Opening a Co-Op Shop

It seems that everyone wants to open up a cute little shop somewhere, but they just don’t have the money. One way to overcome that obstacle is to form a co-op. A cooperative is a group of independently owned businesses that pool their resources and engage in joint promotion and operational efforts. There are approximately 30,000 cooperatives operating in the United States. Opening a co-op business can be economical and have a lower risk than opening a shop all by yourself. Co-ops operate in many different industries including grocery, hardware, pharmacy and in the crafts, gasoline and other retail business. Social services such as medical and elder care and financial services such as bank and insurance and utilities such as electric power all can operate as co-ops.

A co-op retail store can be owned by members who are also producers and by members who are also consumers. The business model is based upon the philosophy of equality, equity and mutual self help. A group of antique collectors could form a co-op to arrange and sell their antiques and then share the costs of operations, advertising and work space as well as retail space. It is owned and operated by these members who use the space. It has both an economic and quality of life purpose because it provides its members with the benefits of a place to sell their products, the opportunity to control the character of their place of employment and a philosophical approach to business.

The advantages of a co-op are many. First, your personal cash output initially is minimal since it is shared amongst members. Next, you don’t need to purchase inventory to start up since it is the members who each bring in their own antiques to sell. Daily operations, such as manning the shop, will be done on a rotating basis of all of the members so you won’t be stuck in the shop all day by yourself and will have time to look for products or refurbish and prepare items to add. And, you will never need to look for employees because the members all put in time. But, there are some things that you have to look out for when establishing a co-op. Because there are many people involved, you will need a director or a team of directors. You will need to train everyone to do every job. Not everyone has had the experience of buying advertising or painting the walls, so all members need to be trained equally. It is best to have a jury system in place so that the quality of the products and the theme stay the same. If you want garage sale type items in the shop, then a high end antiques dealer would not be happy. The price points of items need to be decided upon as a group also. A high end next to a low end may not work well together. Everyone needs to understand that what is offered in the shop is sold in the shop. Sometimes customers think that because things are individual in their space or the dealer, that they can get a better deal by going to the dealer directly and bypass any shop or gallery commissions. And the biggest need of all is getting the word out and promoting the gallery needs to be done on a group consensus. A calendar needs to be designed with an annual budget and all must agree on the expense and the schedule.

Co-ops are commonly incorporated and many are designed as non profit. The legal structure for a co-op store varies from state to state. Member benefits need to be designed and laid out with the help of a tax attorney or an accountant from the very beginning. Otherwise, when designing a co-op store, it is just like any other business. You will need a business license and you must comply with health department and zoning laws. Other elements are insurance, legal contracts, facilities, sources of goods and services.

The success key to starting a co-op store, is putting  together the right group of people who work well together and are committed members. They must be willing to devote their time and effort to managing and operating the store in return for salaries or other benefits. Some members will be employees, others will be managers.Some will produce and arrange products and others will be consumers who pay a fee to join as members to take advantage of prices and selection. You will need to have a plan that is agreed upon by a vote of the members, detailing the salaries of the management and of the staff positions along with what the unpaid work memberships and paid memberships are defined as. A strong  description of responsibilities, rights and privileges for all involved needs to be clearly provided. A firm foundation is required for a co-op to be successful and all members need to understand the rules and the processes. A budget needs to be set up along with procedures for inventory selection and purchase.

Some suggestions from those who have gone before are to choose three people with a good sense for business to be the directors. They should be number and detail oriented. Having an odd number means there will always be a tie breaker rather than two directors possibly disagreeing. It is also suggested to divide the tasks according to members strengths. Some may be better at display, while others who are good at handling behind the scenes like paperwork or public relations. And then, if you have someone who is good at event planning, then you are in luck. The members can be trained at good sales skills.

The location of the co-op is the ultimate test for success. We have all heard “location location location” and it is so true. Remember that second floor shops just don’t work. They lose 50% of their traffic. Of course, you want to be in an area that has lots of street view and foot traffic. But if the rents are too high, look for a location that has lots of parking and easy visibility. The local chamber of commerce or a consultant can often help in location situations.

As a co-op, everyone will have their own piece of the pie, but there is also the individual aspect that many feel is appealing. Unfortunately, that individuality can be the cause of problems too. A jury of peers will need to be appointed to approve what is displayed throughout the shop. Everyone needs a clear understanding of the vision of the co-op and the quality of the offerings needs to be consistent. Sometimes, bringing in outside authorities can do this job so that there are no hard feelings.And, this keeps the selection neutral and professional.

Pricing is another point that can get contentious unless everyone agrees.Every member should agree to charge at least keystone (double) the price they wholesale to other galleries or shops and agree to never undersell the gallery price at craft fairs or online. Keeping your prices consistent maintains integrity for the whole gallery.

If you have ever dreamed of opening your own little shop, a co-op might be the way to go. It is a bit more complicated than a single owner shop, but the risk is minimal and the effort of all involved is huge. There is also the camaraderie that happens when there are many involved. And the rate of success can be higher with the right combination of people, location and product.

Back to Blog
Leave a reply