Discounts at Food Co-ops

Member-owners, member workers, employees, low income shoppers, seniors, and local merchants – all earn co-op discounts!

Food co-ops have very diverse member-owner benefits and services, and specifically they offer a very wide range of discounts at the register. 

Trends in discount practices, over many years of co-op operations, include the following -- each of which is discussed below:
*Purchase discounts for member-owners, while still an owner advantage and an important part of marketing the co-op, have mostly been reduced to a range of 2-5%.  In many co-ops an owner discount is available only at intervals such as monthly or quarterly. Rather than emphasizing purchase discounts, more co-ops are relying on patronage dividends to equitably distribute the bulk of net savings to owners.
*Discounts for member labor, sometimes called “volunteers,” have been greatly reduced, and in many co-ops eliminated – both in order for the co-op to offer better, more efficient customer service through paid staff and to avoid Department of Labor and tax issues that arise with member labor programs.
*Discounts for seniors are shrinking along with all discounts and are sometimes dropped in recognition of the fact that many seniors have a comfortable income. 
*Low-income discounts, for customers who are on a public assistance or means-related program, are an increasingly preferred form of discount at the register.
*Co-op employees almost all get a standard purchase discount on all or most goods, at least if they are a co-op member, and the range of such discounts is quite wide.
*Local merchant discount programs are an additional service offered by some co-ops.

Accounting best practices
Proper reporting of discounts is summarized in “Nurturing Your Income Statement,” by Bruce Mayer, Peg Nolan, and Steve Wolfe (2012): http://www.cooperativegrocer.coop/articles/2012-01-18/accounting-best-practices-nurturing-your-income-statement, which describes recommended GAAP (Generally Accepted Accounting Practices) for operating (profit/loss) statements:

“Gross Sales: Sales are presented first. This consists of sales of your primary products, generally groceries. The sales number required by GAAP is the sales after regularly imposed markups or discounts are applied. So if you charge nonowners 5 percent more, the GAAP sales total is shelf price plus that markup. And if you give owners a 5 percent discount on every purchase, the GAAP sales total is shelf price less that discount. The most meaningful presentation often is to start with sales before discounts or markups and then subtract or add those to get to a net sales number that represents the GAAP sales.

“One way to think of this is that your shelf price is not your true sales number if you charge everyone a price different from that shelf price. Your sales number is what you are regularly charging everyone. Sales should, however, not reflect the net after staff or working volunteer discounts. Those discounts are part of your personnel costs and should be classified with those expenses.”

Member = discount?
The practice of offering purchase discounts to food co-op members (and/or surcharges for non-members), while not common among previous generations of grocery co-ops, became deeply embedded in the co-op stores of the 1960s-1970s and later.  However, among food co-ops that survived in an increasingly competitive market, formerly large discounts and simplistic arithmetic have gradually given way to lower discounts and more careful management.  Emphasis on discounts (which are also available as frequent shopper discounts at big box retailers) also has been modified though marketing the concept of cooperative ownership and its multiple benefits.

A diverse set of views, reflecting the evolution in co-op practices, is found in the following 1996 debate over purchase discounts, co-op earnings, and patronage dividends: http://www.cooperativegrocer.coop/articles/2010-12-28/cooperative-finance-discounts-provoke-discussion.  As stated earlier, the average percent of sales going to member discounts continues to shrink.  Ten years later in 2006, at a time when average annual sales growth in co-ops was an impressive 8%, the average total member discount was 0.66% of sales (http://www.cooperativegrocer.coop/articles/2010-04-05/strong-performance-can-we-sustain-it-market-survey).

[Additional stories and arguments in support of reducing discounts and relying on distibution of annual co-op earnings may be found in the wiki on PATRONAGE DIVIDENDS.]

Member labor
Member labor (aside from employees) is a diminishing factor among established co-ops, but is still an option in many and one which gets a lot of attention because of its historic importance.   Only a small number of small co-ops maintain a member labor requirement, the one sizeable example being the Park Slope Food Co-op in Brooklyn, N.Y. (http://www.foodcoop.com).

Here is a summary by a co-op attorney, Thane Joyal (2012), “Who’s Watching Member Labor in Food Cooperatives?” that emphasizes the conflict of member labor with the Fair Labor Standards Act – member labor encounters minimum wage requirements in particular, but providing workers' compensation coverage is also a serious issue: http://www.cooperativegrocer.coop/articles/2012-01-18/who’s-watching-member-labor-retail-food-cooperatives.  An earlier article, also by a co-op attorney, Nancy Moore (1992) covers similar ground: http://www.cooperativegrocer.coop/articles/2004-01-09/member-labor-issues-retail-food-co-ops.  The need for workers' compensation coverage was underscored in a July 2012 comment by one co-op manager (Harold Vanselow, Chequamegon Co-op: "We eliminated the volunteer positions at our store a couple of years ago when our insurance agent informed us that the volunteers would have to be added to our workers' comp policy and that we would have to produce 1099s for the value of what they received for working, which would then become taxable for them."

