REI made customers owners to profit from loyalty

Seattle engineer Lloyd Anderson wanted a quality ice axe for mountaineering but found local ski shops charged high prices for poor gear, so in the 1930s he began importing a better, cheaper axe from Austria for himself. When climbing friends heard about it, they asked him to order for them too, and the informal favor threatened to become an unpaid full-time job with no way to fund the buying power a real supplier relationship required.

On June 23, 1938, Anderson and his wife Mary formalized the arrangement as a cooperative rather than a conventional shop: 23 fellow Mountaineers club members each paid $1 to join, pooling money for group purchasing power and, crucially, becoming legal co-owners of the business rather than customers of it.

Chartered REI as a member-owned cooperative, returning surplus as annual patronage dividends, so profit depends on repeat business, not single-sale margin.

Members get dividends only if they keep buying, so REI rewards return visits.

Dividends come from real surplus, aligning company performance with member benefit.

Co-ownership removes the conflict between profit and customer interest.

This alignment built loyalty that scaled REI into a national brand.

Restructure ownership so your revenue depends on repeat behavior, not single transactions.

REI grew from 23 founding members contributing $1 each in 1938 into one of the largest retail cooperatives in the United States, reporting more than $621 million in annual revenue by 2000 and, per REI's own membership disclosures, over 24 million members today receiving annual patronage dividends — with the founders, Lloyd and Mary Anderson, holding membership cards No. 1 and No. 2 until their deaths.