With its hospitality and travel components, evo has built a reputation for being more than a place to buy outdoor gear and apparel.
The company wants to take its customers along for a ride that starts at retail but might include a ski trip to Japan or a stay at its backcountry lodge in Whistler, Canada.
While offering that experience to its loyal customer base, evo is also managing the same economic headwinds that the entire outdoor industry is facing, including inventory overhang and soft sales compared to this time last year.
Bryce Phillips, founder and CEO of Seattle-based evo, keynoted the Sea Otter Classic Summit last week in Monterey, California.
Evo is an outdoor, snow, and action sports retail powerhouse with a major online presence and seven retail centers globally.
The company operates retail operations in Seattle, Portland, Denver, Salt Lake City, Whistler, and Hakuba and Niseko in Japan.
Evo also owns a hotel in Salt Lake City, and a backcountry lodge in Western Canada.
Passion Drove the Origin of evo
Phillips spoke at the conference about the beginnings of evo and where his passion for the outdoor space originated.
His childhood in Roseburg, Oregon, shaped his love for nature as well as spurred him at a young age to develop a talent for buying low and selling high.
When his uncle introduced him to skiing in the fifth grade he was hooked, and he started working out a way to fund the activity, which ended up being buying and selling used gear.
“Because we didn’t have the money to pay for it, I was like ‘I gotta figure out how to do this as much as possible for the rest of my life,'” Phillips said. “In many ways, it was about trying to buy the next lift ticket.”
He also shared a story about the death of a childhood friend and how that fueled his purpose to leave a positive impact on the planet.
For example, Phillips cited evo’s commitment to charitable giving, and how that part of the business is “non-negotiable.”
Phillips didn’t provide a percentage of revenue the company gives to non-profits, “because it changes,” but he said evo has made a commitment over 10 years to give $10 million to organizations that focus on underserved youth.
“I’m not looking for pats on the back, but we commit an outsized percentage of what we do to the community,” he said.
Phillips went on to talk about the company’s approach to physical stores. He added that although digital still makes up 70% of the company’s sales, breathing new life into old buildings to house the stores and creating an inclusive, welcoming space that isn’t “too cool” for people to enter is an important part of the brand.
Retail Comp Sales Dip For 2022
In a separate interview with The Daily at the summit, Phillips discussed how business has been going recently in addition to the importance of offering cohesive experiences and combining e-commerce with brick-and-mortar.
Evo is experiencing the same inventory issues and macro-economic headwinds the industry has been facing.
Phillips said it feels like the tide’s gone out after a few white-hot years.
“We’re not immune from that,” he said.
For the first time in the company’s 21-year history, evo’s year-over-year retail comps were down in 2022, falling 4%.
The company grew in total revenue, however, because it had additional revenue streams, Phillips said, and ended up growing the top line 7% overall.
But the comp decline for 2022 is comparing numbers to the abnormal pandemic boom years of 2020 and 2021.
Compared to the more normal year of 2019, evo is still “way ahead,” Phillips said. “Not even close. If you look at the aggregate three years, still great. But this year was tough.”
The company had planned on growth, and since it didn’t hit that growth target Phillips is making adjustments, including changes to cost structure and inventory levels.
“The biggest one is inventory management,” Phillips said. “We did cancel some orders and bought some closeouts. You can’t end the year with tens of millions of dollars in extra inventory.”
Expansion Plans and Hospitality
In the near term, Phillips is taking this opportunity to tighten operations.
“That’s not the big, shiny, exciting stuff. But that’s important for us to be able to have that foundation so that we can keep doing what we do,” he added.
Despite that, evo will continue to expand in Japan, under its Rhythm business. Phillips highlighted the people, the food and culture along with the “incredible deep snow” in that country as reasons to increase the company’s investment there.
Evo’s next retail campus will be in Tahoe City, California.
“We see an incredible opportunity to open new locations and campuses, like we did in Salt Lake City,” Phillips said.
As a way for evo to differentiate its business, the company has also gotten into hospitality, and evo now offers lodging in places such as Whistler and Salt Lake City.
That’s part of the company’s strategy to deliver cohesive experiences to its customers.
“The travel and lodging piece of it are super immersive, as immersive as it gets,” Phillips said. “We love making that connection with customers.”
Evo’s retail arm has been its core economic driver, but to acquire more customers the idea is to offer a family of experiences that relate to each other. Phillips said the hospitality segment has been profitable so far.
“What’s really compelling is when you look at the lifetime of a customer as they make their way through what we call the evo ecosystem,” he said. “If they’re staying with us, they’re traveling with us, they’re in our retail stores and online — those are the customers that are by far the most valuable.”
The plan is to bring more customers into what Phillips calls a 360 experience.
“Web-only is more fleeting. It’s more transactional,” he said. “Web plus store? We have a better connection to the brand. Web plus store, plus go to Japan with amazing people. It’s a whole other level.”
That differentiation in the business has helped evo weather economic storms such as the financial crisis of 2009.
“We saw tons of competitors go down over the years that were just more focused on the transaction,” Phillips said.
Combing E-commerce With Brick-and-Mortar
Phillips believes in combining e-commerce with a brick-and-mortar store presence.
“Digital is powerful. And it can scale really well. But it’s different,” Phillips said.
“Even when people were saying stores are going away, we fully believed in (physical retail). And we’re committed to it. The pendulum is landing in the middle.”
When Phillips talk about omnichannel, he says it in quote marks.
“Whether it be mattresses or shoes or beauty products, everybody has got an ‘omnichannel’ strategy,” he said. “That’s the term to use, but eventually, we’re just going to call it retail.”
E-commerce has gotten really expensive, Phillips added. He pointed out all the cost structures, including customer acquisition costs, the variable costs related to fulfillment and merchandising, and product information.
“At one point in time, people thought the web was the holy grail, and then they realized ‘oh my gosh,’ it’s so hard to make money,’ ” he said.
“From a contribution margin perspective, given margins are already thin, web easily can be lower contribution margin (than brick-and-mortar).”
Looking at the economics, if an average transaction size is small, even if the margin is high, a digital sale doesn’t generate that many dollars, and those dollars are eaten up by variable costs, Phillips said.
“You’re losing money,” he added. “There just isn’t that buffer.”
But having stores with e-commerce is “a one plus one equals three,” Phillips said. “We send a whole bunch more traffic into the front door of our stores because of our digital footprint. But we also get a whole bunch more digital traffic because of our physical footprint.”
Bart Schaneman can be reached at email@example.com.