The number of businesses belonging to purchasing cooperatives has doubled in the last ten years, to about 50,000, according to Paul Hazen of the National Cooperative Business Association. In the hardware and grocery sectors, long-established co-ops like Ace Hardware, have provided an essential line of defense against large chains and made the difference between survival and failure for countless independent merchants. The co-op model is now spreading to other retail sectors.
One example is YaYa! Bike, a new cooperative of independent bicycle dealers, which has grown to more than 130 members with 200 stores in 35 states in just over a year.
YaYa! Bike—ya-ya is baseball slang for a homerun—is the brainchild of Cooperative Solutions, Inc., a five-year-old organization that creates and builds cooperatives. The company has launched seven co-ops, including Amarok, a very successful alliance of drywall contractors, and provides recruitment, financing, and management assistance to help these ventures reach critical mass.
For most of YaYa’s members, their primary motivation for joining is to gain greater clout in an increasingly consolidated industry. The number of bicycle suppliers has shrunk dramatically in recent years. Pacific Cycle, which owns the leading brands of Schwinn, Mongoose, and GT, now has about 30 percent of the market. Independent bike dealers have little leverage with these companies, which determine retail and wholesale prices, and often even product mix.
“There’s a feeling that we don’t have much say,” says Mikki Griffin, owner of Perpetual Motion Bicycles in Carrollton, Georgia. “As the little guy, it can be like talking to a brick wall.”
YaYa is providing an unified voice and building more advantageous relationships with suppliers. Twenty-six distributors have agreed to become the co-op’s “preferred suppliers.” The benefits go both ways. Member stores get rebates on purchases and better terms, as well as streamlined ordering. “I don’t have to police my suppliers,” notes Griffin.
In turn, suppliers are able to increase their market share with fewer staff hours spent servicing accounts. “We’ve already seen an effect—a dozen new stores in the Midwest and West,” notes one supplier. Suppliers also benefit from closer contact and more feedback from retailers on how to improve their products and build more interest in bicycling among certain demographic groups.
Jeff Milbauer, owner of Valley Bike & Ski in Apple Valley, Minnesota, believes this new strength in numbers, combined with superior service and higher quality products, can rescue independents and give them an edge over their competitors.
In the last couple of years, more than 800 independent bike retailers have gone out of business. Independents’ overall market share has dropped below 20 percent, while chains like Target and Toys R Us are selling more bicycles. A recent deal by Pacific Cycle to retail Schwinn bikes at Wal-Mart has independents concerned. Although Schwinn has developed a low-end model for Wal-Mart, such reputable brands have generally been the province of independent dealers.
YaYa is a true cooperative. Each member business has one vote, regardless of its size. To join, members buy one share at $1,500, plus $500 in one-time fees. There are no other costs currently, but the co-op may eventually add services like member web sites for an annual fee. Rebates and co-op earnings are redistributed to members based on the volume of their purchases.
The co-op hopes to grow to a membership of 1,250 dealers, which would represent about one-quarter of all independent bicycle stores. Not just any dealer can join; stores must apply and are considered based on their credit worthiness and quality of service.
YaYa’s plans for the upcoming year include a line of its own YaYa brand products. Stores are already selling YaYa shorts and tubes, and plan to introduce a bicycle this spring. Private label products yield greater margins for the members and provide a way to differentiate their offerings from those found at chain competitors.
Eventually, YaYa members may add the co-op name to their stores to build recognition among consumers—much as Ace and True Value members have done in the hardware sector.