What is a Co-op?

Blog Author WSECU

Written by: WSECU

Published: October 11, 2017

Found in: Community

You've probably heard the term co-op before. You've likely been to an REI or shopped somewhere you didn't even realize was a co-op, like Ace Hardware. You know that co-op membership has benefits - like discounts or money back at the end of the year. All kinds of businesses can be cooperatives; retail, utilities, housing and even your financial institution. But what does it mean to be a co-op? How are they different from other kinds of businesses?

Cooperative Means Together

Co-op is short for cooperative, which means to work together - and togetherness makes a co-op different.  

Most businesses are made up of distinct groups of people: owners, workers and customers. Customers purchase a service, workers provide it and owners reap the profits. Businesses organized this way are happy to offer services, but decisions about what services are offered, how the business is run and what to do with profits typically happen behind closed doors.   Co-ops on the other hand are made up of just one group: members. Those members share a common need - like housing, food or services like loans and banking - and they come together to provide for each other. At a co-op, members work together to make decisions about how to run the business they all need and any profits serve the common good.  

Working for the Common Good

The first consumer cooperative was started in 1769 by a group of weavers in a small Scottish village who bought oats in bulk to sell to their members at a discount. And the first financial co-op, or credit union, began in 19th century Germany with the goal of giving the power of capital to struggling tradesmen.   Modern co-ops are a little more complex, but still self-governed. They have membership meetings and elections that let members choose who should run the business.

Not for Profit

Another important difference between co-ops and other businesses is that most businesses are profit driven. The business owners have to make a profit or it's not worthwhile. But a co-op is "not-for-profit." Their bottom line is a sustainable co-op that continues to provide quality services for its members. That motivation changes how decisions are made from pricing to labor relations to interest rates.

In co-ops, if there is a profit it's returned to the membership - either in improvements to the business, additional services, lower product prices, or directly. If you've ever gotten a dividend payment from a co-op like REI, that's your share of profit for the year.  

Inspired by Service

"This is a credit union, this is a people's organization, starting from the beginning." - Herb Jones, WSECU member since 1972

We're all used to the classic business origin story: scrappy founders with a good idea and a garage, working together to make their dream reality. But how does a co-op start? Rather than folks trying to make a way for themselves, co-ops begin when a few people want to improve life for their entire community.

That's how WSECU began, in 1957 a young Washington State employee, Ed Montermini, had trouble securing a $500 loan for a down payment on a home. He hadn't worked for the state long and couldn't find a bank that would help him. He'd seen how other cooperative credit unions work: members with common interests pooled their money to provide financial services for each other. He wanted to make that option available for all state employees. The credit union began in July and had 65 members by December.  

Continuing the Tradition

From there the co-op grew and expanded from just serving Washington State employees through a single branch to serving anyone who wants to bank cooperatively living in Washington State. But because it's organized as a co-op credit union, no matter how much WSECU expands, it puts the needs of its members before profit.

Like any other co-op credit union, WSECU is member-owned, which means members make decisions about how the organization is run. So WSECU continues to offer premium service to its members like lower interest rates, and programs that benefit the community such as partnerships with nonprofits.  

It's the orientation to community service that makes a co-op truly different. Rather than consumer and the business on opposing sides, co-ops put everyone on the same side working for shared goals. It really changes the way business is done, and has tremendous benefit for everyone involved.   The next post in this series explores the co-operative spirit in other enterprises; stay tuned to learn more.