Bicycles Coming To MEC – Good Or Bad?

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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