Your co-op, December 2004 | PCC Sound Consumer | PCC Natural Markets

Your co-op
Sound Consumer | December 2004

Share your views

The board is eager to hear member feedback on the topic of membership as it prepares an agenda for a January retreat on the subject. You may do that online. You may also speak directly to a board member about this or any other PCC-related topic in one of our stores during a Talk to the Board visit, or at a board meeting.

Upcoming Talk to the Board Dates

Next board meeting

The next regularly scheduled board meeting will be Tuesday, January 25 at the co-op office. The meeting begins at 5 p.m., with member comment period at 7 p.m. as usual.

History of the member discount at PCC

by Tracy Wolpert, Chief Executive Officer, and Randy Lee, Chief Financial Officer

At the semi-annual meeting in mid-October, PCC management presented background on the member discount at PCC — what it is today and what it has been over PCC's 51-year history. For members not able to attend the semi-annual meeting, the full report may be found here. Following is a recap that might be of interest to the general membership.

When PCC started as a buying club in 1953, it operated with a patronage refund structure, whereby a portion of the cooperative's earnings was rebated back to the members. Some very small cash dividends may have been paid out in some years, but for the most part any earnings in this era were credited to the member's equity account in the cooperative. Unfortunately, our co-op had some difficult years toward the end of the 1960s, and by the time the equity structure was changed in 1969, PCC had accumulated losses that negated any accumulated value that the owners had achieved in their individual accounts. There were no non-member transactions in those days.

Those losses may have been the motivator to make the change in 1969 to a Direct Charge Co-op, also called the "Ottawa Plan" due to its emulation of a structure used commonly in Canada, a change made almost simultaneous to PCC's move from its first storefront on Denny Way to the 65th Street location that preceded the former Ravenna store.

Under the Direct Charge plan, each member paid a flat dues amount each month based on the size of their household and then purchased products at the co-op that were priced at exactly what the co-op had paid for the product. The monthly dues were intended to cover the store's overhead. It was not long before the burden of keeping track of everyone's household size became too cumbersome and too poorly aligned with the intention of covering overhead proportional to use of the store. So, the system was adjusted to eliminate the monthly dues payment (with its wait in a separate line to do so every month) and a markup at the register was instituted — 15 percent for members and 30 percent for non-members. Thus, the differential for non-members was explicit. Later that mark-up was changed to 16 percent/32 percent as overhead increased.

In 1974, in response to members tiring of calculating final retail prices in their heads to compare our prices to that at other stores, the members' retails were put on the products on the shelf and the co-op applied a surcharge for non-members at the register. This change also enabled the co-op's management to implement variable mark-ups for different products in response to the marketplace, rather than the absurd highs and the absurd lows that exist with a flat mark-up structure. Non-members continued to be charged a surcharge at the register on their purchases, something that deterred non-members from shopping in our stores and limited our growth. We hoped they would join the co-op — some did, many others simply avoided us.

1996-2002 In 1996, to overcome the lack of appeal our stores had to non-members and to help us grow the cooperative, PCC changed to the Co-op Advantage Program, or CAP, in which the prices on the shelves were the same for all shoppers unless there was a Co-op Advantage sign on the product. Such a sign on a few hundred products would show the member price and a higher non-member price.

This was tried for a few years and was pretty unpopular because the products on CAP often were not what a member happened to want to buy, and often delivered only a trivial discount on substantial purchases. Over time, the data showed that this program generated savings for members of just over 1 percent of member purchases, a poor differential for members.

Member Bonus Days were instituted in early 2002 to give members who cared about a discount an opportunity to get a significant one by channeling one of their shopping trips into a particular day of each month (the 15th). This program seemed to have worked well for some other co-ops, too. After turning out to be affordable in its first year, PCC expanded the program with additional "thank you" days late in 2002 and then increased the Bonus Days to two days a month to alleviate some of the crowding on the 15th. This was well received and worked out economically as it significantly boosted sales in all of our stores while providing a significant differential for members.

The greatest concern about this program has been the inconvenience of members getting to the stores on the bonus days. So, through March 2005, PCC is experimenting with an additional discount shopping trip chosen by the member. What remains to be seen is whether the co-op can afford this large a discount given out so often, but because of its popularity with members and the convenience it affords them to realize major economic benefit from their membership in PCC, management is hopeful it will be possible.