Mountain Equipment Co-op (Profile)

Mountain Equipment Co-op (Profile)

In the Flower Power era of 1971, a bunch of University of British Columbia students, who'd rather have been playing outside, decided to start a business. They'd sell the kind of sporting equipment that no other retailer in Canada thought was worth stocking: avalanche beacons, ice crampons, climbing rope. They wouldn't advertise, because they couldn't afford it. They'd charge a one-time "membership" fee of $5 for those who did insist on making a purchase. And should, somehow, this business succeed, the founders decreed it must never turn a profit.

It's a ridiculous notion, subverting accepted standards of business practice and economic common sense. So, how has Mountain Equipment Co-op - Canada's "environmentally responsible" outdoor store - fostered a growth rate that's all peak and no valley?

In part, by creating a business plan that grows more improbable by the year. The co-op's Web site, for instance, hosts an equipment swap, so prospective purchasers can trade gear among themselves rather than tax the earth's resources by buying new from the co-op. A new Winnipeg store will open in a once-derelict building that was rebuilt at considerable expense using salvaged material. The store's environmental standards are so exacting that even the urine of customers, deposited in its composting toilets, will be recycled as fertilizer for a rooftop garden. And the co-op still doesn't advertise - that might fuel frivolous consumerism.

"It's almost the anti-retailer," says Gordon Harris of Harris Consulting Inc., a Vancouver-based retail expert. "They don't market. They don't tend to behave like retailers, and as a consequence, they end up being a pretty darn good example of what you can do with retail."

This week, MEC, as it's known to the co-operative's 1.6 million members, will hold its 31st annual general meeting at the Vancouver Public Library. It will be an earnest affair, as members try to reconcile its robust growth with a conflicting imperative to walk lightly upon the earth. Expect maxed-out bicycle racks and the Full Vancouver: a veritable MEC catalogue of fleece, Gor-Tex and organically grown cotton, anchored by hiking boots of every description.

The news is good. Canada's largest retail co-operative by membership is generating the kind of numbers that could make its idealistic founders choke on their trail mix. Sales last year, a dismal time for retail, were a record $154 million, up $7 million from the year before. A new store, MEC's sixth, opened in Halifax last year, joining existing outlets in Vancouver, Calgary, Edmonton, Toronto and Ottawa. Winnipeg opens in May and an outlet is planned for Montreal next year.

"We never anticipated that MEC would grow so large," says co-op board member Sara Golling, a retired lawyer from Rossland, B.C., who is still given to kayaking, day hikes and the spontaneous climbing of trees. Back in 1971, she was an impoverished UBC student and part of the Varsity Outdoor Club, a group tired of shuttling south to Seattle for decent climbing and wilderness gear. Four club members had hatched the idea of a co-op the previous spring, when a snowstorm stranded them on Mount Baker in Washington State. Other club members bought into the plan. Golling couldn't afford the $5 membership in MEC, but a friend ponied up the cost of a share so she could be pressed into service on its first board.

The founders, most of whom are still active members, could have parlayed their stake in a multi-million-dollar business into serious money, but there was never a doubt that MEC would stay a co-operative. As a result, Golling's share is still worth $5. The cost of membership hasn't changed in 31 years. What prestige she gets comes from being Member 21 out of 1.6 million. Around certain campfires, a low MEC membership number is a defining characteristic of wilderness chic.

The co-op's initial mandate to sell good gear at fair prices for "self-propelled" recreational activities was simple enough, Golling recalls. But then, as now, other agendas were at play. "An unwritten part of this," she says, "was to become enough of a force in the marketplace in Canada to make other suppliers more competitive."

In this they have succeeded beyond their expectations. For all MEC's determination to leave a modest "environmental footprint," it's often accused of stomping on the competition. As a co-operative, it pays no corporate income tax on profits, since surpluses are returned to members through lower prices, expanded services and occasional rebates. Its product markup is below the recommended retail price, undercutting competitors and causing some suppliers to refuse to sell to MEC.

Co-op CEO Peter Robinson, Member 28,013, dismisses competitors' concerns. Any company could reap a tax benefit by surrendering ownership, becoming a co-op, and dispensing with profits, he notes. Besides, MEC creates something of a symbiotic relationship. Its outlets attract a cluster of competing stores, he says, fostered by the co-op's ability to draw a crowd.

Robinson, 49, a one-time B.C. park ranger and senior provincial housing official, was recruited by the MEC board two years ago for the top job. He was attracted he says, by the board-directed commitment to environmental protection, social responsibility, and sound business. "We want to be a viable, robust, financially secure and healthy organization because otherwise we can't do the sort of things we want to do."

Faced with the suppliers' boycott, for instance, MEC expanded its own product line. About 60 per cent of the co-op's sales come from items designed in-house - everything from sleeping bags to tents, backpacks to clothing. One of the perks for the co-op's almost 1,000 employees is the chance to trail-test new equipment.

