed high scores in mechanical reasoning and spatial ability, but my recommended professions were nursing and teaching—the same as all my female friends. At UW, I was going to be a dental hygienist, but my roommate said, “You’re smart enough to be a dentist,” so I did pre-dental. When I started dating Warren, now my husband, his engineering homework looked a lot more fun than mine, so I transferred to engineering. Turns out I’m a natural engineer in terms of how my brain is wired.

CAREER: In engineering school, I worked for General Electric for a total of 18 months over a period of three years. It was a good time for engineers. I had 15 offers for jobs coming out of school and ended up working for Mobil. I came back in 1981 to work for Rainier Bank as an oil and gas expert because I loved Seattle. Oil and gas isn’t found in the most pleasant places in the world and, being a woman, there were things I had to put up with that would be considered illegal now, and it just became tiresome. I also wanted to raise my children around grandparents.

REI: When I began as COO, our growth was stagnating. We invested in the internet, but we underinvested in our retail stores, the core of the business. We were good at colder climates but not so good at southern climates. We developed great, innovative products, but I felt we had an enormous opportunity to analyze our member data better to understand what our customers wanted. We’ve since relocated a lot of our stores to more convenient places where people could find us. Now we’re learning how to reach younger customers. We’re also seeking racial and geographic diversity.

NEW CUSTOMERS: We love it when an outdoor product becomes a hot thing for people who otherwise wouldn’t be coming in our door. We’ve been quite successful in selling jogging strollers after mommy blogs said, “This is the best jogging stroller and REI is the best place to get it.” That probably brought families in that wouldn’t otherwise have been there. Once you walk into an REI, it’s hard not to get a touch of inspiration about going out and playing in the great outdoors.

GETTING PEOPLE OUTDOORS: Studies show children are spending more time in front of a screen. Children have an affinity for playing outdoors, but it’s up to us as adults to help facilitate that. What are the critical points of entry to introduce someone to outdoor activity? College is one point. School groups, YMCAs, and Boys and Girls Clubs are others. We had a store catch on fire a year ago in Eugene, Oregon. A lot of the merchandize was smoke damaged but serviceable. Our insurance carrier agreed to allow us to donate it all to YMCAs in the L.A. area to help get kids there into the outdoors.

CHALLENGES: You don’t want people to use your stores just as showrooms [and then buy online]. How do you compete with that? You have to think about the value you add when someone shops at REI. There are benefits to being a member. Our stores are staffed by incredible colleagues who know the products. And we have to look at how we are doing in terms of price, service, breadth of assortment and convenience relative to our competitors if we want to be in business for the long term.

TAXES: One thing that’s frustrating is to be providing employment in a state and then be penalized with a 5 to 10 percent sales tax that the online retailer is not collecting but that the consumer still owes. The state of Washington estimates there’s about $438 million a year in uncollected sales taxes from out-of-state direct purchases.

DESIGN: In a world where product is ubiquitous, REI apparel is unique. We have invested in our own designs continuously over the time I have been here. We have a top tent designer. We have taken more design in house to make sure we have a compelling value proposition. If you take the top brands in the industry, we want REI products to represent equivalent quality for a lower price or a better product for the same price.

CIVIC ENGAGEMENT: Community service has been very important to me for decades. Whether it’s board work or volunteer work, you learn to lead through influence and not through power. I try to help share that ethos with my colleagues here. In a job like mine, you have a title that commands a certain amount of power, but when you are on a nonprofit board or you are volunteering, your title doesn’t really mean anything other than perhaps your ability to have influence.

INITIATIVE FOR GLOBAL DEVELOPMENT: The initiative was launched after 9/11. As we looked at the attacks on the United States, we thought, “Why does the world hate us?” We saw an opportunity to bring a business voice to the issues of global poverty, the idea that you are never going to solve global poverty if you don’t create economic opportunity in those communities. I was the first chair of the board. We’ve become a pretty effective national organization with people like George Mitchell, Madeleine Albright and Colin Powell involved. I’ve met with CEOs of African companies with sales of more than $100 million. One company produced retroviral drugs in Uganda while another had a seed and vegetable oil business in Zimbabwe. One of our group, the CEO of Cummins Engines, is investing $75 million in Africa. He wouldn’t have done that without those relationships. We would like to go beyond Africa to Latin America and South Asia.

EDUCATION: As a regent at the University of Washington, I’ve seen the university do some amazing things in a difficult environment. It has prioritized cuts in administration first and has worked hard to make sure that access is high regardless of socioeconomic background. Twenty-five percent of our students pay no tuition. The state wants us to create more graduates in high-demand fields like engineering and computer science, but that’s hard when the budget keeps getting cut. One possibility is to charge higher tuition in fields like engineering where you have high potential for earnings and it costs more to educate you.

