I was catching up on some RSS feeds and discovered that MEC is apparently going t o start selling bikes in the near future. This is good news, not so much that I am in need of a new bicycle, but because I think it is a natural fit for MEC, who usually do a really good job at balancing sustainability/ethical concerns with those of price. Decat, which is a french sports chain which seems roughly equivalent to MEC (but I presume is for profit), sells bicycles and you can see them pretty much everywhere.
But this paragraph really frustrated me:
MEC is launching bikes stores and a full bike line soon. This is controversial not because of the manner in which the bikes are made but rather in how MEC’s service and pricing model may potentially undercut local dealers.
This speaks to my usual frustration with the Ethical Sourcing blog, which too often seems too nice for its own good. MEC should not apologizing for offering a superior service at a better price, especially if all it proves is that you can do the right thing and still keep prices low.
Besides, while MEC will undoubtedly steal sales in midrange bikes from some smaller stores, I suspect that if people need to buy something more elaborate, they will still go to a traditional bikeshop. Where MEC has the real potential of stealing sales is from the Wal-Mart’s and Canadian Tire’s of the world: places which sell lots of bikes, usually of dismal quality, for not too much money. The challenge for the co-op will be to compete with them, overcoming their advertising and brand advantages, matching or beating the chains on price and beating them in service and product.
One of the best things about MEC is that their staff gives excellent and impartial advice.
Having that available for bikes would be most welcome.
Their other big advantage – producing their own brand of quality gear at good prices – would also be welcome.
I think your analysis about who MEC actually competes with is right – people who want to spend a lot on existing MEC products, like backpacks, typically go for high-end brands like the North Face. The lower middle class, students, and people who are only moderately into panniers shop at MEC. The same trend will happen with bikes. If I were a bike shop owner, I would start focusing on high-end bikes as much as possible. I’m also curious whether low-end bikes at small shops are cross-subsidizing the high-end bikes, or vice versa.
I have no idea about the economics of bike sales, but suspect that the margins are such that stores make money no matter what. I suspect that they make more money on peripherals.
I have to say that I love MEC and their prices but now MEC has turned into o the huge corporation that it set out to go against. When MEC started it was a small enterprise selling climbing gear out of a van. Now it is a huge corporation. I know that if MEC starts selling bikes a lot of independent bike shops will go out of business.
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- Gear-without-guilt co-op now a Goliath; Vancouver Sun, April 28, 2007
As you may be aware, Mountain Equipment Co-op is preparing to enter the bicycle business. This move poses a massive threat to independent retails because of MEC’s tax-free status. Large retail cooperatives such as Mountain Equipment Co-op (MEC) are able to avoid paying corporate income tax through the use of a tax loophole presently permitted by Canadian tax law. As a result, Canadians can lose millions of dollars each year in tax revenue that would otherwise go to support programs such as education and health care. This loophole also provides large retail cooperatives such as MEC with a significant and unfair competitive advantage over small- and medium-size retailers. These businesses are often locally owned and are an important and integral part of their communities. They provide employment, services and contribute significant tax dollars to Canada.
The tax inequality occurs because retail cooperatives can avoid paying corporate income tax by reducing their net income through the use of patronage dividends paid out in shares in the cooperative. Paying out the patronage dividends as shares does not affect the control of a cooperative because one member equals one vote in a cooperative. As such, a co-op can avoid paying corporate income tax on yearly surpluses yet retain 100% of the surplus as cash for investment and growth.
Small and medium-sized businesses that are not structured as cooperatives cannot use patronage dividends in this way because paying out patronage dividends as shares would change the control of the organization, and the owners of a small or medium-sized business are not necessarily customers of the business. As such, cooperatives by nature of their share and voting structure are able to avoid paying income tax through patronage dividends whereas small and medium-sized businesses cannot avoid paying taxes on their yearly surpluses. This tranlates into a large and unfair tax advantage for large retail cooperatives that helps fuel their growth and that will ultimately cause many small and medium-sized locally owned enterprises to go out of business.
Canada’s independent outdoor retailers are asking you to continue doing business at the local level and to support the merchant class who have spent years making retail their livelihood. Stop by the store for more details and to sign a petition to have co-op tax status changed. The petition was started by independent retailers in Vancouver.
