MEC

[minx]

doe any of you canucks know if MEC gives a discount on gear if multiple pieces are purchased? my favorite local shops will give me 10-20% off of 4 or more cams. h/e the exchange rate and sale prices might make it worth a big spending spree at MEC and w/e at squamish.

[snoboy]

No discounts.

[Mer]

You can get a volume discount through group sales if you're buying in bulk. Bulk is many more than four items, and you have to order up in advance.

[scott_harpell]

You can get a volume discount through group sales if you're buying in bulk. Bulk is many more than four items, and you have to order up in advance.

 

But if you do this, and get caught crossing the border, you're up shit creek.

[Thinker]

You can get a volume discount through group sales if you're buying in bulk. Bulk is many more than four items, and you have to order up in advance.

 

But if you do this, and get caught crossing the border, you're up shit creek.

 

no problem....pick up the cams on your way to Squish, get em all scratched up good, and the border guards won't even raise an eyebrow on your way back home.

 

....unless Scotty tips them off!

[murraysovereign]

And just to add a blatantly self-interested comment - prices are the same at either of the locally-owned shops in Squamish, so if you're heading up for the weekend anyhow, don't waste your time stopping in Vancouver.

[Dru]

when are you gonna institute a 5% discount for cc.commers murray?

[murraysovereign]

when are you gonna institute a 5% discount for cc.commers murray?

 

As soon as MEC does it , in other words - don't hold your breath. We'd be happy to offer all kinds of discounts on gear for all sorts of groups (and we do for some, such as local Search & Rescue volunteers) but the economic fact is that we are already matching prices with a mega-co-op that is legally required to not make a profit. So we're already selling climbing gear at break-even prices, and there's simply no room left for extra discounts. Simply put, you're already getting a pretty good discount just because you're buying in Canada, in a market that is thoroughly distorted by the dominance of a non-profit retailer. US-based retailers, on the other hand, are able to offer more discounts because they're generally starting from stronger margins to begin with.

[Stemalot]

who ever said mec is non-profit?

[snoboy]

Uh... the law that defines what a co-op is in Canada...

[Stemalot]

might want to check on that again (see below)...if it's non-profit, it'll say "non-profit"

 

http://strategis.ic.gc.ca/epic/internet/incd-dgc.nsf/vwGeneratedInterE/h_cs01402e.html

[jordop]

.

Edited June 8, 2021 by jordop

[Dru]

might want to check on that again (see below)...if it's non-profit, it'll say "non-profit"

 

http://strategis.ic.gc.ca/epic/internet/incd-dgc.nsf/vwGeneratedInterE/h_cs01402e.html

 

there is a difference between NON profit and NOT FOR profit.

[Don_Serl]

murray,

 

you're doing a great job of serving the local market and of providing an alternative to MEC, and i'm sure that it's tough for any small businessman to keep the lights on and bread on the table, but don't "damn" the co-op with false claims. doing so confuses "the marketplace" and, worse yet, risks blurring your vision of your competitor, and leading you into making poor strategic choices.

 

the FACT is that MEC sets its prices at "break even" level as a CHOICE, not because the law requires it to do so. they are NOT a "non-profit" (those are restricted, special-interest type organizations; they are kinda "not-for-profit" (although those words have disappeared from the co-op's self-descriptions in the past couple years, did you notice? and that is a board-chosen objective, NOT a mandate by law); and they are definitely NOT "unprofitable" (the third category, which every business must avoid!).

 

a co-op is simply a different ownership structure - many co-ops (REI, for example) price "at market" (i.e., at full suggested retail prices). this generates a "surplus" or "earnings" (or "profit", as most people would incorrectly call it). in REI's case, their board has always followed a policy of giving back a portion of that surplus to their member/customers as a direct rebate (a cheque). in 2003, they sold about $805m at a margin of 43%, generated operating income of $55m, returned $34m net in member dividends, paid $1m tax on the income, and added $19m to retained earnings. very healthy financial performance!

 

in MEC's case, the board has always CHOSEN to take a different course. prices are set as low as is possible for the business to sustain itself, and when a small surplus is gained even in those "tight" circumstances, the member dividend is paid out in the form of shares, not cash. this achieves 2 aims:

1) reducing taxable income to zero, while

2) keeping the working capital in the co-op.

 

to compare to REI, in 2002 MEC sold $163m at a gross margin of 30% (two-thirds of the margin of REI and most other outdoor businesses in less-competitive environments - thereby the low retail prices). despite the low margin, MEC "made" $2.4m, and distributed $2.4m back to the members as a patronage dividend in the form of shares. taxable income was reduced to zero.