ENVIRONMENT: Last year, we made $4.2 million in direct donations to nonprofits. We’ve facilitated over 3 million hours of volunteer work on public lands. And that’s not just picking up garbage. That’s swinging a Pulaski and an ax and building trails.

The Outsider’s Perspective at Bartell Drugs

The Outsider’s Perspective at Bartell Drugs

Brian Unmacht, the first non-Bartell to run Bartell Drugs, knows his mission is to keep the family-owned business relevant in the face of stiff competition.
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Brian Unmacht spent six years working at his father’s drugstore company and, after college, 27 years at REI, before becoming only the fourth CEO in Bartell Drugs’ 126-year history. Now he’s intent on using local partnerships to make Bartell a strong competitor to the national drugstore chains. 

FAMILY: My father had been an executive at the Bon Marché. In the 1970s, he formed his own chain of small drugstores in rural areas. I spent six years in high school and college working for my dad and eventually managed one of his stores. We were a $20 million business and I computerized the record keeping and did the finances and everything. It was a sort of love/hate thing because you could never separate the business from the family. But I appreciate having had a chance to work with my dad. In 1980, 19 percent interest rates and the recession did us in. We had loyal customers, but customers still went for price and selection when grocery stores started competing with us.

TRAVEL: After college, I spent a year backpacking in Nepal and Pakistan and skiing in Europe. When I returned, I had no money, so I went to work for REI. They had seven stores and a catalog and were beginning to expand beyond the Northwest. I managed the Tempe store in Arizona, opened the Chicago store and then worked on the store in Japan as vice president of international. That was an exciting time.

RETAIL: In the ’80s, it was Walmart that dramatically changed retail as it sourced overseas. In the last 15 years, it’s been Amazon. You’re always going to have disrupters. It comes down to how do you keep yourself relevant? In the recession of 2009, the number of paddling and canoe shops in the country dropped to 1,500 from 2,500. With fewer distribution points, vendors like North Face were trying to increase web sales. At REI, our value proposition was to provide expertise and credibility. North Face would give REI an exclusive for a certain time because of that. It was a win-win.

BARTELL DRUGS: I’ve come full circle. Now I am back in the drugstore space. We are up against $120 billion retailers like Walgreens and CVS. How do we find unique products and services that they can’t carry in their 8,000 stores? We offer assortments of local candy like Theo or Seattle Chocolates. We partnered with Snoqualmie Ice Cream to sell our own brand. At our Bellevue store, we offer scooped ice cream. If you go to Fourth and Madison downtown, we have a partnership with Caffé Vita for the espresso, and with other local vendors for sandwiches and other food offerings.

BEER: Bartell always sold beer but it tended to be Budweiser and Heineken. We put in a beverage buyer who had a passion around craft beer and empowered him to form partnerships. Now we have a partnership with Two Beers Brewing Co. to do a Tangerine IPA limited run. Last year, we did Bartell Spring Elixir with Fremont Brewing. We have 150 partnerships with other locally owned firms.

FAMILY BUSINESS: There have only been three top executives [before me] at Bartell’s over 126 years and they were all named George Bartell. Being family owned, we’re part of the community and take the long view. I tell employees that’s not enough to be relevant. There are a lot of family-owned businesses that fail. 

OUTSIDER: The family put together an outside board five years ago to get a wider point of view and I was put on the board. The family recognized there was going to be a gap before the five cousins in the fourth generation were ready to manage the company. That’s why they brought me in as the first outside manager. With revenues of $500 million and growing, management was also getting more challenging. Evelyn Merrill, the oldest of the cousins, is senior marketing manager. She has a lot of good ideas and is challenging the third generation in terms of her view of the brand.

STORES: We have 62 stores. We are talking about adding two to three stores a year. Today, we’re primarily in King and Snohomish counties, but I want to look at Whatcom [County], Bellingham, Poulsbo, Bainbridge Island and potentially farther south. With the Walgreen/Rite Aid merger, some Rite Aid stores will probably be divested. If the right stores came on the market, we would be interested. The Greater Seattle area is still booming, and with more density there is room to put a lot more drugstores in convenient places. 

HEALTH CARE: We do flu shots now, but we are looking at providing other immunizations as well as testing for strep throat or flu so that you don’t need to go to your primary care doctor every time. Because of our concentration of stores in Greater Seattle, our share of the pharmacy business is right up there with Walgreens. It’s important that we have that scale to work with the insurance plans. We had a pilot program to have Group Health clinics in 25 of our locations, and Kaiser [which is acquiring Group Health] seems interested in continuing the concept.

COST OF DOING BUSINESS: I worry that in five years, if Seattle’s not booming anymore, what does it mean if you’ve raised the fixed cost [by raising the minimum wage]? But I worry less about the minimum wage than the growing congestion issue. I have 2,000 employees who live all over the Puget Sound region. We have to move freight around. Congestion is a bigger and bigger issue. 

EXECUTIVE Q+A RESPONSES HAVE BEEN EDITED AND CONDENSED.