The Truth Behind Opening a Co-op Group.

The Truth Behind Running a Co-op Group

I joined the co-op world almost three years ago. At that time there were a few different co-ops happening throughout North America on Facebook. Fast forward to now, there are co-op groups everywhere. I wouldn’t even want to take a guess at how many there are. I work closely with a few coops, and I know I am the main one for my area, but I also know there are plenty throughout Canada and even more throughout the United States.

One thing I hear often is ‘I want to open my own coop.’ All of a sudden this person has hosts from everywhere saying “don’t do it.” But they don’t say why not. Well, let me fill you in. The co-op world is highly competitive. Most people are working with the same suppliers on the same products. The more groups you have wanting to run the same thing, the harder it is to reach minimums (the minimum amount a co-op needs to receive a discount). So now instead of having a few groups bringing in lots of products, you have multiple groups having to cancel orders.

Running a co-op is also hard work. Now really, a lot of jobs are hard work. A co-op doesn’t pay though. The concept behind a co-op is that you will find a good deal and pass it to your members for the same price. There is normally no mark-up which means no profit. Most groups charge a ‘co-op fee’ or ‘finder’s fee’ but that goes towards things like packing supplies, ink, etc. I know with a recent buy we did the ‘finder’s fee’ received in total was $52.00. I had to pay $5.00 for more tape and $2.00 for another sharpie (mine died last run), I used $2.00 worth of shipping labels, and about $10.00 in gas getting to/from the post office. This leaves me with $33.00 left over. Oh wait, I need to consider the fact that my printer is almost out of ink. Last year I had to replace my computer and my scale (used to calculate shipping costs) which were also expenses. I did find some savings though. This was also a buy where I could package in boxes so I didn’t need to buy poly mailers. Otherwise, I spend another $0.20-$0.50 per order on poly mailers.

You spend time finding a supplier, and then communicating with that supplier to make arrangements for your group. Sometimes this can be quick and easy. I’ve done it in a matter of a couple emails. Other times it seems to take forever. Also, if you are dealing with any overseas suppliers, the time change is a factor. It would not be unheard of for a host to be up past the wee hours of the morning securing a deal just so that she can talk to a supplier during their ‘business hours’.  I have a few suppliers that I work with regularly that it takes 20+ hours just to get the buy set up.

Once you’ve got the details it is time to make the spreadsheet or a form. Depending on the options -number of people, items, orders etc – this can take 2-20 hours. We always try to put as much information as possible into our documents before we make them ‘live’ but there are always questions. As a host you do the best you can to answer any questions. Finally comes the time to invoice everyone and place the order.  Invoicing takes on average 1-2 hours. Usually you can place an order by email so it only takes a couple emails. Once the order is paid for you wait. You keep in touch with the supplier until the items make it to you. Sometimes this takes a lot of emails and a lot of communication to stay on track of the order and when it is shipping. Once you get the order it’s time to sort and ship. This is also the time the members are very excited for their products. Don’t get me wrong, I love opening the boxes too it’s like Christmas presents throughout the year!  You go through everything and make sure it’s there, if not your back to communicating with the supplier. Once it’s there you start packaging. Then you need to weigh and measure so you can quote for shipping.  Once that’s all complete it’s usually pretty easy. Wait for members to pay shipping, print a label and drop it off at the post office. As long as PayPal cooperates printing a label can take five minutes.

On an easy purchase you’ve put in:

1 hour communication for set up

2 hours set up for the spreadsheet

2 hours total for questions

1 hour invoicing

1 hour placing order and following up with supplier

2 hours doing inventory and sorting

1 hour measuring and weighing and posting shipping

If you have been keeping track there are already 10 hours put into it. With my last purchase having $33 after supplies were paid, I made approx. $3.30/hour. That would be classified as a good buy.

With multiple different co-ops you run into competition. Some competition is good of course. But if there is a bunch of groups running the same thing at the same time, then you can’t reach minimums. Now you are putting more time into a buy by trying to fill your purchases so you are not paying out-of-pocket for a product. There are times when you do everything you can and end up having to cancel the buy without finalizing a sale. You still put the work into communicating with the supplier, setting up the spreadsheet, and answering questions but you don’t have enough orders to complete the sale.

Co-ops are also classified as a business in the eyes of the government so taxes must be completed. In my first year my tax return showed a -$400. Last year was -$1200 as we had some big buys happen where customers backed out of paying. I am in the process of doing up my business taxes for this most recent tax season. So far I am showing a profit of $120.0 so according to taxes I made $12/month.

I’m not going to be the host to sit here and say don’t do it. If it’s what you truly want to do then go for it. All I ask is please think before you leap. Be aware of everything that goes into running a smooth coop and remember your competition. Having five coops running out of the same area is only going to make things more difficult for everyone.

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