Re-inventing the Co-op                                         home
 JAN 2000
How the retail co-operative movement is modernising

Whatever happened to the Co-op?  Not so long ago, there was a Co-op shop on every corner.  Now there are few.  Older readers will recall going as small children to the Co-op with their mothers to collect the ‘ Divi’ every quarter.  Divi (short for Dividend) was a cash payment made to members in proportion to their purchases in the previous quarter.  This money came out of the Society’s profit.  In the past, the Co-op would not give credit, so people used to save up the Divi school uniform.  Whilst this ‘peoples bank’ was beneficial to the members, it was to be one of the factors that led to the decline of the movement.  Activists and co-operative managers became obsessed with the size of the dividend and maintained it at high levels: sometimes as high as15%.  They were afraid that if the Divi was too low, the trade would collapse.  No money was left for the capital investment needed to update the stores.  In the immediate post war period, this accumulating neglect was not noticeable.

New 'Welcome' format store

 Everything was drab just after the War.  But by the swinging 1960s, the effects were beginning to show and the Co-op became synonymous with the dowdy, old fashioned shop on the downtown end of the High Street. Service was poor and there would be paint peeling off the woodwork.  Whilst the Co-ops were staggering on, a revolution was taking place in the retail industry.  The small and medium sized family owned firms were being driven out by the dynamic capitalist multiples like Sainsbury’s and Tesco’s.  Many household names disappeared at this time; Liptons, Home and Colonial, International Stores, MacFisheries, and David Greig to name but a few.  The new multiples used modern methods like self-service which had been pioneered by the Co-op in the 1940s.
But the crunch came in 1970 when the Heath Government abolished Resale Price Maintenance.  RPM was really a licensed price ring which enabled manufacturers to legally fix the prices of goods in the shops.   If you didn’t sell at their price, they would not supply you.  In the pre-war period, the British Radio Manufacturers Association refused to supply the Co-op with radios on the grounds that the payment of Divi represented a discount.  So the Co-op made its own, aptly named; ‘Defiant’.  Clearly RPM was against the public interest but remained acceptable during the period of austerity and central state planning that was fashionable during and immediately after the Second World War.  By 1970, it was time for it to go.  The Co-op supported abolition in the interests of consumer protection.  Little did they realise that they were signing their own death warrant.
When RPM went, many of the internal structural weaknesses of the Movement became glaringly obvious.  That was also true of many of the old established private firms who had also allowed themselves to atrophy in the cosy cocooned world of rationing and planning controls.  A new breed of trader had arrived and so had the motor car.  By the 1970s, the UK had the most competitive, sophisticated and aggressive retail industry in the World.  To this day, there is nothing in continental Europe to compare with it. But the most competitive market of all was and still is food.  Here the profit margins are small and companies will only survive either by economies of scale or by operating in a niche market.  Given the state that it was in, it is amazing that the Co-operative Movement survived as a retailer at all!
The Co-op also suffered from its fragmented structure.  In 1950, there were over 1000 different independent societies.  Wholesale mergers and amalgamations took place.  Today there are just 48.  Improved marketing and managerial methods were introduced.  Managers were appointed on the basis of ability not time-serving.  Strict rules of corporate governance to stop corruption and unethical behaviour were introduced.  Also, experienced outsiders with proven track records were brought in.  There were and still are doubts about this.  The fear was that these people would not be faithful to co-operative principles and would turn the Co-op into ‘just another business’.  These fears were strengthened by the involvement of senior co-operative managers in the recent Lanica Affair when an attempt was made to demutualise the Co-operative Wholesale Society by the City speculator Andrew Regan.
In order to combat the competition, some Societies built superstores and out-of-town hyper-markets.  The performance of these has been patchy.   The future of the Co-op is probably in convenience stores and small supermarkets in markets towns. The potential is enormous in this £30billion market.  Many people do not wish to drive to the edge of town superstore for every purchase. Other people either don’t drive or don’t have access to a car.  This is particularly true where the family car is used by the breadwinner to go to work.  Pensioners often prefer the personal touch of a small store.  Convenience stores are for ‘top-up shopping’ too.  On the trading side, considerable progress has been made in recent years.  Whilst the overall market share in food did decline slightly last year, convenience stores have shown very substantial growth.  Other parts of the Co-operative Sector continue to prosper.  Banking, Insurance, Travel, Pharmacy and Footwear have produced very good results
