A marriage of convenience?: co-op business partners

The co-ops collaborating inside – and outside – the movement

A competitive and fast-changing retail market means co-ops have to work hard to expand their brands, keep pace with changing consumer habits and adapt to new technologies.

Forming partnerships with other businesses is an obvious way to do this; it allows co-ops to access their expertise and scale. The benefits are clear when it comes to innovative retail tech, which can require too much expensive R&D and specialist expertise to do in-house.

It’s not entirely risk-free; notably in IT where projects across the public and private sectors have encountered high-profile problems. The Co-op Group itself found itself involved in a lawsuit against IBM, after a £175m Agile software platform contract, for its Insurance business collapsed in 2017. In February this year, IBM was ordered in the High Court to pay the British insurer £13m in damages  – much less than the £128m the Group had claimed.

Despite such setbacks, co-ops still need to innovate and call on companies with the expertise to help them do it. Steve Murrells, chief executive of the Co-op Group, told the Co-operative Retail Conference in March that: “we need to run towards tech. Co-operation really does work but some of the issues we’re facing are so complex and so deep-rooted we’re not going to solve them on our own. 

“Partnering and patterning in tech is something we’ve got to grab, and we have to choose our partners wisely. Collaboration is going to be the way we break through in tech.”

Among the collaborations, the Group has embarked on is a project with Finnish tech retail developer Digital Goodie, which is helping the retailer develop its dedicated online grocery shop and home delivery service.

The Group’s online service and e-commerce operations run on Digital Goodie’s Connected Commerce platform, which is designed to provide an end-to-end service to customers. The Group controls the end-user experience and can build and design its user experience without dependency on Digital Goodie. The Group’s digital team has designed and built its own storefront, which went live in August 2019. 

It’s not the Group’s only partnership when it comes to home deliveries; it is working with Starship Technologies to test out delivery drones in the Milton Keynes area. Starship – founded in Estonia in 2014 and now headquartered in San Francisco – is funded by a venture capital model familiar to the big tech world, having attracted US$85m in venture funding; it was set up
by Skype co-founders Janus Friis and Ahti Heinla and other backers include billionaire Airbnb cofounder Nathan Blecharczyk, Russian
tech investor Grishin Robotics and German auto giant Daimler.

Businesses with access to this kind of capital have an advantage over co-ops when it comes to developing tech. But these partnerships are not always welcomed by their members. Another Group partnership on home delivery is with Deliveroo – one of the tech platforms singled out for criticism by the platform co-op movement.

Some members were critical of this choice of partners at the Group’s AGM but Chris Conway, the Group’s e-commerce director, said the rapid rise in online grocery shopping meant the Group needed to find a way to deliver on the sort of scale Deliveroo offered.

He added that the Group was working with local partners and with Deliveroo to address any concerns about riders’ pay and conditions.

Meanwhile, on continental Europe, disenchanted Deliveroo riders have set up CoopCycle – a European federation of worker-owned bike delivery co-ops, complaining that Deliveroo has delisted workers for forming trade unions or missing delivery times because they kept to speed limits. 

Could this sort of collaboration offer a more co-operative way forward? Trebor Scholz, director, Institute for the Cooperative Digital Economy, has called for the global co-op movement to assist in the growth of worker-owned platforms – suggesting that the International Co-operative Alliance should help develop a global co-operative taxi app to loosen Uber’s grip on the market.

In retail tech, the co–op movement is doing some of its own development work, with VME Retail Systems converting to the co-op model last year. VME supplies retail software for the supermarket and convenience store sector, with customers including Heart of England, East of England, Scotmid and Tamworth Co-ops. When the business converted to co-op status, CEO Stephen Gill told Co-op News he wanted to increase its collaboration with the movement, including smaller community shops and European co-ops which have been driving their own innovations, such as Eroski and Coop Italia.

“By making those connections we could help the smaller players in Britain; Allendale or Coniston can’t afford to go out to visit Mondragon but VME can do it for them,” he said.

At the Co-op Retail Conference, Debbie Robinson, CEO of Central England Co-op, said co-ops should pool their resources and knowledge to push for a “fully digital co-operative movement”, with more platform co-ops and ethical versions of services like eBay.

“It’s ridiculous that we’ve got people all over the place working separately on the same problems,” she said. 

Central England has found an outside partner to help with its home delivery offer – Snappy Shopper, whose other clients in the movement are Scotmid, Heart of England, Chelmsford Star, East of England, Tamworth and Southern. Founded in Dundee in 2017, Snappy has rapidly grown its platform – from 220 local store owners signed up in 219 to more than 1,000, and has attracted investment from former Sainsbury’s chief Justin King. 

Co-ops are also developing partnerships in stores. Southern Co-op is the owner of Cobra Coffee, a Starbucks UK franchised business partner which has been steadily expanding since 2013 and now has 34 branches. And  Central England, at its new showcase store at Boley Park, Lichfield, has a coffee bar run by independent Irish chain Insomnia. Costa Coffee machines are a common sight in stores run by the Group and other retail societies.

It’s not all corporate partnerships, though: at the Boley Park store, Central England has involved worker co-op Suma to develop and supply a zero-waste refill station. And Midcounties Co-op has installed a coffee machine from Revolver Co-operative at its Southmoor store.

Co-ops are also extending the use of franchising to grow their brands. This offers an alternative way for them to expand but also means a growing number of stores owned by independent businesses rather than by the membership.

Franchising has seen the Southern Co-op growing its network of Welcome stores, with 48 stores operated by 22 franchisees. And the Co-op Group has set out to double its franchise estate to 30 stores by the end of the year. In March, it opened its first service station franchise, in Cornwall. It is also growing its number of campus franchises. The first opened at Leeds University in  2019; a seventh, at Keele, opened last month.

“It is a real example of how franchising can extend the Co-op Group’s reach and gets Co-op into a space where it has never been before,” said the organisation’s head of new channels, Martin Rogers, after the Cornwall launch. “The agility of the franchise models allows us to open Co-ops where we wouldn’t ordinarily be able to.”