This move makes sense for MEC (REI in the US already sells bikes). More competition in the market benefits the consumer. The only mom and pop shops affected will be those that located in major cities that have MEC stores. Independant retailers already compete with the likes of Walmart, Sport Check, Canadian Tire, ect…
MEC is a beast. They exploit tax loop holes to undercut competition. MEC will traditionally carry name brands and undercut the competition. This eliminates said competition (Mom & Pop shops) that have provided exceptional service over the years. Eventually MEC will begin selling name brand bikes. Why? Simple, the traditional distribution network will be gone (remember the Mom & Pop shop). MEC then begins to “rip-off” many of the innovations made by these supplier companies. They never invest in their own R&D, they let others spend the time and money. These stolen ideas eventual end up incorporated into their own brand products. With a refined offering in place MEC then severs ties with their suppliers and ends up carrying only their own product, having eliminated much of the competition in the area and in some cases, killing off many market participants. MEC is anything but an ethical business and anyone who shops there is just inviting the day when we all have no choice but to shop at MEC. Crap product, poor design and no functional R&D program. Don’t believe me? That’s fine but I’ve been on the inside and the company is anything but what you’d like it to be.
Why don’t these local shops complete the work to become a co-op as well, to also take advantage of these loop holes?
Well I’m glad I don’t need to take the time to explain why MEC is an unethical business as others on here have explained it well. I can almost guarantee that if they start selling bikes here in Victoria, BC that we’ll lose at least 50% of the local bike shops. When they came to town thats what happened to the general outdoor shops. There’s now only us and one other large independent left and we’re just hanging on. They won’t be competed against Walmart or Canadian tire, their bikes are a joke, they will be directly competing against local bike retailers. For those who said that they should start concentrating on high-end bikes must not realize how a business works. High-end will not pay the bills and keep the doors open. Low-end and commuting bikes are the bread and butter of the independents. Oh, and margins are NOT high. In fact they are quite low on bikes. If they are forced to lower prices they may as well not sell them. Oh and MEC has already taken a large part of the accessory market away them, so there is nothing left to fall back on.
I know you broke outdoor lovers love your cheap prices and think your doing great things for the planet. I used to be the same. But take it from someone who has worked for many years on the inside, MEC is the opposite. If figure their good to evil ratio is now up to 30:70. Is that a company you want to support? Oh and since your a member of a co-op have you received your large dividend check from the massive ‘profits’ that MEC is making each year? didn’t think so.
Laura: sorry it’s not that easy (almost impossible) or cheap to change your business to a co-op. Not mention we’d probably lose 70-90% of our business if we started telling every customer that they now need to pay a membership fee before they’re purchase.
I like it that MEC will sell bicycles. One of the things I like about MEC is that it is a cooperative. It isn’t them the MEC; we are the MEC; you and I.
We are able to buy through our coop, merchandise, at better prices than retail, and if cycle shops don’t like it, too bad. I think we would all be better off if we could buy cars, motorcycles, building supplies etc etc, through coops and use the money we save to buy other things, or perhaps…. wait for it…. SAVE
What we are talking about here is cutting out the middle man. Unless the middleman can add value in some way, I say, move over and get out of my way, and take your hand out of my pocket.
I buy my cycling shorts from MEC because they sell my size. When my local bike shop starts selling shorts in sizes bigger than “extra-tiny”, then I’ll start supporting them.
Would I buy a bike from them? Maybe, if I liked it enough, and the fit was right. I wouldn’t choose by price alone, because you don’t end up riding a price tag for 10 or more years. From what I’ve seen of their bikes so far, the prices aren’t that much lower than what nearby bike shops sell.
Oh, and as for quality – I’ve got some MEC panniers that are more than 20 years old and still in great shape, and I can’t wear out my hideous yellow cycling jacket. Can’t say that for some of the packs and clothes I’ve bought at bike shops.
MEC is a proud Canadian outdoorsy version of Wal Mart. MEC were even smarter than Mr. Walton though because they started out as a Coop. Essentially, as a coop they could choose to pay dividends to their shareholders or they can retain the profits and become huge players in Real Estate.
The coop status helped get MEC to where it is. They did also start out with what seems like innocent motives of getting outdoor gear into the hands of people who couldn’t find the equipment at any regular retailers.
