Collective purchasing: what lessons can co-ops learn?

One of the most highly anticipated speakers at Co-operatives UK’s Co-operative Retail Conference, held in Stratford in March, was Arttu Laine, executive vice-president of Finnish retail co-op network SOK Corporation.

The network of organisations owns 20 independent co-ops in the country, including food stores, hotels and the S Bank. SOK has had enormous success in Finland; in 2015 it reported sales of over €10bn and a profit of €304m – two-thirds of which came from the food and consumer sector. “It’s the core of staying in the game: profitability,” said Mr Laine.

A major contributor to SOK’s success, he explained, is its commitment to making sourcing alliances, not just nationally but internationally. This is “absolutely necessary” for a small player in an international market.

This message of co-operation across borders has been proven effective. The Coop Trading Partnership between co-ops in Finland, Norway, Sweden and Denmark has enabled joint food sourcing and the Partnership currently involves 4,400 stores and 7.7 million members at a market share of 33%.

“You have to invent new ways of being effective,” Mr Laine said, adding that new partners must be found, alternative sources searched for, and supply chains shortened.

Although there is great collaboration between SOK and independent co-ops, the two have clearly defined tasks. SOK does back office work such as chain management, logistics, and national and international sourcing; while the independents take care of store management, local sourcing and execution.

SOK has also actively tried to reinforce the bond between the public and the organisation. What were ‘members’ are now known – and referred to – as ‘customer-owners’. Advertising campaigns emphasise that people are ‘owners’ – the tagline to its adverts is ‘We own it’.

All of this has led to 84% of Finnish households being customer-owners of SOK businesses. As Mr Laine joked: “We still have some work to do”.

Nick Read, chief executive officer of the holdings board at Nisa, expressed his admiration for the work done by SOK in cross-boundary deals.

Mr Read also described how the competitive market meant every deal must be scrutinised. Following the retailer’s first ever loss (of £11m) in 2015, every single supplier contract with Nisa was renegotiated.

New ways of buying are equally vital: “We’ve got to find new ways to buy, and to buy intelligently,” he said.

Unlike SOK, Nisa is a not-for-profit retailer and Mr Read said he believes small independent retailers are in a position to take advantage of current market conditions.

Alongside efficient buying, he echoed the thoughts of James Walton from IGD Retail Analysis in the morning’s session, who spoke of the importance of fresh produce. Local sourcing networks can also allow for collective purchasing, he said, while a growth in volume can result in greater quality and lower costs.

This quality is vital, Mr Read added. Although price was clearly a large factor, he believes online and at discounters is not necessarily where people want to buy their goods. “It really is a race to the bottom if we only compete on price.”

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