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Sharpening the competitive edge

How cooperatives are standing their ground against encroaching for-profits

cooperatives versus corporations

The streets of Toronto are dotted with brightly coloured, eco-friendly cars that are available at mere dollars a day. With a few clicks online, people can pick up a key (or a keycard), take their pick from hundreds of curbside vehicles and simply get in and drive away.

In the previous century, this would have appeared to onlookers to be an extremely polite form of theft. But it’s called car sharing, an urban transportation service that seeks to provide users with round-the-clock access to a network of shared vehicles at unattended, selfservice locations. The idea is that members are saved both the money and the trouble of owning a vehicle, while communities reap all the benefits of having fewer cars on the road: less traffic congestion, less smog and a more liveable urban environment.

Canadian co-ops often find themselves at a disadvantage in terms of resources, both human and material, when facing large and profitable corporations

“There’s a huge culture shift underway,” says Hilary Henegar, marketing director at the Vancouver-based car-sharing service Modo. “People are starting to see that car sharing can really help to offset the rising cost of living, as well as a lack of urban parking.”

Quebec City played host to North America’s first car-sharing service, Communauto, back in 1994. Since then, rising fuel prices and a burgeoning environmental awareness have grown that small venture into big business. Car-sharing services are now available in 25 cities across Canada, with more than 100,000 members sharing 3,000 vehicles among them.

The effect on our cities is real and growing. Each member of a car-sharing service is said to be responsible for a per capita reduction of 1.2 tonnes of carbon dioxide every year. Every shared vehicle is thought to replace between six and eight of its privatelyowned counterparts on the roads, resulting in a dramatic drop in traffic. Who knows? If enough Torontonians begin to use car-sharing services regularly, even Highway 401 might stop resembling a parking lot twice a day.

Car-share revolution

The evolution of these socially-minded services is widely seen as a success story. But there’s a shakeout taking place just out of the public view. Car sharing came to North America in the form of cooperatives: nonprofit, community-based ventures concerned with providing services to their membership rather than with making money. But in recent years Canada’s retail co-ops have faced increasing competition from corporations encroaching on their market – and their ideas.

Canada’s history with consumer cooperatives stretches back over 100 years to the foundation by Gabriel-Alphonse Desjardins of his caisse populaire in Quebec in 1900. Agricultural co-ops took root in the 1920s and 1930s when the farmers responsible for growing Canada’s staple crops banded together, gaining greater control over the price and availability of seed grain. Retail co-ops remained relatively small and rural in Canada until the foundation of Mountain Equipment Co-op (MEC) in 1971, which has since become a giant spanning 16 cities and boasting more than four million members. MEC is more the exception than the rule, however, and the majority of Canadian co-ops need to make a determined effort to contend with their more profit-minded counterparts.

The Daimler Mercedes-owned Car2Go illustrates how a company with major resources can make a significant impact in just a few years. Founded in Ulm, Germany in 2008, Car2Go now has fleets in 28 cities worldwide, including London, Lyon, Amsterdam and Washington, D.C. It has made a splash in Canada too, flooding the streets of cities from Vancouver to Montreal with over 1,600 identical, blue-and-white SmartCars. An aggressive marketing campaign promotes Car2Go as “spontaneity on wheels,” allowing users to go wherever they like, whenever they like. Downloadable apps enable users to locate the nearest available vehicle in seconds and reserve it at the touch of a button. Customers can just walk to the car, unlock it using a membership card and PIN, and off they go.

A local affair

By contrast, the Vancouver-based cooperative Modo is a much more local affair. Founded in 1997, Modo offers Vancouverites a mixed fleet of 300 conventional and hybrid vehicles.

Unlike Car2Go’s one-way model, which permits customers to drop off a rented vehicle in any approved parking spot, Modo’s two-way model requires users to bring it back to where it was found. As a co-op, the people at Modo need to keep overhead low. This translates to a lean operation, with relatively few staff and a modest advertising style that can struggle to make its presence felt.

This is the same old story. Canadian co-ops often find themselves at a disadvantage in terms of resources, both human and material, when facing large and profitable corporations. So what’s a local car-sharing co-op to do in the face of such competition?

The answer might be simple: don’t compete. “Our mandate is to reduce impact on the region as a whole,” says Henegar. “We’re trying to reduce the number of cars on the road by sharing vehicles. So if somebody is choosing Car2Go over Modo and gets a regular vehicle off the road, awesome! They’re helping us to fulfill our mandate.”

The way Henegar sees it, big companies – particularly with their larger advertising budgets – are doing smaller co-ops a service by familiarizing consumers with the relatively new concept of car sharing. Car2Go’s fleet of identical, interchangeable vehicles and the convenience with which they can be picked up and dropped off, makes the idea easy for people to grasp. Over a short period of time car sharing is coming to be seen as normal, even mundane.