A typical member labor discount program of today is this one (February 2012 listserv comment):  “Sacramento Natural Foods Co-op doesn't have volunteers who get a discount – it has owner-workers who are compensated with a discount on their purchases. The owner puts in 6 hours per month to get a 10 % discount on purchases in the following month. The program is flexible – hours can accumulate or the owner can put in their work periodically and get the benefit the following month. The discount can be stacked with some other discounts but not all.”

And at Alternative Food Cooperative, Wakefield, R.I.:  “Our worker/member discount structure is 6% off at register for 4 hours a month and 12% off at register for 8 hours a month.  The member has to work a full month before receiving their discount.  Also they have to keep working continuously in order to keep receiving it.”

Staff/employee discounts
Co-op employees typically receive a discount on purchases, although the range of discount allowed varies widely.  A 2002 food co-op Cooperative Grocer human resources survey gave this summary:
“Employee purchase discounts were offered pretty much across the board, and most co-ops didn’t distinguish between full time and part time for this benefit. The median was 15% for both. There was a lot of variation, however: the high employee discount on purchases was 34% and the low was 8%. (http://www.cooperativegrocer.coop/articles/2004-01-07/human-resources-survey)  A more recent (April 2012) co-op listserve discussion offered these examples:
Community Food Co-op, Bellingham, Wash.:  We provide a 20% discount to all staff working at least 8 hours per week. This is extended to their spouse or domestic partner and any dependent children. We do not have a policy regarding a minimum number of hours worked to remain employed.
Davis Food Co-op, Davis, Cal.:  We give a whole variety of benefits to employees. Only if they are a member of the cooperative (household or shareholder) do they get a discount on purchases. They need to average six hours of work per week, and there's a limit to how many household shopper they can "lift up" with their discount.
People’s Food Co-op, Kalamazoo, Mich.: Our policy is 20% discount for all employees working at least two shifts per week.
The Merc, Lawrence, Kansas: 10% employee non-owner, 15% employee owner and board, 10% for CMEF (a sister non-profit arm) board, 5% daily senior owner, and 5% daily for Vision Card holders (Kansas's supplemental nutrition assistance program).
Berkshire Co-op, Great Barrington, Mass.: 20% discount across the board for all employees who average 12+ hours a week.  It also factors into our living wage formula as a benefit so that the discount actually gets measured as a personnel calculation factor.
Outpost Co-op, Milwaukee, Wis.: We offer discounts on selected items - 10% for non-owner employees and 15% for employees who are owners. We have no minimum hour requirement.   We consider our discounts a great employee benefit as it's virtually unheard of in conventional grocery retailing.

Senior and low-income discounts
Senior discounts, formerly quite common, are increasingly being questioned and reduced. As an example of current practices (reported in September 2012), the fiscal year low-income discounts totaled 0.26% of sales at Wild Oats Market in Williamstown, Massachusetts.  At Community Food Co-op in Bozeman, Montana, total senior discounts were 0.22% of sales and total low-income discounts were 0.35% of sales.

Renate Kopynec of Wild Oats described that co-op’s discounts for low-income shoppers:
“We offer a 10% "Healthy Food for All" discount to low-income shoppers.  We define low-income shoppers as customers eligible for SNAP benefits  (food stamps), WIC, Medicaid, and select state health insurance programs in our tri-state area. We are not interested in looking at peoples' tax returns, so we stick to eligibility to programs that "pre-vet" applicants for us. Customers must re-apply for this program annually.  This is open to both members and non-members. Currently the cost of this discount is running .25% as a percent of gross sales.”

An innovative approach to serving more low-income residents was described by Clem Nilan of City Market Co-op in “Bringing Low-Income Shoppers into the Co-op” (2009): http://www.cooperativegrocer.coop/articles/2009-11-19/bringing-low-income-shoppers-co-op.

Merchant discount programs
Some food co-ops maintain longstanding programs with local vendors, in which mutual support among these businesses sometimes includes purchase discounts at the co-op as well as discounts and/or coupons for co-op members at the other businesses. Purchase discounts for these businesses often are greater than the standard co-op member-owner discount for pre-ordering caselot quantities. 

Here is an example from Lynn Chriestenson of Fort Collins Food Co-op (June 14, 2012): “We offer 20% off on pre-orders if it’s to a local business for resale.  All other members get 10% off on pre-orders.”  This comment was followed by one from Joel Landau of Deep Roots Market: “At Deep Roots Market we do similar:  20% discount on preordered case quantities to local businesses for resale, provided we have their Tax Resale # on file (so we don't have to collect or pay Sales Tax on these items).  We consider it part of our mission of supporting local vendors."

From Carol Spurling of Moscow Food Co-op (December 2011), a bit more detail:  “The Moscow Food Co-op has had a Business Partner program for a very long time. We instituted some new criteria for joining the program a few years when there was some kerfuffle over a business partner owned by someone who belonged to a church that was openly condemning homosexuality. Now we ask that businesses declare themselves to be non-discriminating. At the same time we took the opportunity to align the program with our strategic goal related to "sustaining the local food and goods economy," by asking that businesses that join be at least 51% locally owned…The only thing that has been kind of a pain is the free membership given to business partners. That causes hassles when it is time for an election, because free memberships don't get to vote. We're thinking we might want to eliminate that part of it in the future.”