1. Consumer incomes- As consumer incomes change the ability to sell non-essential goods is directly affected. REI sells non-essential goods. If consumer incomes are rising they will have discretionary income and REI should benefit. If Consumer incomes are flat or decreasing REI will see a negative impact on sales. 2. Inflation- Inflation is a measure of the decrease in the value of money. This means that if inflation is increasing it will take more money to purchase the same product. Again with REI they sell non-essential products and would be negatively affected by inflation. Inflation has not been a problem but it is predicted to be in the future so REI must factor this into their sales and marketing strategy.
How does the current global economy affect REI retail operations?
1. Since REI is not a global company they are less affected by the global economy. They are not immune however as the global downturn affects the U.S. economy as a whole. This in turn does have a secondary effect on REI. 2. Since the global economy directly affects the U.S. economy any downturn in the global economy is going to have a negative impact on the U.S. economy therefore having a secondary effect on REI. This would have the same effect as mentioned in the U.S. economy in part one.
Legal and Regulatory Environment
What types of legal and regulatory forces affect REI in the U.S.?
1.Federal, state and local regulations and agency’s affect REI as well as every other business. The Federal Trade Commission regulates competition to avoid unfair practices. The Consumer Protection Agency helps protect the health and safety of consumers. Since REI has many private label products they must make sure that they are safe to avoid lawsuits and huge fines. 2. Since REI is a consumer Cooperative they also have some other regulations that govern how they manage their business. This does give them some tax advantages over the competition but may be a disadvantage when it comes to retained earnings and investments.
What types of social and culture trends affect REI?
1. REI has built its business on cultural trends. They are very environmentally friendly and very involved in special causes that relate to their business. They market to a special group of consumers that have similar believes and are willing to purchase products to support that believe. This is an example of Relationship Marketing and REI has been very successful with this strategy. 2. REI, according to their website hosted over 750 volunteer events to help the local community and environment. REI started in Seattle which is a perfect market for this type of approach. This market is very socially driven and willing to support companies that also have similar believes with the environment. This also may be a limiting factor when looking at future growth for REI. Especially is the economy takes a further downturn.
What type of technology changes affect REI?
1. Changes in manufacturing techniques can have a huge impact. If similar products that REI sells become cheaper from a competitor due to technology advancements it has a direct impact on REI. They will either have to advance with the technology, change suppliers and/or manufacturing, or reduce price and margin to compete. Either way this is a threat to REI. 2. Another example of how technology can affect REI is simply in customer information. Who their customers are, the purchasing habits, personal information, disposable income etc… A company that is tied into this data and uses it as a guide to their marketing strategy will have an advantage over a company that does not. As a consumer coop REI has the ability to have a more complete data base than a non coop.
Competitive forces are also a part of the marketing environment, and we will review those in this unit’s second assignment.