Co-ops & Competition

One of the articles in Toward A Sustainable World Order (IC#36)
Originally published in Fall 1993 on page 27
Copyright (c)1993, 1996 by Context Institute

David Thompson is principal of Thompson Consulting and works with coops in the US, Europe and Japan. He is also president of Twin Pines Cooperative Foundation and author of more than 100 articles and publications about co-ops.

In 89 countries of the world, over 700 million individuals are members of cooperative organizations. Aggregated globally, cooperatives are a powerful economic model. In some countries they are a sizeable force within the national economy.

On the other hand, many cooperatives are small, independent and marginal. Frequently they are invested in their local community to the exclusion of external alliances and networks. One of the great and yet unsolved dilemmas facing cooperatives today is how to maintain sustainability as a locally controlled independent economic unit in a competitive market dominated by larger and larger players who have neither respect nor interest in community or national borders.

CO-OPS IN EUROPE

At the end of the Second World War, consumer cooperatives were a major presence in most European countries. They could be found in almost every town and city. Most were still locally owned and controlled democratic institutions responsive to their local community.

Cooperatives in the modern sense have been around since the people of Rochdale, England founded their co-op in 1844. The consumer cooperatives of Europe were the first to organize group purchasing, wholesales, transportation networks, and a host of allied services, such as banking and insurance. While they were the only retailers doing it, the independent local co-ops were economically successful and they were growing. Fortunately for the cooperatives, it was not until after the Second World War that competition among retailers began to heat up. Chains were forming, wholesales being organized, supermarkets being built. For about 25 years, the co-ops stood and watched the competition take away their market share. The local cooperative societies, with their small corner shops on High Street, were no match for the big supermarkets sitting on cheap land on the outskirts of town.

Does this all mean that the future of retailing is in the hands of the multi-nationals? What has to be done to maintain a cooperative in a competitive environment?

BANDING TOGETHER

Consumer cooperative organizations in Europe, Israel and Japan recognized the growing global market and created Inter-Coop in 1971. The objective was to promote economic collaboration between the member organizations and thus to increase their competitive power. By the end of 1992, 18 central buying organizations from 16 countries were members of Inter-Coop. The 2,800 primary-level society members operate 15,500 shops; the members’ 1991 turnover was 45,229 million ECUs (European Currency Units).

Inter-Coop created a non-food buying group, which in 1992 accounted for joint purchases of 70 million ECUs. During 1992, Inter-Coop signed agreements with 17 major European non-food suppliers.

The main headquarters of Inter-Coop are in Denmark with an office in Hong Kong. Inter-Coop also has a close working relationship with NAF, a Danish organization owned by eight of the Inter-Coop members that handles joint food purchasing. NAF, through its California office, is one of the largest purchasers of food products from California’s agricultural cooperatives.

Due to the volume of purchases from Asia, Inter-Coop created a transportation system for the region that last year shipped 6,500 containers to Inter-Coop member organizations.

Inter-Coop also established Inter-Coop Retail to exchange information and experience on retail trade, to train senior managers, and to develop a "Strategic Management" course.

In response to the member co-ops’ environmental concerns, Inter-Coop buyers do what they can to obtain environmentally friendly goods. The creation of Inter-Coop was an important step in increasing savings through collaboration. The Inter-Coop link allowed the co-ops to benefit by obtaining discounts based upon their combined volume, just as the commercial chains were already doing.

At the same time, this interdependence at the top helped to strengthen the independence of the national cooperative movements.


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JAPAN’S COOPERATIVE MOVEMENT

The Japanese cooperative movement today has 13 million members involved in 665 local cooperative societies, which operate 2,300 stores with over 50,000 employees. Over 5 million households participate regularly in nearly 1 million han groups. The number of han groups has doubled in the past five years.

The success of the han approach can be attributed to a combination of features:

  • They reduce the need for tremendous amounts of capital by not having to build or own stores. At least in the early stages, their capital investment went only into distribution centers and small delivery trucks.

  • They take advantage of the huge jump in computer technology to give people at home tremendous ease in ordering and communica-tion.

  • They separate the centralized management and distribution center from the decentralized han groups. The business side focuses on aggregating and using economic power, allowing participants at the han level to concentrate on member activity and democratic participation.

As a result, the cooperatives offer economic advantages of scale to their members as consumers, while at the same time providing the organizing advantages of decentralization to their members as citizen activists. The combination of the two elements is without doubt the most important example of a successful consumer cooperative to emerge in the 20th Century.

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