It is going to be a difficult year for the retail co-operative sector.
Last year, the sector reported a decline in sales and this year is likely to see the trend continue. One only needs to look at the wider retail sector to see the problems. Tesco has halted its store opening programme and is closing another batch of loss-making branches.
Goldman Sachs predicts that closure programmes are likely to escalate over the coming years. Its analysts say that those with larger stores will be most affected, but believes the fall in like-for-like sales will continue for up to five years.
Where do co-operatives stack up in this? The main problem for all retailers is around the ownership of large stores, of which there are few in the co-op estates. And, while co-operative stores have the convenience factor for shoppers, the price of goods is an area that the sector has to keep on top of.
Asda, Sainsbury’s and Tesco are desperately investing hundreds of millions of pounds to reduce prices in a battle to level the playing field with discounters such as Aldi and Lidl.
Traditionally, it has been food sales propping up other weaker areas of a co-operative business, which over the years has been anything from travel to pharmacy. But now co-operatives are finding themselves in a place where food is not the bread-winner.
Retail co-operatives are in the midst of reorganising its buying group, Co-operative Retail Trading Group, into Federal Trading Services. The thoughts behind this new structure must be mindful of today’s problems facing the retail sector.
Plus, one of the problems for declining profits has been the reduced dividend from the Co-operative Group to its independent society members – one of the knock-on effects of the Group’s capital troubles over the past couple of years.
Armed with the knowledge that the solution doesn’t lie with food alone, investment in new business ideas is starting to gain traction with retail co-ops. The most successful is undoubtedly Co-operative Energy from Midcounties Co-operative.
Looking at the idea of how co-operatives should be there for communities by helping to solve its problems through market intervention is the key to securing the future of the retail sector; in this issue we look at healthcare, a sector where retail co-ops have started initiatives beyond simple pharmacies. But co-operatives are also developing many more creative ideas to strengthen food stores, including the opening of libraries and post offices in branches.
Investment in the wider co-operative sector is still a crucial role for the retail sector, especially for the long-term prosperity of the movement. Partnerships – or co-operation among co-operatives – are needed to ensure a full circle of benefits for all co-ops.
For example, retail co-operatives have long supported credit unions. In recent years, credit unions have opened their doors to Co-operative Electrical, and recently Co-operative Energy, to cross-sell products – for the benefit of both co-operatives.
Large-scale co-operation across the whole movement seems to be an aspiration, when it should be a reality. After all, there is strength in pulling together and presenting a united front.