Here we are, many years later, with a very corporate mentality of grow-grow-grow. MEC plays the ethical card – how ethical is it to enter a market (bikes) where shops survive because the owners and employees absolutely love bikes. I have never heard a person say they couldn’t find a bicyle they were looking for. An MEC exec. actually told me MEC was getting into bikes because bike shops don’t do a good job of the commuter bike segment. Most shops I have gone into in the last 5 years have about a third of their floorspace dedicated to commuters. Go ask to meet the owner of your local bike shop. Ask where they live. Bike Shop owners at best make an OK living – if they are extremely good at their business. Bike Shops are increasingly under pressure from department stores and drug stores who create a “fair price” for an entry level bike at $99 with the consumer – seriously, who thinks a mechanism as involved as a bicycle should cost $99. The additional pressure of MEC is a frightening thought – mostly because MEC is like a WalMart in Canada. They achieve their cheap prices by going directly to manufacturers – great for the consumer – unless the consumer has any sense of community. The bike shop owner lives in the community where his shop is. The MEC model is the same as WalMart – put small businesses out of business through unfair sourcing and pricing strategies.
I think this all comes back to an appreciation for old-school economies. Buy locally. Your neighbour keeps his job. Your neighbour supports your business or another neighbours business. Everyone is happy. I call this “Shopping on Purpose – with purpose”. Quit buying disposable crap. Plan purchases so you can afford to buy something good. Buy from your neighbour. The end result from my experience is a much happier transaction. I get looked after. I feel confident about what I’m buying.
MEC, Walmart – same kettle – different fish. Mega Corporations that just want some of your money. One markets cheap prices every day. One markets “we care about the workers in our factories”. Start caring about your neighbours – get rid of price as the major deciding factor in a purchase and all factory workers might have a chance of ethical treatment – hell there might even be a chance of a factory down the street instead of halfway around the world.
I just dropped by the MEC downtown Toronto and… I see the bikes! They have some really nice models, I like what I see. (I’m liking the hub gear ones and they even have fixie.) Based on the prices and the models I saw, they are competing with mid to high-end small bike shops, like the local bikes shops that sell nicer Trek, Devinci, or nicer Norcos.
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If local bike shops carried what I wanted, at a reasonably comparable price, I would support them. I think a lot of cyclists probably support a “buy local” mentality. However, when I can get a 2 Watt LED bike light at MEC for $35, and none of the local shops carry PlanetBike, and typically don’t have ANY decent lights for less than $50… you can guess where my money is going. I checked out all the LBS’s here recently. A large portion of their floor space was dedicated to Mountain Bikes with front suspension or full suspension – certainly not what the average consumer needs or wants. MEC has 2 cyclocross bikes in their 10 bike selection. Less than half of the LBS’s here carry cyclocross bikes.
From my point of view, MEC isn’t competing with local bike shops. They are offering what the local bike shop isn’t.
MEC is a not for profit member owned co-op, and as such they get tax breaks, it’s not “exploiting a loophole” (if you really want to talk retail juggernaut and tax loopholes, look at large publicly traded corporations). You don’t like it or you think it’s communism? Fine, say so, but don’t lie about what it is it to promote your far right ideology.
Saw the bikes today. Most of it is practical mid range stuff that most bike shops don’t even sell (including one of the best designed city bikes I’ve seen) – they might have something similar, but not quite equivalent, or at a different price point. Conversely if I want either a really cheap or a performance bike I’d shop at a bike shop. Still think I’ll get my next bike at my local bike shop, since they know bikes, have better selection, will swap out parts for me, and can order whatever I want.
See? That’s how you compete with MEC. Selection and service.
@Gee “MEC is a proud Canadian outdoorsy version of Wal Mart. MEC were even smarter than Mr. Walton though because they started out as a Coop.”
Yes, you’ve hit the nail on the head. MEC members will get rich by buying so much outgear that they’ll get millions of dollars in refunds (ie. patronage dividends).
I don’t think you understand how people get rich. Mr. Walton owned all the stores 100%. There is absolutely no way any one MEC member can get rich off of MEC – you can only get back a portion of what you put in.
