Earlier in the month I attended a conference organised by Co-ops UK (our industry trade association) focusing on the challenges and opportunities faced by co-operative retailers. Its an annual event, but it was my first time there. I was particularly impressed by a presentation from James Walton, chief economist at IGD (the Institute for Grocery Distribution) surveying past and future trends in retailing and the economy as a whole. And the whole proceedings were ably presided over by Ed Mayo, Secretary General of Co-ops UK.
Shared brand and services
It was a great chance for me to get to chat at greater length with leaders from some of the independent co-operative societies. Many of these are closely linked to the Co-op Group, many of them use our brand and have votes within our democratic structures. We have a federal wholesaling system, meaning that many products are brought centrally using our collective purchasing power to get better prices. But they are also proudly distinct, with their own histories and a clear focus on their own regional constituencies.
The existence of these independents is sometimes a cause of confusion to Group members and customers. They see the Co-op brand over the shops and on own brand products inside, but find they cannot swipe their membership cards. If you understand the history behind this you can understand it, but in the modern era with so much more focus on clear brand identity you would probably not want to invent such structures!
The Co-op Membership offer
So I was especially interested to gauge the thoughts of the independents about adopting the Group’s 5+1 membership offer. It would be so much simpler if members could receive 5% on Co-op branded products and get 1% donated to local community projects, regardless of where they bought those products.
But you can understand why some of the independents are feeling reticent about adopting the same scheme. In a business where margins are often wafer thin, giving away 6% of margin can feel a big risk, especially if you still want to be able to give away dividends or support good causes in other ways too in accordance with the wishes of your own members.
To be able to afford it you need to be able to see a number of factors coming to fruition. You need existing members to switch their purchases from branded products to own brand products, as we need to give away less margin to suppliers on the latter ranges. Secondly, you need your members to start increasing their basket size and frequency of visits in response to the offer – so they are buying more from you than before. And thirdly you need to attract new members – not just converting existing shoppers to membership (though that is a good thing in itself), but attracting in brand new customers to increase volumes.
There are already promising signs on all these fronts for the Group, with growing proportions of own brand sales and half a million new customers signed up as members. But you can understand why an independent may for the moment want to wait and watch before plunging in.