MEC Strategic Planning Case Study Report

This is a group project, written by Lindsey, Lydawn, Renee, and I.

Mountain Equipment Co-op (MEC) is a Canadian co-operative that began the MEC outdoor gear retail brand. MEC was founded in Vancouver in 1971 and operated solely in Canada.[1] However, in October 2020 the MEC brand name, assets, and store leases were purchased by a private American investment firm. As this was a fairly recent transaction, we are uncertain if this has or will impact MEC’s mission, vision, and values.

MEC aims to inspire and enable everyone to lead active outdoor lifestyles.[2] They accomplish this goal by selling high quality outdoor gear and clothing, while additionally providing high-end services. Furthermore, MEC offers passionate and knowledgeable staff who are experts at matching their members with the gear that best suits their needs. MEC is very member focused. They require customers to purchase a lifetime membership to shop there, until this past October, and offer helpful advice and expertise to all their customers.

MEC’s offers high-quality, high-performance products at fairly competitive prices. MEC’s values of integrity, co-operation, creativity, leadership, sustainability, stewardship, humanity, and sense of adventure are what guides them. This enables MEC to be heavily practiced in having good social value.[3] MEC has taken the Outdoor Industry CEO Diversity Pledge which commits them to share their learnings and to be open about their progress and setbacks in regard to their commitment to supporting diverse communities. MEC has made a lot of progress in diversity, equity, and inclusion. Most recently, MEC has implemented unconscious bias training for their staff. This year, a Certified Canadian Inclusion Professional led a training session for store managers and head office staff. It was a powerful session exploring privilege, systematic inequalities, cross-cultural communication, and their own unconscious biases. The goal of this training session was for their staff to feel a greater sense of comfort in discussing sensitive topics and for everyone to broaden their perspectives at work and in the world. This training will become widespread throughout the company by this upcoming summer.

Subsequently, MEC has made more plans to make change happen including more inclusive hiring practices.[4] This practice that MEC is working on would entail anonymized screening for potential candidates. No names nor genders would be visible to the hiring managers. This would prevent unconscious biases from affecting hiring decisions. Moreover, they are launching an accessibility training program for staff, focusing particularly on store staff. On top of that, MEC is seeking ways to celebrate and recognize our differences. They want to elevate awareness of the cultures and beliefs that make up their staff teams. Their current ideas for this include book clubs and social meetings as opportunities for people to connect and explore diverse views. This would enable thought-provoking conversations about topics that would facilitate important learning from one another.

Stated in the 2016-17 MEC Annual Report, the co-operative takes pride in their success which is dependent on secure cash flow, inventory movement, effective use of floor space, and investment in systems, tools, and product development.[5] MEC exceedingly values their supportive members which is evident as they provide economic value to them through releasing patronage returns. MEC’s Board chooses to announce a patronage return where MEC’s gross earnings at year end are divided between members depending on how much money they spent at MEC over that year. The patronage return is given in the form of MEC shares (worth $5 each). The Board monitors planning and financing, and regularly buys back members shares and replaces them with gift cards. MEC expressed that they remarkably contribute to Canada’s economy and that the co-operative created roughly $1.41 billion in 2016-17 through payroll, operations, member purchases, and community offers. Additionally, in 2016 MEC reported $12.6 million patronage returns, while redeeming $5.4 million worth of shares from over 110 000 members in 2016, and redeeming $1.8 million from over 35 000 members in 2017.[6] After the buyout in October 2020, we are unsure if MEC’s patronage returns are still issued, but in the past, this economic return provided value to MEC members which should be recognized.

 

On top of all their efforts at creating an accepting and unbiased environment, as well as their 2016-17 economic value offered to members, MEC also has incredible ecological sustainability efforts in place. This would include the sourcing of their products and the materials used, and their packaging and transportation of gear.[7] Furthermore, all of MEC’s retail stores are designed with sustainable features in mind including; LED or florescent tube lighting, motion sensors to turn off lights in unoccupied areas, high windows to allow for natural lighting to shine through, geo-exchange systems in concrete floors to provide radiant heating and cooling, on-site energy generation such as solar panels on the roofs of their buildings, as well as many other unique and sustainability focused features.[8] MEC also provides members with handy ways of repairing their gear and clothing in order to truly get the most out of their outdoor gear and clothing.

