Canadian Retail Chain Raises Ire of Bike Trade Association

The following is my contribution to a larger article in Bike Europe — regarding the Canadian cycling industry. Full article

Canadian Retail Chain Raises Ire of Bike Trade Association

Canadian outdoor equipment retailer Mountain Equipment Co-op (MEC) has decided to expand its product line-up by selling its own house brand line of bicycles and offering bike repairs and servicing (they currently only offer bike parts, accessories, and clothing). The move doesn’t sit well with the Bicycle Trade Association of Canada.

“What MEC engages in is a very predatory retail practice,” says Pete Lilly, the president of BTAC. “They’ve dominated and basically decimated the outdoor industry in Canada and I think the bike industry needs to be aware that with them coming into our sandbox, we risk going down the same path.” The co-operative, however, expects good things from this expansion of their role in the Canadian bike industry. “I think the question is how come it’s taken so long for MEC to get into bikes,” remarks Tim Southam, the co-op’s public affairs manager.

“That’s the question I hear from people. They say, ‘It’s surprising you haven’t done it till now.’” One of the chief criticisms levelled at MEC by other retailers, concerns their non-profit status. The organization was formed in 1971 to supply mountaineering and climbing gear to the outdoor enthusiasts who couldn’t get the gear they needed to tackle Canadian mountains.

The company has grown from this niche market to boast store sales of CAN$247.7 million in 2008 and 3 million members, selling a range of goods from canoes to clothing, with twelve stores across the country and online shopping. Despite its growth into a major retailer, it remains non-profit. This allows MEC to keep large cash reserves, due to Canadian tax laws, which give special status to co-operative businesses, in recognition of the difficulties they face in raising capital. Canadian financial columnist Don Cayo has been following the issue since he first raised questions about the tax benefits in a 2006 article. He thinks the move by MEC will drive some independent bike stores out of business.

“I personally would be astonished if it (MEC) grows the market enough to compensate for the market share it will take,” says Cayo. MEC does draw enough customers to its stores that many bike shops acknowledge a location nearby the big retailer can be a blessing, however mixed. Paul Bogaert, owner of two Bike Doctor stores in Vancouver, British Columbia has been in the bike business for a couple of decades. Both his first bike shop, and current Vancouver store, need only look across the street to see one of MEC’s flagship locations.

“We don’t really drop our prices, so much as we avoid selling the same things,” says Bogaert. “Now it’s getting harder, as they start selling more and more bike products.” But going national with a bike brand in Canada is no easy feat. Ed Luciano, another bike store owner (Mighty Riders) living in MEC’s shadow, notes that there’s no been shortage of attempts to go national in the past. “Essentially they’re starting a brand, but how many Sekines, how many BRCs (now-defunct Canadian bike brands) are there going to be, that only last seven or eight years? I would not want to be the person in charge of that program,” says Luciano. “That’s a lot of work.”

At stake are not only the dollars flowing from both traditional cycling customers, but also the growing market made up of Canadians choosing to incorporate bikes into their transportation options. The fact that MEC hasn’t until now offered complete bikes for sale, or specialized services such as repairs, has been a crucial niche for the independent bike shops. The new challenge for them will be to find another gap in the mountainous range of products in MEC’s line-up, and hope it’s wide enough for most to emerge on the other side.