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@Gee – Do you really think that if you keep buying things at your local bike store that somehow a bike factory will pop up in your neighbourhood? Bike accessories and bikes almost completely come from Asia. There is virtually nothing in a bike store that is made locally.
Bike stores have no buying power and little capital to start a factory. If anything MEC has a much bigger chance of starting a bike factory in Canada. They’ve done it before with outdoor gear (though it closed down).
The biggest complaint leveled against MEC is that it is somehow tax exempt because it gives out patronage dividends as a way to “avoid taxation”. This is wrong (www.coopzone.coop/files/Co-op Taxation.doc). Patrongage dividends are like coupons – they work to adjust the price that the customer pays. At the end of the year if MEC has a surplus the rest is given out as patronage dividends.
When a member gets that rebate they are required to claim it on their own income tax if what they bought was a business expense because the rebate is reducing their expense.
MEC members have voted that the patronage dividends be held by the co-op as shares and paid out to the membership occasionally. Given that MEC has no other access to cheap capital like a corporation with stock, it’s only fair that MEC members be able to keep their shares in MEC as a way to fund MEC’s ongoing operations.
Interesting comment about MEC putting outdoor gear shops in Victoria out of business. I moved to Victoria from Vancouver long before there was a MEC on the Island. I was absolutely appalled at the prices local shops were charging for outdoor gear. A basic gore tex jacket was about $450 in Victoria, with the similar goods in Vancouver about $175. Needless to say, I shopped in Vancouver as did many people I know.
My local bike shop had basic lights starting at about $50. Hmmm. So I tried not to ride at night. Then MEC comes along and they can sell a similar light for about $10. What is up with that? Are you telling me this is because of their tax free status? I don’t believe it.
How is it that in Vancouver stores compete with MEC on price? MEC is just one place I go, and often I find the same thing cheaper elsewhere. Not in Victoria. That is why MEC kicked their butts.
The bikes came out this week. I was a bit disappointed to see they are not really much cheaper than similar Norcos or Devincis at the other shops. That’s probably because local bike shops were already extremely competitive on bikes, and margins were not obscene. Still, I will buy the MEC bike to support them.
Former Victoria outdoor gear shops Rest in Peace.
Perhaps they didn’t start out that way but now MEC is just another gross consumer-identity-lifestyle brand a la Starbucks or Ikea.The overall quality of their merchandise has gone down drastically and the prices have disproportionately gone up. All they have going for them is a no questions asked return policy (which you will need w/ their crappy tools and planet bike stuff). Their bikes are not particularly good or any sort of bargain.
Small indepandant cycle shops can’t compete with MEC on such a narrow margin of retail mark resulting in their getting squeezed out. It’s big box predatory pricing/marketing similar to the Wal-Mart effect.
One thing that bothers me is that I’ve been reading posts where people have already said they will buy a bike from MEC because of better pricing and better product. I recently compared two styles of bikes, an internal gear commuter and a cyclocross, at different LBS and MEC. In no way did MEC have the better product or pricing on these bikes. I found both their Hold Steady and Cote to be no cheaper than other offerings from Rocky, Brodie, etc. In fact, the Hold Steady was almost $400 more than the Rocky Metropolis. Granted, it had a nicer fork and slightly better brakes, and maybe this matters to some people. The point is that it was absolutely no better in terms of bang for buck, and certainly an upgraded fork is not a requirement for hassle-free commuting. So will MEC sell bikes because they have a better product for less money? Absolutely not! Will they sell bikes because of better service? I have no complaints with the LBS that I use, so I say no to this. Ultimately they will sell bikes because of their buying power and size.
These people criticizing MEC for its tax-advantaged co-op status are hilarious. Nothing stops a competitor taking the same status. The only problem is that you don’t get rich running a co-op. You might get rich running a sole proprietorship or a corporation. It’s your choice.
For the record, I buy my bikes at a local bike shop that includes free tune-ups. I buy some of my outdoor gear at MEC, but most at local stores. My decision is based on price, quality and service, not legal structure.
I just don’t believe MEC can make that much damage to the bike industry. LBS are at each others throat and undermining their own margin. How come you don’t feel bad when you’re ripping off in of your LBS for free tubes or rebates on these guys labour? MEC is and has been a good company that offers good benefit to their staff as oppose to any LBS.
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