MEC aspires to be the most viable, vibrant outdoor retail store in Canada. They want to see a future where Canadians, particularly the youth, play outdoors more often and in an increasingly higher volume. Furthermore, they hope to see people have access to a carefully nurtured network of parks, wilderness, and outdoor recreation areas, allowing them to have a strong connection with nature. MEC hopes that their organization and its members set an example that inspires other organizations and people towards environmental, social, and economic sustainability. As it is put on their website, they want to leave the world better than they found it.[9]

Customer Segments[10]

        MEC proudly serves and creates value for its wide range of co-operative members. When customers purchase a $5.00 lifetime membership with MEC they join into a community of over 5 million people who share the same love, passion, and interest in enjoying and being active outdoors.

Customer segments include[11]:

·      Men

·      Women

·      Kids (Baby (0-2 yrs), Toddler and Child (2-7 yrs), and Youth (8-16 yrs)

 

Customer Relationships[12]

        MEC values building genuine, long-lasting relationships with their members. MEC establishes and maintains its customer relationships by ensuring:

·      Trustworthy, high-quality outdoor gear, equipment, products and services

·      Sharing expert knowledge, advice and experience

·      Environmentally sustainable, socially responsible and fair business practices and consequential impacts

·      Equality and inclusivity

 

Value Propositions[13]

        MEC delivers superior value and a unique competitive edge to its members by following their nine guiding values:

·      Quality

·      Integrity

·      Co-operation

·      Creativity

·      Leadership

·      Sustainability

·      Stewardship

·      Humanity

·      Adventure

Value Propositions Continued…

        Each of MEC’s customer segments are offered a variety of excellent, reliable outdoor gear, clothing, equipment and services for all of their outdoor activity needs whether they are competitive, recreational, vigorous, moderate, or just for fun!

        MEC seeks to encourage and enable people of all ages to participate in any outdoor activity in any capacity. MEC commits to leading by example and practicing environmental, social, and economic stewardship while inspiring other organizations to do the equivalent. In short, MEC strives to leave the world better than they found it.

Key Activities[14]

There are numerous key activities which contributes to the smooth, daily operations at MEC.

MEC’s key activities which provide our customers with innovative and ongoing value are:

·      Selling outdoor gear, clothing, equipment, accessories, and various products & services

·      Bicycle and Ski services

·      Providing expert advice and tips – running, fitness, hiking, camping, cycling, rock-climbing, watersports, backpacking, travel, snow sport

·      Product care and maintenance

·      Packing lists

·      Supporting community organizations and programs -       Parks Canada “Learn to Camp” -       “MEC Outdoor Nation” -       “Good Times Outside”

  

Key Partners:

MEC has partnered with a variety of industries to ensure their operations are environmentally, socially, politically, and economically responsible.[15]  Additionally, MEC partners with numerous community organizations where they give back to Canadians by supporting, funding, and initiating various youth programs, educational resources, and outdoor safety projects.[16]

Key Industry Partners[17]	Key Resources Provided from Industry Partners[18]
Fashion Revolution	The “world’s largest fashion activism movement, mobilising citizens, industry and policymakers through our research, education and advocacy work.”[19]   Vision: “conserve and restore the environment and values people over growth and profit.”[20]
America’s Group	Identifies, manages and tackles systemic issues in Central America’s garment industry.
Better Work Program	“Partnership between the UN’s International Labour Organization and the International Finance Corporation”[21] This program assembles “brands, governments, factory owners, unions and employees to improve working conditions in the garment industry.”
Bluesign	Examine supply chain inputs so MEC Labels can minimize chemical and resource impacts that go into the manufacturing of products and materials.   When products and materials are Bluesign approved it means that the assembling of the product was socially and environmentally safe.
BSI	Identifies ways to assess potential risk in the supply chain. BSI initiates country risk assessments to determine socially and environmentally responsible sourcing of materials.
Fair Factories Clearinghouse	Social compliance data Audit questionnaire and results Th goal is to reduce audit fatigue in the supply chain.
Fair Labour Association	Partners since 2005. Collaboration between businesses, universities and civil society organizations which function to protect workers’ rights.
Social Labour Convergence Project	Signed on to this Project in 2016. Created a “converged assessment framework”
Sustainable Apparel Coalition	MEC has been a member since 2011. The goal is to lower the environmental and social consequential impacts from manufacturing clothing and footwear.

