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Matt Hyde: Peaking the ROI for REI.com

The narrow path to E-commerce success has proven to be steep and often insurmountable for many in the Pacific Northwest. Not so for Matt Hyde, head of the online operations of outdoor outfitter REI.

It could be that Matt’s simply better outfitted for the climb. As the head of REI’s online sales (he’s the Veep), he can call on a loyal (if not zealous) client base (1.7 million REI members) and 78,000 different products stockpiled in the outdoor outfitter’s database, or stacked inside its 400,000 square foot warehouse in Sumner,Wash.

Or it could be Matt’s propensity for exploration and risk-taking. The tall, well-conditioned, 38-year-old has participated in mountain treks on six continents (so far this year he has scaled 14 new peaks). Imagine being able to take that appetite for adventure to work each day. In Matt’s case, it was practically a job requirement as head of the adventure-travel division of REI, his stepping-stone to the online post. It was in that position that Hyde began to display his Sherpa-like instinct for business opportunity while uncovering a link that’s been increasingly hard to find in today’s new media ventures — profitability.

Like any expert trail guide, Matt knows his territory inside-out, or in REI’s case, outside-in. Since starting with the organization in 1986 as an outreach coordinator in the Bellevue store, he has worked in every division of the company, from mail order to retail stores to travel. And he knows the territory that exists in that place we call cyberspace. Not Internet space, per say (which is, in essence, simply a conduit for transactions between people), but the intranet-like space that exists between REI and its customers — customers who are also part owners in the REI cooperative.

“Most companies,” Hyde says, “have to serve three groups of people: their customers, their employees and their owners. We serve only two groups: our customer-owners and our employees. This gives us a huge advantage. We’re able to focus on our customers.”

Converting the Faithful
With a degree in geology, Matt knew far more about rocks than racks when Internet opportunity first came knocking. That moment occurred in 1996 when REI COO (now CEO) Dennis Madsen handed him a budget of $250,000 to get an online store up and running, an amount that looks amazingly sparse by today’s standards. It’s been all vertical ever since. According to Media Metrix’s latest survey, REI.com logged 430,000 unique visitors in July. While chief rival Fogdog (FOGD) received 660,000, REI’s 1999 online sales – $41 million – were six times higher than Fogdog’s.

Perhaps just as importantly, the impressive online sales have not come at the expense of REI’s stores or catalogs. Annual revenue for the company as a whole is up $136 million since the website launched. There’s a lesson here for those brick-and-mortar retailers who’ve approached the Web timidly, afraid of cannibalizing offline. But it’s not the marketing lesson you might expect. REI.com is not outflanking its traditional store sales by offering different merchandise or seeking to attract a different audience. It’s being 100% user-centric with a customer base that has been defined by a research director at Gartner Group as being “viciously loyal.”

According to one recent survey, shoppers who visited REI.com spent 22% more, on average, in REI’s stores than those who did not go online. “We evaluate this month to month,” Hyde says, “and every time we look, multichannel shoppers are spending more money with us.”

There are plenty more marketing insights coming from Hyde’s binoculars. In the early going, while REI visitor counts continued to climb in February 1997 (after the premiere holiday selling season), the management team quickly learned the lesson that visitors are one thing, buyers another. Hyde focused more on conversion – the percentage of visitors who actually make purchases. And since 1997, REI’s conversion rate has grown from 1.9% to 3.7%, well above the industry average of 2% to 3%.

“I’ve always approached e-commerce as a retail business with technology and marketing as the primary foundations,” comments Matt. “This approach has kept me focused on offering great service and building a strong value proposition for our customer. Our customers have rewarded us for this focus and in the end this is where you can attribute our success.”

Hands-On Customer Service
REI.com stays close to its customers in several ways. In the design phase, Matt invites customers to participate in usability testing at the campus-like corporate HQ in Kent. Participants are given an assignment to navigate somewhere or accomplish something on the site. The feedback loop is invaluable in testing ideas and confirming intuitions about how useful the website really is.

Should a customer get stuck online, Matt’s group has introduced a thoroughly modern solution — live, in-browser customer assistance. A visitor in need can type in questions to a chat window at the top of the browser and receive real-time assistance from service reps at the other end of the line.

Especially spiffy is a live, co-browsing capability that lets REI staff guide a user to a particular Web page by taking control of his or her browser. It’s like having an REI shopping guide looking over your shoulder, and even clicking your mouse for you.

Shoppers can also find that kind of assistance by using the Internet kiosks in REI’s gigantic shopping centers. REI management challenged Hyde to get computer kiosks into the stores by the end of 1998. There are now 95 in operation. If a customer can’t find what he/she wants in the store, an employee can walk over to a kiosk and order the item; the customer pays at the in-store register, and the item is delivered to the customer’s home a few days later.

The kiosks have also made it possible for REI to open up stores in smaller markets that can’t support the company’s 70,000-plus-square-foot megascenters. Two new stores — in Kennewick, Wash., and Missoula, Mont. — are “mere” 10,000- to 14,000-square-footers Thanks to the kiosks, customers there have access to the same stock that Seattleites do.

Despite the early successes, Hyde considers the Internet to be a “humbling medium.” Although 1999 was indeed profitable for REI.com (as was 1998), the $41 million the site contributed to the company’s overall sales was less than it would expect from a single store.

“We’re still in the infancy of online shopping,” says Matt. “The two near-term technologies that are going to impact e-commerce are the ubiquity of Internet access and personalization or customization of websites. But don’t forget online shopping is going to outlive all of us. Even five or 10 years from now technologies are going to be developed that improve online shopping in ways that none of us can yet imagine.”

Larry Sivitz is Managing Editor of Seattle24x7.com
Matt Hyde
VP of Online Sales, REI
6750 S. 228th St.
Kent, WA 98032
Phone: (253) 395-8112
Fax: (253) 395-4368

REI VP of online sales
REI Online store manager 1996 – 1999
REI Adventure travel manager 1994 – 1996
REI Customer service mail order manager 1993 – 1994

Oregon State University, B.S. Geology


Note: REI has cut 238 Seattle jobs so far in 2000. But 200 of these were at its THAW manufacturing subsidiary, which it recently closed down. Some of the remaining 38 were in Internet-related positions. The company said many of the positions were replaced because of technology and new procedures. REI opened six new stores in 2000, including flagship stores in Denver and Tokyo.

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