As consumers run up against the limitations of the one-way system, some start to look around for more robust longterm solutions. This presents an opportunity for co-ops like Modo to step in. Not only is each vehicle in Modo’s fleet different, offering a selection ranging from sporty two-doors to spacious minivans, but members begin to feel an actual sense of ownership.

“Once you’ve signed on to be a full member, you begin to understand that you actually own this car and dozens of others,” explains Henegar. “There’s a sense of shared responsibility, instead of anonymity, that we find causes members to take better care of their vehicles.” Being a member of a cooperative can even expand one’s sense of belonging in the community at large. “I’ve heard from several members that they’ve started to notice and pick up litter when they’re walking down the street. Because if they don’t, who will?”

Ease of responsiveness

The co-op model also enables a level of responsiveness that would be difficult to achieve in a more conventionally structured enterprise, since the end users are also the owners. “We do everything we can to meet the members’ needs since they can express them directly to us,” says Sharon Enman from Victoria Car Share Co-op. “If members are concerned with keeping rates down, that’s what we focus on. If they want more variety in the fleet, we address that as well. We help our members to plan trips, compare prices and [show them] how to get the best value.” Call it the benefit of being the little guy: carsharing co-ops can add a personal touch that proves elusive to bigger and necessarily lessresponsive services.

The key is to take advantage of the features that make cooperatives unique – whatever those might be – say those who run successful co-ops. Many Millennials prefer to do trade with small businesses in their communities rather than with large corporations

Canada’s changing demographics make the future of the car-sharing business look rosy. A study published in the National Academies Press found that younger Canadians, aged 25-34, were disproportionately likely to participate in car-sharing programs and trended toward the higher side of the scale in terms of education and income. In short, the people most likely to buy what car-sharing organizations are selling are also the ones that most businesses would give their eyeteeth to reach and retain. Even better, evidence suggests that the earlier eligible drivers begin to share cars, the less likely they are to want to own a private vehicle later on.

So maybe it’s ironic that those same demographic factors are presenting carsharing co-ops with perhaps their greatest challenge: young people, in particular members of the millennial generation, have grown up in a consumer environment where cooperatives and collectives can sometimes feel like relics from a bygone era.

“We’re learning that we shouldn’t mention the fact that we’re a co-op, at least initially,” says Henegar. “There’s not a lot of recognition as to what the term actually means. So at best it doesn’t really register and at worst it translates as a lack of legitimacy from an untested model. Anything we have to explain beyond the concept of ‘we share cars’ ends up being a distraction and a barrier to entry.”

Principles and pragmatism

For those who see cooperatives as a form of activism, downplaying that aspect of the movement might seem to go against principles. Still, pragmatism might be necessary to help this sector thrive. For a long time, consumer cooperatives have been recognized for adding value and building community. But this view might be changing. The reality is that market forces have made shared responsibility an unfamiliar concept to many in the latest generation of Canadian adults. The good news is that this perception problem can be dealt with in much the same fashion as most other perception problems – with carefully managed messaging. For example, Modo is studying the possibility of soft-pedaling the environmental benefits of its services. Rather, it is considering targeting a larger audience with a message about lower prices that would appeal to just about everyone.

That approach doesn’t surprise Brendan Denovan, communications manager at the Ottawa-based Canadian Co-operative Association.

“It seems to me that co-ops appear whenever distortions in the market cause certain goods or services to become really expensive,” he says. “[That’s when] people start looking for alternatives. Whether it be a small grocery store or a rural co-op out in the country, they start collaborating to bring down prices. Co-ops essentially operate as a sort of market correction. You have to understand that this is my personal perception, but even in the microcosms of smaller industries like car sharing that’s the role they’ll end up filling.”

The key is to take advantage of the features that make cooperatives unique – whatever those might be – say those who run successful co-ops. Many Millennials support the growing local-first movement, for instance, preferring to do trade with small businesses in their communities rather than with large corporations. To that end, they can be made to see the value in enterprises such as funeral cooperatives; some of which have taken over small companies that might have otherwise been subsumed by American multinationals. Several of these funeral co-ops have distinguished themselves by price, of course, as well.

Similarly, food co-ops often capture the zeitgeist by encouraging 100-mile-dietsavvy members to get to know the farmers who produce the goods they eat – a strong and singular selling point, along with value for money – as many people want to feel connected to their community.

The wider lesson

There might be a wider lesson here for those cooperatives in the retail sector that call Canada home. The playing field is often not going to be level and private enterprises with massive resources will throw their weight around. And co-ops have major challenges ahead in reminding Millennials that the word “collective” is neither antiquated nor dirty. But by offering consistent value, engagement and accountability to its members, even the tiniest co-op can make a real and lasting impact on its community – working alongside the private sector, rather than struggling against it. Bottom line? Canadian co-ops can compete with even the most robust businesses. And sometimes that means not bothering to compete at all. ◊