 

 

 

 

Partners Continued…

 

2021 Community Partners[22]	Key Resources Provided from Community Partners[23]
Alpine Club of Canada	MEC and ACC shares similar goals of inspiring people to climb and experience the alpine MEC offers funding for ACC youth programs and daily operations
Association of Canadian Mountain Guides	ACMG has a love for nature, outdoor adventure, and providing Canadian youth with the resources and knowledge to safely be active in the outdoors. MEC and ACMG run Adventure Access Program
Avalanche Canada	Partnered since 2001. Public Safety Programs, Public Avalanche Bulletin, Avalanche forecast app, Avalanche Skill Training program MEC directs staff for AST Training
Canadian Parks and Wilderness Society	Key Partner since 1988 Assist with increasing protection of natural regions. Projects; Bighorn Country (AB), Magpie River (Quebec) and more.
Leave No Trace Canada	Encourages and enables safe and responsible recreation outdoors. MEC provided initiate seed funding and assisted in the assembling their infrastructure. Inspires MEC staff to become Master Educators.
PARKBUS	Helps Canadian living in urban centers visit and experience national and provincial parks by offering transportation.
Parks Canada	Learn to Camp Program shares skills, resources, experience, and encourages the beauty of the great outdoors.
Protect Our Winters- Canada	POW, Canada’s non-profit Battling against climate change and inspires Canadians to become environmental advocates. Provides Canadians with knowledge about the consequential effects of climate change
Spirit North	Empowers and encourages indigenous youth to engage in and have fun participating in sport, school, and life.

 

Key Suppliers

        It is critical to MEC that their suppliers meet standards for workers’ rights and environmental sustainability. MEC only works with factories that meet their standards and they ensure this happens through a series of auditing programs, training and empowerments projects, such as Fair Trade.[24] As of 2008 MEC has made a commitment to disclose all names and addresses of the factories and manufactures they work with.[25] MEC wants to ensure their supply chain transparency.  MEC’s supplier disclosure list is separated into tiers to help organize their dozens of suppliers. Tier one includes MEC’s finished goods supply chain and subcontractor supply chain. Whereas tier two includes material supply chain partners. MEC updates their supply disclosure list twice a year to guarantee the most accurate information.[26]

How Does MEC select their global suppliers?[27]

1.     It starts with the question why does MEC want to create something new? - Start research to find the best factories around the world.

2.     Search for partners - Set up site visits to factories to see if it is a good fit.

3.     Assess and Audit – A third party audit of the factory gets completed. If a zero-tolerance issue if found the product stops moving forward. (ex. child labour)

4.     Sign a Partner Agreement- The partnership commences once MEC’s contract is signed.

5.     Training From MEC – All factories must undergo mandatory training from MEC.

6.     Make MEC Label Products – Once all the pieces of the puzzle are in place product begins

 

2020 List of MEC's Key Suppliers:[28]

http://meccms.wpengine.com/wp-content/uploads/2021/03/January-2020-Factory-Disclosure-List_English.pdf

 

Channels of Distribution

        It is important to MEC that they use channels of distributions that minimize the carbon footprint. MEC is always searching for innovative ways they can transport their products with minimal environmental impact. [29] Here are some of their main channels of distribution:

·      Ocean Freight shipments – A common form of overseas shipments where ships have a lower carbon footprint than planes.

·      Rail Shipments – Since it has a lower impact than trucks.

·      SmartWay partners – Carriers that keep fuel costs and environmental impact at a minimum.

·      Social media – Twitter, Instagram, Facebook

·      Online Store – Ecommerce

·      Retail – In store shopping

 

Key Resources

        MEC has several key resources that help them achieve their mission to provide outdoor gear, clothing and services around North America while maintaining their commitment to staying environmentally sustainable.[30] Some of their key resources are:

• Environmental and social sustainability
• MEC membership program
• Products
• Service in bike and ski
• Expert advice in running, fitness, hiking, camping, rock climbing, cycling etc...
• Partnerships
• Building space for retail locations
• Labour, ex staff and talented sports mechanics
• Transportation, ex. ocean freight, rail shipments and etc…  

 

Cost Structure

 

Mountain Equipment Coop 2018-2019 Financial Statement[31]

Statement of Earnings

(Expressed in the thousands of dollars)

Sales                                                                                       $462,446

COGS                                                                                       (313,062)

Gross Margin                                                                          149, 383

 

Selling and administration expenses                                 (164,345)

Restructuring expenses                                                             (8530)

                                                                                                     (23,492)

Other income                                                                              17,034

Earnings (loss) before net income                                           (6,458)

 

Income tax                                                                                   (5,029)

Net earnings (loss)                                                                    (11,487)

 

Variable and Fixed Expenses

Expenses (fixed)[32]

·      Salaries, wages and employee benefits

·      Supplies and services

·      Rent and occupancy

·      Amortization

·      Interest

Expenses (variable)[33]

·      Loss on disposal of property and equipment and intangible assets

·      (Closed MEC retail location and office in Montreal) 

MEC has recently sold due to sluggish sales, overcrowding inventory and the COVID-19 impact, to Los Angeles-based private investment firm called Kingswood Capital Management.

