Bicycles Coming To MEC – Good Or Bad?

Filed in Cycling & Mountain Biking, News by . Most recently updated on

Here’s an interesting article I found in the Vancouver Sun that takes a closer examination of Mountain Equipment Co-op (MEC)’s plans to manufacture and sell bicycles.

Bicycles are coming soon — as early as November — to Mountain Equipment Co-op stores in Vancouver, Calgary, Toronto, Montreal and Winnipeg.

If you’re one of MEC’s nearly three million members, and if you like good gear and good deals, you might applaud this.

Or not. At least two groups of people, both small, aren’t happy.

First are those co-op members who have firmly held, even persnickety, views of what MEC was, is and ought to be. Among them:

– Some who think the co-op isn’t going far enough — although it’s going a long way — on ethical sourcing of MEC-brand bikes.

– Some who think MEC should never have expanded beyond its original niche of selling gear not sold elsewhere.

– Some who think it has become just another big box store, focusing on “lifestyle accoutrements,” not good gear.

– Some who don’t think it should compete with local shops.

– And a few, me included, who object to a giant like MEC using the tens of millions in tax-free earnings its co-op status allows it to amass to compete with businesses that get no similar break.

The other group of unhappy campers are owners of the 60 or so Metro Vancouver bike shops and their counterparts in the other cities. They fear the MEC juggernaut will wipe them out. It has already stunted the growth of Vancouver’s independent gear stores. It keeps them small, forces most to cluster in the shadow of the huge MEC Broadway store if they want any foot traffic, and confines them to niche products that MEC doesn’t sell….

…read the full article.

It seems the issue of the tax breaks MEC receives from its Co-op status is stirring some controversy as it enters a new market and begins competing with local bike shops. 1 in every 15 Canadians is a member of MEC. It clearly is not the little co-op it used to be, so should it still receive the tax breaks it does? Arguing that MEC shouldn’t, you can read the open letter from the Bicycle Trade Association of Canada to MEC’s board of directors here (excerpt below).

Independent bicycle dealers – our members and the primary channel for the sale of decent quality bicycles in Canada – compete on a level playing field with each other. They contribute under a common set of tax requirements and must seek resources for capitalization for growth through retained earnings (which are taxed) or from financial institutions (at interest, or in the current economic climate with low interest but acquired at great difficulty).

In Canada taxes are used by democratically elected governments to support infrastructure and services demanded by the electorate. Taxes paid by all independent bicycle dealers are used to support public infrastructure – including bicycle lanes, bike lockers etc.

As a co-operative MEC and its members do not pay corporate tax on patronage returns re-invested in the co-operative. MEC is thus able to re-investment its surpluses into capital projects (new stores, etc.) while paying little or no corporate income tax.

This preferential tax treatment affords MEC a huge competitive advantage that permeates its entire business whether from building new stores to pricing based on ever increasing buying power – it is this preferential tax advantage that poses unfair competition to independent bicycle dealers.

While we appreciate the intent behind MEC’s stated objectives to, “…expand the cycling market in Canada and increase our support to cycling communities.”, we are perplexed as to how its entry into the bicycle market proposes to do that.

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Comments (6)

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  1. darren says:

    REI is different than MEC in that it gives the savings back to the customer as a dividend at the end of the year and their prices are not any different than other retailers. It’s actually quite expensive to shop at REI and they carry a lot mroe higher end gear as well. MEC passes their savings to the customer by offering cheaper gear at the point of sale.
    MEC is not what it used to be and has already changed the entire outdoor retailer landscape for years now. Good for consumers who feel better about buying from them cause they think they are doing so good environmentally and ethically without having to sacrifce much time or effort to themselves.

  2. Gary says:

    I think MEC getting into bikes is great – I’ll still buy from the local bike shop since it’s more convenient but I don’t think another retailer carrying a handful of MEC-branded bikes is going to change the landscape of bike retailing. Look at REI in the US – they have a few bikes, that are decent but a bit bland, and they attract new riders who are on the fence when it comes to a bike purchase. This is not the end of the world for other bike retailers.

  3. Herb says:

    These bike stores crying foul at MEC are a bit dishonest and a lot confused. What’s so different about the bike industry from any other industry with small retailers? Why not argue that MEC should go out of business altogether? Would that make you happy? (Perhaps)

    No MEC member or staff is making a profit off the business. A bike store, however, is a for-profit business (even when it fails to make a profit) and many a bike store owner would be happy to make a nice tidy profit, or even create a big chain of stores to dominate the market. There’s a bit of jealousy there.

    What MEC has at the end of the year is almost all given back to the members as shares. These shares are paid out occasionally to members who may in turn pay taxes on that money (if they used their purchases for their own business). This money is effectively a discount on purchases made at MEC. That’s how co-ops work.

    Bike stores should just smarten up and start their own buying co-op to get some buying power so they aren’t powerless to the whims of distributors.

  4. gee says:

    I would accept your argument if I had ever heard a person ask, “I don’t know how to find a shop that sells bicycles – where do I find such a thing?”
    MEC has taken the coop thing too far. It started with hippie roots – just a way to get outdoor gear into the hands of people who couldn’t find the gear anywhere.
    What is good or hippie about, “lets enter a market segment where we will likely put a bunch of passionate cyclists out of business. Yes consumers have great selection already but if we enter this market we can kill some businesses”.
    I own a small bike shop. It was my lifelong dream and it is now a reality. Dealing with the regular business stuff is trying and stressful but worth it. Having some goliath WalMart type business decide they’d use their tax advantages to put people like myself out of business is highly un Canadian.
    What happens to the next generation of kids. What do you tell your kid if he or she says, “I really want to start a small bike shop – that would be my dream.” Is your answer, “sorry, but a regular person can’t do that because MEC owns property on every street corner and they don’t have to play by the same rules as you.”
    My shop pays taxes. I proudly pay taxes because I’m proud of Canada and where most of my taxes go. How has MEC been able to convince its sheeples that not paying 22% taxes – and paying out 5% to earthy causes is some sort of ethical high-ground?
    As for the comments about “Canadian Tire” competition. MEC knows what the bread&butter bikes are for bike shops and they’re focusing on exactly that. The only bike shops left will sell niche items like square wheels, bikes with 5 wheels or made for 3 armed ladies.

  5. Karl Woll says:

    I tend to agree. I don’t see it providing much more competition than Canadian Tire already does. People wanting specialized or higher end bikes will still go to the specialty bike shops

    Karl Woll’s last blog post..Vancouver Regional Outdoors Club

  6. GMT says:

    Where to start? :-)

    First of all – MEC is a good thing. It makes decent, quality outdoor products available to a wide customer base at reasonable prices, and has been massively successful in doing that. It’s size enables a wide variety of gear to be sold, and it employs good staff that know what they sell.

    Secondly – although MEC does enjoy an advantage by being a co-op, that advantage is still available to other industry groups. There isn’t anything to prevent bike stores from forming their own co-op – however, that would certainly change the risk & profitability model for those stores.

    Third – MEC selling bikes will likely be the same way they sell goretex jackets – they’ll sell likely decent bikes at good prices, but there will be lots of opportunity for the bike specialty stores to continue to sell more specialized and name-brand bikes.

    Finally – making bikes even more accessible to the broad population is just a generally good thing. If MEC gets more folks to ride bikes simply by selling them, then that’s great for the country.