 

note that the fact also is that returning "profit" to customers to lower taxable income to zero is NOT just something available to co-ops. you could legitimately do the same thing with the profits of your shop in squamish (not that you'd want to - you live off those profits). and of course, you'd need to record the name and address of every customer for every transaction to enable you to do so, so in the real world ONLY co-ops, with their member = owner = customer structure can practically do this.

 

one further point: the objective of ANY business has to be to make a profit (even at MEC, the objective is to make around 2% "surplus"). when that happens, the usual course of events in all businesses is to distribute some (but not all) of that profit to the owners. for a publically traded company, those owners are the shareholders; for a privately held company (like yours) the owners are... the owners; for a co-op, the owners are the member/shareholders. different structures, names, and scales, but fundamentally parallel.

 

so, back to my point: it's OK for you to grouse about how "tough" MEC makes it for other outdoor businesses in Canada - the margins (and therefore prices) are the lowest in the world for most goods (except for some interent retailers in obscure corners of Europe). your job, and your challenge, is to find ways of "adding value" that the co-op can't or doesn't. for instance, as you've pointed out, you're in Squamish - the co-op isn't. people can drive straight thru to the crags, then shop, rather than having to wait till 10 a.m. MEC opening, shop for an hour or two, then get to Squamish after lunch. and/or you can carry stuff the co-op does not. and/or you can provide better, more personable, more "user-friendly" service than MEC. you can make people aware of all this on forums like this one. etc, etc...

 

the point is, MEC ain't going away, the competitive environment in Canada ain't getting any softer, and you don't do yourself any favours by mis-understanding and thereby perhaps mis-judging your major competitor.

 

i offer this absolutely genuinely. i worked at MEC for 25 years and i "believe" in what and how the co-op does business, BUT i sure don't want to see them being the only game in town. that would be a VERY bad outcome for outdoor consumers.

 

good luck to you; may your business thrive!

 

cheers,

[Winter]

Maybe you crazy Canucks think "non-profit" means something different but down in here in the states it just means there are no owners that get distributions.

 

"Non-profits" are allowed net revenue (ie profit). They just aren't allowed to distribute profits to any owners (because there are none).

 

Otherwise it would be damn hard to run one of these things, because it would be break exactly even or lose money every single year. Not at attractive option.

[Fromage]

Don, thanks for the lesson on finance and business management. It is always refreshing to read a rational, well-reasoned, and well-written position on these boards. And the Merrycans frequently learn new things, so thanks for sharing the wisdom.

[tomtom]

in REI's case, their board has always followed a policy of giving back a portion of that surplus to their member/customers as a direct rebate (a cheque). in 2003, they sold about $805m at a margin of 43%, generated operating income of $55m, returned $34m net in member dividends, paid $1m tax on the income, and added $19m to retained earnings. very healthy financial performance!

 

<Thread drift>

 

Yeah, I noticed this too in the REI financial statement. I believe they added that to their $157 million in retained earning. Obviously, REI could have distributed a 15% dividend, but chose not to. People only expect a 10% dividend. Why do they need all this cash?

 

REI Financial Statement (.pdf)

 

</Thread drift>

[Don_Serl]

in answer to tomtom's question: "Why do they need all this cash?" - there IS no cash!

 

companies finance their operations on equity and debt (strictly speaking, liabilities, which are amounts that have to be paid out to someone, some time). retained earnings contribute to equity, but (while i'm no expert) companies that have NO debt whatsoever must be exceedingly rare. and debt costs you money. so, the amount that you increase your equity allows you to decrease your debt. this is generally a good thing cuz:

#1: it gives YOU more control of your financial affairs rather than having to please the bank,

#2: it insulates you against unexpected "turns" in the big, broad world,

#3: it costs you less,

#4: it gives you "room" to turn to debt if you need to,

etc...

 

on the other hand, loading up with debt allows a company to "leverage" a market position, opportunity, and/or competitive advantage much more dramatically/faster than it could if it relied just on its own resources (i.e., equity). of course, the debt has to be paid back over time, and many companies fail because they project too optimistically, leverage too hard, their projections aren't met, their cash flow position tightens, and they either cut costs dramatically or go out of business. MEC suffered through a bout of exactly this type in 2002/3, which (on a personal note) is why my job disappeared.

 

as for REI and its retained earnings, yup, the "cash" got added there. retained earnings totalled $178m at the end of the year. add in the $70m in memberships, and you've basically got $250m in equity in the company. BUT, REI also has $100m of stock on the shelves (inventory), owns $250m worth of property and equipment, and has a variety of other commitments on its funds. the difference gets financed by long term debt ($63m) and shorter term financing (money owed to vendors is often a big part of this; see accounts payable = $106m).

 

see, isn't finance fun?

