MEC: Hierarchy of Values

Nov 30th, 2020

Mountain Equipment Co-op was founded in 1971 as a manufacturer and retailer of outdoors equipment.  This member-owned co-op originated with a group of climbers and deep wilderness backpackers who were frustrated with the difficulty of finding appropriate and quality outdoors gear such as climbing ropes, pitons, chalk, or tents.  Membership was open and cost just $5.  MEC gear was famous for its durability–it was pricy, but always a buy-it-for-life purchase, and all MEC products were guaranteed by the company.  All profits were directed back into the business. 

By 2012 Mountain Equipment Co-op had expanded to 15 stores, with locations in prime retail spaces such as Portage Avenue in Winnipeg, Broadway in Vancouver, and Queen St. in Toronto.  The organization then rebranded its retail identity to MEC.  Many members noted that the quality of the chain’s core products dropped at this time.  Items with the new MEC logo seemed to use inferior materials and no longer came with the famous guarantee.  Over the next few years the marketing focus and product mix drifted from the core “Mountain Equipment Co-op” brand to acting mostly as a retailer for other companies’ product lines.

Then in 2020, MEC executives announced that the company was being sold from the co-operative to an American Private equity company, Kingswood Capital Management.  A MEC press release on October 30, 2020 to announce the completion of the sale made the following claim:

The acquisition creates a positive path forward for MEC, strengthening the brand, preserving jobs and opportunity for employees, and enabling MEC to continue to be the outdoor supplier of choice for Canadians.

Despite such confidence of the corporate head office, membership was outraged.  Many members had opposed the sale and/or vowed no longer to shop at MEC, even launching a lawsuit to block the move.  Some employees reported that the company still owed severance pay

Now here is my argument: by examining MEC’s value proposition we can reveal how this acquisition is misguided, a step in greater transformations to the company, or both.

MEC’s value proposition had three main points that are relevant to this discussion, in ascending tiers:

  1. Functional: sells made-to-last quality.
  2. Lifestyle: prioritizes hard-to-find equipment.
  3. Social: operates as a member-owned co-op with environmentalist and social justice values.

The MEC changes from 2012 to 2020 interacted with these value points.  But much can be learned from examining the responses to each change.  Notably the membership reacted stronger to alterations to the higher-order points of value.

First, the rebranding of the company to MEC and the redesign of the products from a “buy it for life” quality level was not well-received by membership, but most members continued to shop at MEC because it maintained its higher-tier functions of lifestyle and social benefits.  That a backpack might last only five or six years instead of, well, forever, was counterbalanced by the greater value of still being able to acquire gear that was unavailable elsewhere.

Second, the shifting focus from specialized products toward other brands’ product lines was also poorly received, as it meant that MEC was putting fewer resources towards supplying and curating the hard-to-find equipment in favour of widely available brands such as The North Face, YETI, or Patagonia.  But MEC continued to offer its highest-tier value in the social benefit.  The selection of tents and ropes may have decreased and the company’s offerings were now less distinct from other Canadian outdoor chains such as Atmosphere or SAIL, but the company was still a co-op, and the customers were still members.

Now while the changes to the functional approach to the business (“what we do”) caused grumbling among the members, the social change was the one that proved catastrophic for company.  The buy-out by foreign investment firm completely undermined why many members were willing to pay premium prices.  The members shopped there because it wasn’t owned by a remote corporation.  The acquisition was intrinsically self-defeating: it alienated MEC’s longest and most loyal customers.

Going forward, MEC may flourish as a high-end outdoor lifestyle brand.  But now it’s one corporate retailer among many in the Canadian market.  And that Mountain Equipment Co-op’s original three key value propositions are gone means that MEC-Kingswood will need a strategy for rebuilding those customer relationships, from the ground up.