 

Revenue Streams

        MEC is a co-operative business, therefore the governance structure is unique. MEC is a democratic organization controlled by their members. These members have the ability to participate in policy development and decision making. Becoming a member costs an individual  just $5.00 for a lifetime subscription, and in return they receive 1 share. From 1971 to 2017 MEC has issued 16 share redemptions and has returned a total of 35 million over the years.[34] The membership fee has become one of the company’s major revenue streams.

Other Revenue Streams[35]

• Membership fee of $5.00, there are 5.8 million members
• Transaction based revenue at retail stores across Canada
• Online store 
• Gift cards
• Service based revenue
• Assets, ex accounts receivable, inventory, investment joint arrangement
  

S.W.O.T. Analysis

Strengths

• Conscious environmental and social impact
• Co-operative organizational structure
• Lifetime membership
• High product quality
• Sustainable materials for products
• Competitive prices
• Good brand reputation, high brand recognition (consumers trust)
• Very knowledgeable staff

Weaknesses

• Weak presence in Canada (only 21 stores)
• No international presence
• Slower response to market demand
• Weak social media engagement

Opportunities

• COVID-19 pandemic
• Development of new technologies to enhance product offerings
• Online presence

Threats

• COVID-19 pandemic
• Change in consumer preferences and spending habits (more technology based)
• Increase in competition
• Weather and climate changes

Strategic Option

The recommended strategy for MEC is for the organization to focus on marketing, more specifically, marketing online the opportunities COVID-19 brings for outdoor activity. If MEC wants to stay competitive, it will have to strengthen its online engagement. MEC should do so primarily through its social media channels. Overall, the main goal is to focus on why now is a great time to reconnect to nature.

 

This is a profitable strategic option for several reasons. As the S.W.O.T. analysis reveals, the COVID-19 pandemic is an opportunity and a threat for the outdoor equipment and apparel industry. It presents a great opportunity because people are getting outside in nature more than ever before. The proof can be seen in campsite bookings in Manitoba for example. This year, within two hours of campsite registration being open, Manitoba Parks made nearly 11 thousand reservations. The same time last year, there were only 5,700 reservations.[36] This provides a massive opportunity for the outdoor apparel and equipment industry. MEC can capitalize on this by connecting to consumers online and directly marketing towards this initiative. This is the perfect time for MEC to take advantage of this opportunity and increase marketing efforts in order to gain a competitive advantage.

 

Additionally, because of COVID-19, people are online shopping more. Shopping online has soared, and in-person shopping has drastically decreased. This only strengthens the need for solid online marketing and engagement. In this case, the minimal number of physical stores for MEC could be a good thing. More than ever, MEC must have an engaging online presence, especially an engaging social media, that draws people in to view their page and products.

 

There is also less risk with this strategy of strengthening online marketing efforts. Opening more physical stores across Canada can be risky with the COVID-19 pandemic and the impact it has had on consumer buying trends. But strengthening online marketing efforts and social media engagement does not require a significant investment or risk. Society is becoming more digital, meaning people are very connected to their technology. For these reasons, it is recommended MEC pursues a focused marketing strategy, specifically on the opportunities surrounding COVID-19. 

 

Bibliography

“ABOUT.” Fashion Revolution. Accessed April 7, 2021.     https://www.fashionrevolution.org/about/

“About MEC.” MEC. Accessed April 8, 2021. https://www.mec.ca/en/explore/about-mec

“About Us.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/about-mec

“Diversity, Equity and Inclusion.” MEC. Accessed April 8, 2021. https://www.mec.ca/en/explore/diversity-equity-and-inclusion

“Factories and Partners List.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/factories

“Green Buildings.” MEC. Accessed April 8, 2021. https://www.mec.ca/en/explore/green    buildings

“How We Work with Factories and Partners.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/how-we-work-with-factories-and-partners.