The Co-operative Movement is not just about shopping.  It’s about ethical behaviour, caring and sharing. It’s about democracy and equality.  Everyone has just one vote regardless of how much they have invested in the Society.  Women have had the vote since 1844 when the Rochdale Equitable Pioneers Society was founded.  Women’s economic rights were respected too.  The Pioneers would not pay out a woman’s Divi to her husband.  Today the Co-op promotes Fairtrade products and seeks to improve the working conditions of Third World workers.  This is not new. Even in Victorian times, when the Co-op owned large tea plantations, it did its best to secure decent conditions for its workers.  The preservation of good food standards has always been a top Co-op priority.  Indeed one of the first products sold at Rochdale was pure flour.  At that time, the private traders used to lace flour with ground chalk to increase its weight. Recently, the Co-operative Party has been leading the campaign for the new Food Standards Agency.  As part of its Ethical Trading Policy, the Co-operative Bank will not lend money to anyone involved in animal testing.  CWS Agriculture as Britain’s biggest farmer has refused to allow its farms to be used for GM experiments nor will it allow foxhunting on any part of its 80.000 acres of land.
On the democratic side, the age profile of the activists is a worry in most Societies.  More younger people need to be recruited.  Internal procedures need to be modernised so that everyone can participate.  Postal and proxy voting should become the norm.  Many people can’t get to meetings..  But it is carers who are hit the hardest.  Even today, these tend to be mainly women who are simply unable to leave the children or an invalid alone.  It is a form of social exclusion.  Greater use of the Internet could help here.  So could telephone polling.
The Co-op started as a community initiative.  Until recently, the participation of the Societies in the affairs of their local communities had diminished.  In the 1970s, survival became their main pre-occupation.  They became too inward looking.  This has changed drastically.  The lead was given by the Oxford Swindon and Gloucester Society which allocates 1% of its profits every year to community projects particularly co-operative or self help ones  The huge Co-operative Wholesale Society followed suit.  Part of its new Dividend Card money goes to Community Dividend awards.  To date over £900.000 has been donated.  Amongst beneficiaries are the Caldercruix Community Food Coop, the Boston and District Credit Union  and the Monkey Puzzle Community Self Build Housing Co-operative.  Help was also given to a LETS scheme in Hexham and a graphic design workers co-operative. in Langley Moor.
The legal framework in which the Co-op operates needs updating.  The Industrial and Provident Societies Acts date from Victorian times and need a drastic overhaul.  But the IPSA legislation also covers a wide swathe of other mutual organisations:  over 10,000 ranging from huge Housing Associations to Working Men’s Clubs and tiny Allotment Societies. The new Labour Government set about the urgent task of reforming the regulation of the private sector by establishing the Financial Services Authority. This was an enormous task which is still not complete.  The Financial Services and Markets Bill is currently before Parliament.  The next area of reform should be the mutual sector.  But how?  The UKCC has suggested reforms to co-operative law.  The Building Societies and the Friendly Societies have done the same in their sector.  The government seems to have eschewed piecemeal reform in favour of a wide ranging review of the whole mutual sector.  Detailed consultations are taking place at the moment with interested parties.  Hopefully these will be concluded this year (2000).  A commitment to modernise the mutual sector could be a major plank in the manifesto for the Second Term. 

However legislation itself will not ‘Save Mutuality’.  Only the Societies and their members can do that.  Mutuality will only prosper if it is seen to address the needs and aspirations of ordinary people in their daily lives.  This applies to the Co-op as much as anyone else.  That being said new legislation would be welcome and would strengthen further the revival of the Co-operative Movement that is already taking place.   For further information:- see www.co-op.co.uk 

 
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This article was published in THE CHARTIST JAN 2000

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