 

seriously, learning a bit about how to read a balance sheet is a useful thing to do - lots of common misconceptions get cleared up, and a better appreciation of the challenge faced by any and all business is gained - whether that be at the scale of valhalla pure in squamish, or REI.

 

(btw, if you want to be amazed by efficiency in a retail operation, check out walmart's financials: $244 BILLION dollars of revenue in 2003 - largest company by revenue on the planet by far - and making a profit while running on 21.5% gross margin (half of REI's). leave aside all the sniping - much of which is valid - and from a purely financial point-of-view, that's effing amazing!)

 

enjoy your day,

cheers,

[Stefan]

Good write up on the financials and what they mean Don.

 

However, I slightly disagree with this statement you made:

one further point: the objective of ANY business has to be to make a profit...

 

I believe the objective of any busines has to be positive cash flow, becuase a business can be profitable and still go bankrupt....

[Stemalot]

have you considered working for a bank yet, Don?

 

great write up on the outdoor retail finance.

Edited March 26, 2004 by Stemalot

[murraysovereign]

Hi Don,

thanks for giving a far more detailed explanation than I could ever be bothered to do. I opted for the "thumbnail sketch" and in so doing over-simplified in the interest of brevity. The main point still stands - that gross margins in Canada are significantly lower than in the US, so there's little or no room left for additional discounting, which was the original question that started this thread.

 

And please don't think that I'm "damning" MEC - far from it. The existence of MEC has allowed the development of an "outdoor" market in Canada of a size that simply wouldn't exist otherwise. The independent retailers like myself are simply feeding on the edges of that market. If MEC disappeared tomorrow, as some independents wish, the effect on the Canadian retail market would be dramatic, and many of those same independents would find themselves struggling to survive the disruption. I think it's the Chinese (it always the Chinese, isn't it?) who say "be careful what you wish for - you just might get it"?

 

Me, I'll take the relative stability of the current arrangement. I'm having a hard enough time trying to figure out what the dollar is going to do next, without having to also contend with a completely transformed competitive landscape. Of course, I'd still prefer to see people buy from independents like myself, rather than MEC or the Forzani Group, but I may be just a little bit biased.

[tomtom]

Thanks for the lessons, Don. I started thinking about that after I had posted.

[Don_Serl]

stefan,

 

well, you're dead-on that cash flow is the "life blood" of any organization, and that a "profitable" business can go bankrupt. however, i'll stand by my statement that the OBJECTIVE is to make a profit.

 

an "objective" is a strategic aim. that's long-term, and answers a question about "what" the business is trying to do.

 

cash flow is tactical, and short-term, and speaks to a question about "how" the business goes about accomplishing its objectives.

 

so, a business that is "profitable" (in that a one-time snap-shot of its financial situation looks positive, i.e., its year-end consolidated statements) can still get into a life-threatening negative cash flow situation at some point during the year. more money is flowing out than is coming in, and if the company does not have "resources" (line of credit, ability to obtain a loan, possibility of selling an asset, option to issue more stock, whatever) to get more liquidity ("cash") into circulation, it'll hit the wall. if it hits hard enough (and/or if its bankers happen to be hard-pressed at the moment) it might be forced into bankruptcy.

 

virtually every business goes thru cycles of positive and negative cash flow. in the outdoor business, things are generally negative february thru the spring, then turn positive thru summer, then maybe bump back negative for a couple months in the fall, then go WAY positive (hopefully) over winter/christmas. the key, as you allude to, is to have enough "cash" (in a variety of forms) to cover the outflows till they turn back into inflows.

 

large businesses usually manage this thru financial tools: lines of credit, whatever. small businesses often rely on their suppliers to accept delayed payments - usually the suppliers grouse about it, but are OK with this - better that than not getting paid at all!

 

a good analogy for cash flow is fording a river. if you are six feet tall and the river is 4 ft deep no problem. but, if the river "averages" 4 ft deep [which makes it look like you are "profitable"] but has a section 8 ft deep which is longer than you can cross while holding your breath (assuming you can't swim, but that you CAN walk on the bottom...), you drown! your cash flow was insufficient.

 

of course, it's also plenty easy to simply go out of business because you're unprofitable!

 

or, as dickens so accurately put it:

 

“My other piece of advice, Copperfield,” said Mr. Micawber, “you know. Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

 

cheers,

 

p.s. apologies for the thread drift - kinda got carried away. i suppose somewhere in here is the ability to answer the original question about discounts and MEC/valhalla pure prices...

[Fromage]

Don Serl, you have this man quaking in fear of his job.

 

[Don_Serl]

more likely, that man i quaking in fear that he would have to run a sporting goods shop!

cheers,