Consumer co-operatives are forming a successor to the Co-operative Retail Trading Group. The new buying group, Federal Trading Services, will be collectively owned by independent retail societies and the Co-operative Group, which are currently part of CRTG.
“The idea came to life in November – as a concept it has gone from creation to inauguration in a few months,” said Mark Smith, chief executive of the Southern Co-operative and a director of Federal Trading Services.
In his NRCC presentation, Mr Smith explained how the Group’s crisis had showed there was an overwhelming need for co-operative reform, not only in terms of governance, but also within buying.
“CRTG needs to be a mutually beneficial commercial success,” he said, adding that all their dealings should be commercial and legally robust.
The Co-operative has lost 2.3% market share in the last five years. At Southern Co-operative, 60% of their business has an Aldi or Lidl within half a mile, said Mr Smith.
Multichannel is an opportunity he added, “but it’s moving faster and we have to respond to it”. Customers’ tendency to shop around could also be seen as a challenge as they are less loyal. Discounts at other retailers as well as the growth on online shopping are also threatening convenience stores. “Realistically we are not going to have an online offer for 2014 -2019”, he said.
The idea behind the new federal organisation is to put everything together: quality and good prices; personalised services; convenience; and co-operative distinctiveness. FTS could help enhance selling margins, enable affordable prices and give a better way of running a brand. It was created to reduce costs through collaboration and efficiency.
“FTS was designed to close the gap with the Co-op’s major competitors on buying effectiveness by ensuring a slicker supply chain,” added Mr Smith. “National food distribution is another gap the societies will have to work on.”
He added that consumer co-operatives needed to operate as a chain of 4,000 stores that could compete fully with “the big boys”, and that the societies needed to find an appropriate way forward for branding.
The FTS will also include the funeral businesses and is starting to get involved in prepaid plans. Legal contracts are in place and as a new federal entity with a board of directors, it will have a managing director recruited from outside and an independent chair.