The coop does not buy wholesale from the producers and sell retail.
Producers set their own prices, so we don't have a wholesale mark-up.
We charge the producers a commission to sell through the coop, and the customer members pay a commission to buy through the coop. That is how we get the money we need to operate. We pay for rent, utilities, supplies, equipment, materials, mileage, work-credit, accounting fees, and etc. on down the list of typical business expenses.
The producer commission is 11.25%, and the customer commission is 11.25%. The customer is also charged a base shipping and handling fee of $2.25 for each order placed. The Oklahoma Food Coop operates on a margin of just over 22.5% of our sales, which is much less than the margin of a conventional grocery cooperative. I have discussed this with various people in the conventional grocery cooperative movement, and their typical mark-up on wholesale prices is 30-35%.
Why is it called shipping and handling?
Because if we call this commission "shipping and handling" (which it is, because it pays for the process of getting the groceries to the members), the charge does not incur sales tax. If we call it "customer commission", then sales tax will be charged on the fee. So naming it "shipping and handling" saves the member money.
Why don't we load all the fees on the producers and not charge the customers?
Both producers and customers are members and we have felt from the beginning that both should support the coop's operations. ("We" being the original organizing committee and the subsequently elected officers and board.) If we only charged the producers, then prices will rise and that will increase the sales tax paid by the customers.
Operating Surplus and Patronage Refund
If the coop ever develops an on-going operating surplus, members would be eligible for an annual refund of that surplus in proportion to their patronage. Since both customers and producers contribute to the Coop's revenues, then both Customers and Producers would be eligible to receive some of those distributed funds.
This means that if the Coop earned a hypothetical $50,000 in operating surplus on revenues of $1 million dollars . . . and a given member bought or sold $1,0000 with the coop during the year, that member would be entitled to a patronage refund of $50.
This would be calculated as follows:
$1000 in coop patronage divided by $1,000,000 in coop revenues shows that that member was responsible for 1/10th of 1% of the surplus.
$50,000 times .1% equal $50.
In practice, if the coop became so prosperous and efficient that we were generating a significant operating surplus each year, we would reduce our charges or expand our services.
Each member holds a literal property right as a member of the coop in the assets of the coop. For our fixed assets, each member's property rights are equal. For operating surplus, each member's property rights are based on their patronage (that is, their personal contribution to that surplus).
Oklahoma Food Cooperative