For businesses struggling to overcome the pandemic, maybe it's time to focus on core values.
Consider REI Co-op, PCC Community Markets, and MEC — three iconic community-based Cascadia businesses whose survival may depend on returning to practices closer to their roots.
Seattle’s REI Co-op recently suffered self-inflicted wounds. PCC Community Markets undermined its success with tone-deaf leadership. MEC is trying to reset under new ownership. They previously put too much emphasis on growth and now show varying signs of potential.
These are member-owned cooperatives — a popular form of corporate governance in Cascadia — so benefit from extremely loyal customers. As icons they matter more than most generic retailers.
Missing the outdoor surge
REI, founded by Seattle climbers in 1938, boomed over the last 40 years as it broadened into clothes and lifestyle equipment. Critics always say it has lost its way, yet business doubled in the 2010s to about about $3 billion annually. Still, something seemed to change after it hired a Coach executive as CEO in 2013. Stores increasing were located in strip malls, and it closed its climbing-forward store in Redmond next to trails and transit, in favor of a traditional box near freeways.
In mid 2019 a longtime retail-finance executive became CEO and shored up the books. In 2020 REI reported zero profit, but only after an $80 million gain from selling its headquarters properties, including selling a new purpose-built office complex to Facebook. The company is debt-free and has plenty of credit. Yet it sales fell as it cut inventory — it performed worse than peers, despite the pandemic-era boom in outdoor activities.
REI has a history of blaming poor business decisions on external factors rather than its own business decisions. For example, it blamed an ill-fated foray into Japan 20 years ago on the poor economy rather than its execution. Moves in 2021 to focus on products and initiatives on carbon-reduction and conservation seem aimed at shoring up support, though lack of inventory remains a challenge.
Tone-deaf grocery leadership
PCC was started by 15 Seattle families in 1953, long before organic foods could be found in major stores. As competition increased it gradually went upscale, managing to keep loyalists with ever-stricter food standards while adding locations and a fancier shopping experience. Yet the largest community-owned grocery in U.S. fueled criticism that growth was its main goal, hiring one CEO from Starbucks and another from Kroger.
This grousing became headline news when the CEO publicly campaigned against COVID compensation for workers in Seattle, despite the company seeing a 26% increase in both net income and sales, to $2.6 million and $383 million, respectively during the year. A backlash among members led to two longtime store employees being elected to the board over management's choices, with pledges to rethink the company's practices. The CEO quit. In stores, there appears to be more employee turnover and concern about the organization's direction.
Co-op gone wrong
MEC, started in Vancouver in 1971 as Mountain Equipment Co-op, stretched the support of its loyal customers by pursing branding and growth like any other retailer. Management strayed from the cooperative ethos and still growth stalled. In 2019 MEC reported a loss of $16 million on sales of $462 million. In 2020 losses grew to nearly $23 million while sales stagnated at $463 million. By Sept. 2020 the board had sold out: a California private equity firm paid $150 million and converted MEC into a private company.
The buyers gained a trove of consumer data that alone makes the deal worthwhile, though they pledge to keep stores and employees. This weekend the Victoria store was packed and seems fully stocked, but it's unclear if that traffic translates into sales. Will MEC succeed as a regular company or will it need to return to its roots? The direction will say a lot about the viability of the co-op model.