MEC's current head office, opened two years ago in a recycled former car dealership in Vancouver, now houses a product development team, a test laboratory and a production department. For industrial designer Gordon Rose, an avid outdoorsman, the latest challenges have included creating two top-level Serratus mountaineering packs, and a redesign of MEC's sleeping bags. He and his girlfriend just returned, relationship intact, after testing a new model bag over several nights of -30° C temperatures. He expects some ideas will be poached by competitors - MEC prefers to spend on innovation rather than on patenting and protecting existing designs. By then, he says, he'll be on to the next generation design. "If poorer companies borrow some good ideas, at least the gear they make will be better."

The co-op farms out production to factories in Canada and around the world, but not before the facilities, both domestically and in such countries as China and Vietnam, win the approval of Naomi Ozaki's production department. Her team checks the usual things - price, quality, reliability - and then it monitors pay, employment standards, safety and environmental practices. Fire exits are marked, labour regulations posted and an employee policy manual written before MEC does business. The co-op pays a premium, Ozaki says, to contract with "the kind of factories we believe carry forward our principles and our values, both in building the product and in the way they run their business."

Even so, the flashpoint of last year's annual meeting was a debate on the propriety of doing business in China, where the co-op utilizes several factories. Co-op members - at least the kind drawn to annual meetings - are kept warm not just by down and fleece, but by the knowledge that, in some small way, their purchases promote MEC's "core values" of ethical conduct, respect for others and respect for the environment. "Morality," notes analyst Harris, "turns out to be a fairly important feature." So does the belonging that comes from paying $5 to be called a member rather than a customer, from receiving, twice yearly, a fat catalogue (of recycled paper, naturally), and from a shared struggle. Apparently even freeze-dried lasagna - "just add boiling water" - goes down better knowing that 0.4 per cent of gross sales are donated to environmental causes.

The result is that the MEC logo - two mountain peaks and the name of the co-op - has become both a visible brand and a declaration of social responsibility. "Something of an alternative to the Canadian flag overseas," says Ian MacPherson, director of the B.C. Institute for Co-operative Studies at the University of Victoria. "It's a less ostentatious and more typically Canadian way of making a statement."

A case can also be made, after three decades in B.C., that the co-op has inspired, for better or worse, the province's sense of style. MacPherson and his wife sometimes bide time at an outdoor café by rating The West Coast Uniform of passersby. "It's pretty hard to score a perfect 10 if you don't have an MEC Gor-Tex jacket with an MEC knapsack," he notes. "And a coffee."

Fuzzy feelings don't preclude efficiency. The co-op may not run a profit, but it prospers by watching costs and using operating surpluses to finance growth. Its cautious expansion is as sure-fire as it gets. It adds stores only where it has members generated by catalogue orders or its year-old e-commerce Web site. With more than 24,000 members in Manitoba and almost 76,000 in Quebec, its newest outlets have a customer base before their doors open.

The stores and remote sales are supplied from a sprawling 94,000-square-foot warehouse in Richmond, B.C. Most gear arrives already tagged and priced by the manufacturer. A computerized inventory and warehouse system tracks purchases and reorders replacement stock from suppliers. Internet and catalogue orders are turned around within hours, to the point that logistics manager Alan Fitterer can tell the weather across the country by the kind of snow, rain or camping gear flowing out the door. Shipping by Canada Post is free to customers, though they pay a premium if they want their order couriered by air. "For Eastern retail stores, we use rail," says Fitterer, who is fluent in MEC-speak, "and that leaves a lower impact on the environmental footprint."

The co-op's very success is a constant test of virtue. Can you paper the country with 1.5 million catalogues a year, sell ever more gear made in the Third World, have thousands more people lug it into the wilderness - and remain a cuddly, conscientious co-operative?

You can try. The nine-member board of directors, in perhaps its most overt political act, recently drafted a letter urging the federal government to crawl off the fence and ratify the Kyoto accord, the international agreement to reduce greenhouse gases and combat global warming. Protecting the environment is also sound business. You can't sell winter gear if there's no snow, notes Robinson. "Climate change affects the ability, long-term, of the co-op to survive."

At this week's annual meeting, the board will present a new, more muscular, vision statement for MEC. Golling says it "goes further than the previous vision in directing MEC to take a lead in environmental and social justice issues." Expect the co-op, with the clout of 1.6 million members, to become a more outspoken advocate, she says. "We'd like to prove that we can be more environmentally and socially responsible and still be a viable business."

The goal - to "work more mindfully towards making positive changes in the world" - is already listed on page 70 of the catalogue, part of the new product line for Spring and Summer.

See also RETAIL TRADE.

Maclean's April 29, 2002