More than 1 billion people – 1 in 8 of every human on this earth – are members of a cooperative, and yet the co-op business model is not always widely-known or well-understood. In this post, we’ll break down some of the common misconceptions we’ve encountered in building a cooperative marketplace for artisans.
Myth #1: Co-ops don’t make money.
Cooperatives are businesses, not charities. Just like any successful business, cooperatives should have a carefully-designed business plan and structure that ensures enough profit for its owners to keep its doors open.
The results speak for themselves: in 2012, the sales of the 300 largest cooperatives in the world totaling $1.1 trillion, an amount comparable to the GDP of some of the major national economies.
Myth #2: Co-ops are hard to find.
Once you start looking at cooperatives, you’ll find them everywhere! One billion people worldwide are members of cooperatives.
Even in the United States, where cooperatives may seem less visible than the rest of the world, there are 29,000 cooperatives representing nearly every business sector. For example, there are utility cooperatives, cooperative daycare groups and apartment buildings, mutual insurance, co-op grocery stores, credit unions, farmer co-ops, professional graphic designer collectives, and many more!
Myth #3: Co-ops are more likely to fail.
Incredibly false! Time after time, the opposite has proven to be true. Cooperatives have shown greater productivity, employee retention, and business longevity than traditional businesses.
The oldest known cooperative in the world, the Shore Porters Society, established by local council in Aberdeen, Scotland in 1498 is still in business!
But they’re not alone: economical studies have shown worker-owned cooperatives were roughly one-third less likely to fail in the United States (2005) and cooperatives of all kinds had a 14-27% higher five-year survival rate in Canada (2011).
Myth #4: Co-ops are too new.
There is nothing new about cooperation or cooperative business models. Models of cooperation are prehistoric: the first North Americans to practice cooperation were, of course, Indigenous. For example, Pacific Northwest coast tribes practiced collective fishing and the Shoshone held cooperative rabbit hunts.
Professor Jessica Gordon Nembhard documented the long tradition of cooperation among Black Americans in her book, Collective Courage: A History of African American Cooperative Economic Thought and Practice: from money-pooling to mutual aid societies. In Philadelphia, Benjamin Franklin created one of the first documented American cooperatives, a fire insurance company still in operation today.
The first documented cooperative business dates to 1498, but the modern cooperative business model is as old as the Industrial Revolution itself. Almost as long as there has been a culture of wage-earning, there has been a counter-movement for alternatives.
The first modern cooperative business model was established by the Rochedale Society of Equitable Pioneers of England in 1844, and it is the blueprint upon which most cooperatives are structured today.
Myth #5: It’s too hard for co-ops to raise capital.
Vast sums of capital aren’t required to start every business, and there is a supportive and growing ecosystem of cooperatives helping cooperatives. 81% of businesses never receive any outside funding, and very few businesses require venture capital. As documented by the Kauffman Foundation, between 90% and 95% of entrepreneurs require some amount of financing to start their businesses.
The pool of available funding is much smaller than for traditionally-owned businesses from traditional banking, but one of the universal principles of co-ops is that we help each other. Accordingly, there is a supportive network of co-op loan funds and even government programs, including special attention from the United Nations.
Myth #6: Co-ops aren’t online.
Not only are cooperatives going online in greater numbers than ever before, there is an entire name for the movement. ”Platform cooperatives” are democratically-managed businesses that use a website, mobile app or a protocol to facilitate the sale of goods and services.
The term was coined by New School professor Trebor Scholz in a 2014 article and covered in a book by him and Professor Nathan Schneider, Ours To Hack and Own: The Rise of Platform Cooperativism, a New Vision for the Future of Work and a Fairer Internet. Platform co-ops are organized and represented by the Platform Cooperatives Consortium.
Myth #7: Co-ops can’t scale.
There are large cooperatives that represent serious big business, such as Credit Agricole in France and Mondragon in Spain.
In the United States, some of the largest cooperatives include Land O’Lakes, ShopRite, REI, Navy Federal Credit Union, and ACE Hardware, a purchasing cooperative for independently-owned hardware stores. (Read the report: NCBA-CLUSA “Co-op 100”)
One American example of a cooperative that scaled is Ocean Spray Cranberries: formed in 1930 by three cranberry growers, it has grown to over 700 member growers and employs over 2,000 people today.
Cooperatives are what you make them.
Just like businesses, cooperatives require hard work to be successful. But with good planning and solid advice, they can be built for the long haul in a way that puts their community first.
Resources / Further Reading
- About the International Cooperative Association. ICA.coop
- ‘Cooperatives Aren’t Charity’: An Interview with Brian Van Slyke, founder of the Toolbox for Education and Social Action (TESA)’ Kanya D’Almeida for Truthout.
- Curl, John. For All the People: Uncovering the Hidden History of Cooperation, Cooperative Movements, and Communalism in America. PM Press, 2012.
- Facts about Cooperatives. Independent Welding Distributors Cooperative.
- Facts About Co-ops That Will Impress Your Friends. Cooperativesfirst.com
- Facts and Figures. Cooperatives of the Americas.
- How to Invest in Cooperatives. Greg Brodsky for Start.coop on Medium.
- Scholz, Trebor and Nathan Schneider, editors. Ours To Hack and Own: The Rise of Platform Cooperativism, a New Vision for the Future of Work and a Fairer Internet. OR Press, 2017.
- Six Myths About Cooperatives Debunked. USDA Rural Development.
- Worker Cooperatives: Pathways to Scale. Democracy Collaborative, June 2014.