REI worries gear shops in Missoula

MISSOULA, Mont. -- The Home Depot warehouse, with its distinctive orange trim, can be seen a mile from Interstate 5. Opened in June, the store is still too new to be considered a fixture on this city's landscape. Yet in just a few weeks, it's already taking a toll on United Building Center, the place local residents and contractors traditionally have gone to buy construction materials and hardware.

Home Depot's impact on Missoula's shopping habits hasn't gone unnoticed at two other local businesses either: Trailhead and Pipestone Mountaineering, two established hiking, camping and outdoor stores about to face an outside challenge of their own.

In mid-August, Recreational Equipment Inc. will open its doors in a shopping center on Reserve Street, a stretch of road fast becoming a regional shopping hub for Western Montana. And though Missoula's store won't be one of REI's "flagships" -- which often include a stream, bike trail or climbing wall -- it promises to be a formidable competitor with the potential to drive at least one of the two local retailers out of business.

What's happening in Missoula isn't much different from what happens in any town, big or small, when a large established retailer moves in on a local merchant's turf. And it shows the flip side of what often is presented in Seattle as nothing but good news for the rapidly growing chains that began as the Emerald City's homegrown businesses.

"Historically, where REI has gone (into) towns with two other stores, one of them has gone out of business," Pipestone owner Jim Wilson said. "If you take a look at our whole economy, small businesses are dying. Large businesses put small businesses out of business. I call it the Wal-Mart philosophy. Everyone wants to buy at the lowest price, regardless of the consequences."

REI spokesman Mike Collins said no matter the size of a new REI store or the town in which it's located, the complaints and concerns about REI's arrival are always the same. The Missoula store will be REI's 58th and one of its smallest, along with stores in Bellingham and Grand Junction, Colo.

"Our effect on the market comes up no matter where we go," Collins said. "Be it Albuquerque or Chicago there's always the question of what we'll do to the locally owned businesses. We find those businesses that are tailored to the needs of their customers do well."

Missoula's no stranger to cutthroat competition for the bucks spent on outdoor gear.

Two big-box stores, Gart Sports and Bob Ward, are now skimming off customers who tend to prefer car camping over technical climbing or weeklong treks through the wilderness.

For 20 years, Charlie Stevenson had those customers all to himself as the founder of Trailhead, Missoula's first outdoor specialty store.

That changed in 1995 when Wilson challenged Stevenson's monopoly by opening Pipestone just a few blocks away. The years since have been what Wilson calls "a five-year struggle, a helluva time." Nevertheless, the two stores divvied up the climbing, kayaking, cross-country skiing and backpacking markets, each eventually finding a niche and a way to turn a profit.

What escaped their attention were the 1,700 area residents who are REI cardholders.

Distant co-op members are a key ingredient in REI's expansion plans. In 1998, the company set out to identify communities where a small store made sense. Bellingham was the site of the first such store. Grand Junction got the second this spring. A year ago, REI decided Missoula's customers warranted a store of their own. Last winter, the company settled on a 10,000-square-foot site, choosing a shopping center over downtown because of the availability of parking, access to the freeway and Reserve Street's bustling business climate.

"We look at what we call the recreational index," Collins said, explaining the company's evaluation of a community. "That index includes the availability to the outdoors. We also look at the retail environment. We wouldn't go into a town that didn't already have retailers. Then we look at the membership itself. Seventeen hundred members in a city the size of Missoula is a significant number."

The number grew that large for several reasons. Because it is a college town, Missoula has a transient population of students and faculty, many of whom came here with REI memberships. Lacking a Nordstrom store, many Missoula residents routinely drive 200 miles to Spokane, where they can also shop at REI's 30,000-square-foot store.

Finally, over the years, Stevenson's monopoly on quality climbing and hiking gear rubbed some people the wrong way, leaving them feeling either intimidated by the store's elite atmosphere or believing they were paying too much.

No one ever questioned Stevenson's tenacity as a businessman. But the prospect of REI moving to town seems to have persuaded him it was time to sell the store he founded 26 years ago. Two months ago, Trailhead was sold to Todd Frank, a former employee who bought the company fully aware of the challenge ahead.

REI's store in Missoula is designed to maximize sales in a limited space. The store will forgo bikes and kayaks and focus on climbing and hiking gear -- the bread and butter of both Pipestone and Trailhead. REI will augment that with merchandise available online or through its catalog: alternatives neither of the other stores have.

Pipestone and Trailhead's owners are taking slightly different approaches to REI's arrival. While conceding REI is a great company, Frank believes its size and buying power make it slow to react to new products.

"What makes them great is also their greatest weakness," said Frank, who plans to stock his store with cutting-edge items and labels REI has yet to discover--items such as a revolutionary "internal" backpack that's part of a product line called The Works at the Mystery Ranch. "Anytime you have a new competitor come to town it creates a little stress," Frank said. "But for us it allowed us to take a look at what we're really good at and expand on that. We'll hold our own by being unique. If we're getting beat up bad on a certain product line we may take a look at finding something more unique."

Wilson, reacting with less bravado, takes a somewhat grimmer view. In September, he will move his home from Butte, where he operates a second store, to Missoula, where he will personally direct the battle ahead.