Well, I see the conversation over at Wealth Bondage didn’t stop while I took the weekend off. Some very good discussion in the comments to this post. Mike Edwards has some especially good points. Great new weblog to track.
To capture my own thinking in one place, I’m going to post comment(s) to other blogs here. Possibly edited for context.
Credit Unions are co-ops. I’m meeting with the manager of the local CU next week to investigate building closer ties with our grocery co-op. Then a few board members will attend each other’s board meetings. I’ll report what I learn.
I can tell you that at the national level, the banking industry is constantly trying to shut down the credit unions. This takes the form of trying to limit their geographic reach, customer demographic or number of offices via legislation. The National Cooperative Business Association (www.ncba.coop) works really hard to publicize and lobby against all this hooha.
Re: competition: What’s amazing to me is that co-ops thrive, if you can call it that, in the grocery business. This is a business with 25% gross margins, 1% (!!) net margins, and a business model highly sensitive to labor rates, perishables and continous margin maintenance. For contrast, Microsoft has something like 85% gross margins and on the order of 70% net (from distant memory; please correct if you know current numbers). Software CDs don’t rot after four days (some might say that MSFT software rots on day one, but that’s a different topic), the margins allow for lots of slop and experimentation, and although labor is expensive it’s a relatively fixed cost.
What this says to me is that passion can compete in one of the toughest businesses round. Yes, Whole Foods and the like can put a co-op out of business pretty easily, but we’re talking about pockets of resistance here, not taking over the world. Part of good market research (sorely lacking in most non-profit ventures) is analysis of demographics, consumption habits, geography, etc.
If an industry of ex-stoners can stay alive at 1% net margins, there is hope for alternative business structures, no matter what the big guys do.
July 28, 2003