“Industry groups we work with.” MEC. Accessed April 7, 2021, https://www.mec.ca/en/explore/factories

“MEC at a Glance.” 2016-17 MEC Annual Report. Accessed April 7, 2021.            https://meccms.wpengine.com/wp-content/uploads/2017/06/MEC_2016-17_Annual            Report_digital_EN.pdf

“MEC’s Economic Contribution,” 2016-17 MEC Annual Report. Accessed April 7, 2021. https://meccms.wpengine.com/wp-content/uploads/2017/06/MEC_2016-17_Annual            Report_digital_EN.pdf

“MEC Home.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/

“Membership.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/membership

“Mission and Values.” MEC. Accessed March 31, 2021. https://www.mec.ca/en/

“Mountain Equipment Co-operative Financial Statements ,” 2019. http://meccms.wpengine.com/wp-content/uploads/2017/06/2019-02-24-Mountain-Equipment-Co-Op-FS-AR_digital-signatures.pdf.

“Our Vision.” Fashion Revolution. Accessed April 7, 2021, https://www.fashionrevolution.org/about/

“Packaging and Transportation.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/packaging-and-transportation.

“Partnerships.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/partnerships

“Peaks and Valleys: MEC's Struggle to Survive in a Hostile Retail Market.” BLG, 2020. https://www.blg.com/en/insights/2020/12/peaks-and-valleys-mecs-struggle-to-survive-in-a-hostile-retail-market

Rosen, K. (2021, April 05). Manitobans left frustrated as demand for campsite reservations

skyrockets. Retrieved from https://winnipeg.ctvnews.ca/manitobans-left-frustrated-as demand-for-campsite-reservations-skyrockets-1.5375250.

“Social and Environmental Accountability,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/sustainability-innovation

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[1] “About MEC,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/about-mec

[2] “Mission and Values,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/mission-and-values

[3] “Diversity, Equity and Inclusion,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/diversity-equity-and-inclusion

[4] Ibid.

[5] “MEC’s Economic Contribution,” 2016-17 MEC Annual Report, 21, Accessed April 7, 2021, https://meccms.wpengine.com/wp-content/uploads/2017/06/MEC_2016-17_Annual-Report_digital_EN.pdf

[6] Ibid.

[7] “Social and Environmental Accountability,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/sustainability-innovation

[8] “Green Buildings,” MEC, Accessed April 8, 2021, https://www.mec.ca/en/explore/green-buildings

[9] “Mission and Values,” MEC.

[10] “Membership,” MEC, Accessed April 7, 2021, https://www.mec.ca/en/explore/membership

[11] “MEC Home,” MEC, Accessed April 7, 2021, https://www.mec.ca/en/

[12] “MEC at a Glance,” 2016-17 MEC Annual Report, 2.

[13] Ibid.

[14] “About Us,” MEC, Accessed April 7, 2021, https://www.mec.ca/en/explore/about-mec

[15] “Industry groups we work with,” MEC, Accessed April 7, 2021, https://www.mec.ca/en/explore/factories

[16] “Partnerships,” MEC, Accessed April 7, 2021, https://www.mec.ca/en/explore/partnerships

[17] “Industry groups we work with,” MEC.

[18] Ibid.

[19] “ABOUT,” Fashion Revolution, Accessed April 7, 2021, https://www.fashionrevolution.org/about/

[20] “Our Vision,” Fashion Revolution, Accessed April 7, 2021, https://www.fashionrevolution.org/about/

[21] “Industry groups we work with,” MEC.

[22] “Partnerships,” MEC.

[23] Ibid.

[24] “How We Work with Factories and Partners.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/how-we-work-with-factories-and-partners.

[25] Ibid.

[26] Ibid.

[27] Ibid.

[28] “Factories and Partners List.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/factories

[29] “Packaging and Transportation.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/packaging-and-transportation.

[30] “About Us.” MEC. Accessed April 7, 2021. https://www.mec.ca/en/explore/about-mec

[31] “Mountain Equipment Co-operative Financial Statements,” 2019. http://meccms.wpengine.com/wp-content/uploads/2017/06/2019-02-24-Mountain-Equipment-Co-Op-FS-AR_digital-signatures.pdf.

[32] Ibid.

[33] Ibid.

[34] “Peaks and Valleys: MEC's Struggle to Survive in a Hostile Retail Market.” BLG, 2020. https://www.blg.com/en/insights/2020/12/peaks-and-valleys-mecs-struggle-to-survive-in-a-hostile-retail-market.

[35] Ibid.

[36] “Manitobans left frustrated as demand for campsite reservations skyrockets.” CTV News, 2021. https://winnipeg.ctvnews.ca/manitobans-left-frustrated-as-demand-for-campsite-reservations-skyrockets-1.5375250.