Amazon.com Inc. is nearly every retailer’s nightmare, but outdoor sporting goods retailer Gear Coop has used the e-commerce giant to fuel its growth since launching nine years ago.
The Costa Mesa-based company reached $22 million in sales last year and signed a lease two weeks ago to move into a 12,000-square-foot warehouse. It also named former Sport Chalet Chief Executive Craig Levra its president this month.
Founder and Chief Executive Terry Lee said that bringing the industry veteran to its executive team will take Gear Coop to the next stage of growth.
“We have a lot of great ideas and initiatives that we talk about but just haven’t been able to achieve,” Lee said.
“Craig brings a wealth of management experience into our team, and it’s been tremendous so far.”
Gear Coop is known for its large selection of climbing gear but also carries products for other outdoor sports, such as camping and skiing, at its lone store at the South Coast Collection shopping center and online.
Though it has the 3,500-square-foot store and a website, about 85% of sales come via Amazon, Lee said.
Its digital storefront on Amazon sells brands such as Black Diamond, GoPro and Smartwool. Its ability to get traction selling name brands like The North Face on Amazon is significant since many vendors are trying to control and even limit exposure on Amazon by third-party sellers in order to prevent counterfeiters and losing a cut of sales.
Last year, roughly half of the products sold on Amazon were through third-party sellers, the e-commerce giant’s second-largest source of revenue, according to research website Statista. Third-party sellers generated $23 billion in sales for Amazon in 2016.
“The fact that Gear Coop saw in 2009 that Amazon was the way to go—what vision,” Levra said.
He said Lee’s foresight is what drew him to the company, along with its nimbleness.
“We’re not encumbered by a lot of physical space,” he said. “Our capital isn’t invested in buildings and fixtures and legacy computer systems. The capital flows differently.”
Getting Anchored
Lee has more than 15 years of climbing experience that includes Yosemite National Park, Joshua Tree and Tahquitz in Idyllwild.
He wanted to open his own outdoor gear shop and saw Amazon as the perfect place to start.
“I definitely wouldn’t have started this business if it weren’t for Amazon, because I was an Amazon Prime member,” he said. “Being a climber, I saw there was an opportunity to offer [climbing] products.”
The serial entrepreneur—he also founded a broadband internet company—called on industry contacts, and when he snagged Swiss manufacturer Mammut as a client, other brands followed.
He next launched Gear Coop’s website and leased a small store on 19th Street in Costa Mesa. Lee said the storefront was key in helping him open accounts with major vendors, since brands then preferred to wholesale goods to brick-and-mortar shops.
“It was basically a shack that was zoned for business with a residential house in the back,” he said. “We probably had about 200 square feet, and we had a wall of climbing shoes and climbing gear.”
Business was growing, thanks to its Amazon sales, and Gear Coop had achieved No. 2 status behind major retailers like REI with some of its wholesale accounts.
“Adidas was wondering, who are these Gear Coop guys? They’re like our second-biggest customer” for outdoor shoes, he said. “They gave us a $30,000 credit line, and I’m on the phone with them saying no, we need $300,000.”
Gear Coop moved into its current space, which features an indoor climbing wall, in 2012. It has 45 employees at the shop who’ll move to the new warehouse across the street where its corporate office and outlet store will be.
The shop carries a curated selection of men’s and women’s clothing and accessories. It sells more than 70,000 items online from more than 200 brands.
Gear Coop has also focused on fostering a local community of new and experienced climbers through several functions, such as a weekly Beer & Bouldering event in its store. It also hosted the annual Reel Rock film tour, which drew 900 people last year.
“Our local presence, our community has been a key part of our success,” Lee said. “It’s important that we’re an authentic outdoor company, and without that brick-and-mortar presence for the customer, I think that’s hard.”
Top of the Rock
Levra said the shift from executing a growth strategy at a national chain to working for a local retailer is exciting.
He joined Sport Chalet in 1997 as president and was promoted to chief executive two years later. He helped grow the La Cañada Flintridge-based chain from 18 to 55 stores and guide it to more than $400 million in revenue. He left his post in 2015, and the following year Sport Chalet ceased operations.
Analysts said the company’s downfall was its inability to create a niche within the industry and its large debt. Parent company Vestis Retail Group acquired the chain in 2014 for $17 million in cash and took on its more than $50 million in debt.
Levra wouldn’t talk much about Sport Chalet’s struggles but acknowledged that the retail landscape has changed, giving specialty retailers like Gear Coop a leg up.
“Habits have changed, and today more than ever the consumer has the ultimate power. I wouldn’t call it a [retail] apocalypse. I would call it an adjustment,” he said.
Lee adds that the company’s focus is to remain disruptive in the outdoor industry, which has typically kept a more traditional mindset about how to sell and reach consumers.
“We were the first to offer free two-day shipping in the outdoor industry, the first to offer free returns, and the first to offer both. We’re going to continue to do new and innovative things in the channel.”
