MOUNTAIN EQUIPMENT CO-OPT H E P R I VAT E L A B E L S T R AT E G Y

C A S E S T U D Y A N A L Y S I S

Presented By:

Chitwant TahalyaniDr. Swati Gogawat

Kedar Risbud

CASE SYNOPSIS

The case details the current scenario of the sports equipment market in Canada vis-à-vis MEC’s strategies.

Mountain Equipment Co-op (MEC) is a well-known Canadian retailer of gear for mountaineering , rock climbing, ski touring, hiking.

CASE FACTS

•Owns the mainstream name-brand market•Market leader - 20 % share of industry

FORZANI

•Entry-level mainstream -Hockey, Football, Basketball•10% share of market•Employs young adults, pays minimum wages

WALMART

•Focus on niche sports -Scuba Diving, Running, Biking•Higher-end, higher-priced•Employs active sports participants

INDEPENDENT

STORES

MEC HOLDS ONLY 1.2 % OF THE MARKET

HIGHLY FRAGMENTED MARKET

SPORTING GOODS MARKET VALUED AT

$7.5 BN A YEAR

M A J O R C O M P E T I T O R S

GRADUATED INTO OFFERING 3 MAJOR USPS

Focus on wilderness-

oriented recreational

activities

Co-operative corporate structure

Economic, Social,

Environmental Sustainability

15 stores across Canada

Online & physical revenue - $248mn

1,387 employeesRetail wage of $10 to

$11

To break the mold of a

‘knock-off-artist’

Built design team in 2003 for

developing private label

Not mainstream Hiking

CampingClimbingSnow sportsWater sportsGreen buildingCommunity grantsCanada-wide parks

Brands:Arc’teryxBlack DiamondPatagoniaPrana

38 % OF SALES OWING TO PRIVATE LABEL

PROBLEM DEFINITION

MEC EXISTS IN A HIGHLY SATURATED AND MATURE MARKET WHERE THERE IS FIERCE COMPETITION BETWEEN COMPETITORS FOR

MARKET SHARE

PEOPLE MACHINESMETHODS

MATERIALS MANAGEMENTENVIRONMENT

• Shortage of willing employees in Canada

• Cheaper labor available in Asian countries• $19 CAD vs. $0.6 CAD

per hour

Developing private brands

Cost of materialhigher in Canada

• Extended lead times in Canadian factories

• Less responsiveness to market demands

• Moving manufacturing away from Canada

• Pricing competitors’ brands higher in category of own private labels (thermarest)

• High-handed behavior with suppliers

Acquisition of cheaper machines

in overseas markets

EFFECT

•Private-labeled products eating into other brand sales in its own stores• Seen as infringing on intellectual property owing to copy-

>replace model•Negative public perception owing to cutting of Canadian jobs• Souring of relations with suppliers• Seen as not abiding by its own highly vaunted policies and

only seeking profits

CASE INFERENCES

CANADIAN MARKET SHARE BY COMPETITORS

Forzani Total Canadian Tire Walmart MEC Independent Stores

Others0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

MARKET PLAYERS

MEC IS COMPETING IN HIGHLY FRAGMENTED MARKET

IT ENJOYS ONLY 1.2% OF THE TOTAL MARKET SHARE

COUNTRY OF ORIGINCanada

30%

Other70%

PRODUCT ORIGIN

Canada Other

MOST OF THE PRODUCTS ARE GETTING MANUFACTURED IN ASIA BECAUSE OF LOW COST, LABOUR, MANUFACTURING COST ETC.

PRODUCT CATEGORYPRICE RANGE (CAD)

PRIVATE LABELS OTHER BRANDS

WEEKEND & ALPINE BAGS 69 - 144 123 - 198

WOMEN’S HIKING CLOTHING 25 - 55 73 - 79

PRIVATE LABELS ARE CLEARLY SOLD AT A MUCH LOWER PRICE THAN OTHER BRANDS

BUSINESS MODEL

UNDERCUT

COPY

MANUFACT-UREPRICE-OUT

REPLACE

RECOMMENDATIONS

•MEC must refrain from unethical practices like selling competitor’s brands at higher prices• Improve relations and work practices with local suppliersAbstain from handing out threats of lawsuits

•Build a positive public image and brand equity by standing by their company philosophiesLeveraging social media to connect with their customers and appease them

T H A N K YO U