Retailers’ cooperative is a business model in which individual independent retailers build an organization together with retailers with the same purpose to create a chain store-like mechanism . There is a franchise in a similar business model, but in Retailers’ cooperative,the franchise stores themselves form the headquarters, whereas in the franchise, the headquarters and the franchisees are separated.
Strengthening sales capabilities by selling products at multiple retail stores, and at the same time collecting information obtained in daily sales activities at the headquarters. It can be said that the strength of Retailers’ cooperative is that they can efficiently carry out purchasing and sales affairs.
Initially, the voluntary chain was a business model that was mainly viewed at retail stores, but in recent years, the entry of the service industry has increased, and independent businesses with the same consciousness have their own ingenuity. It also has the feature of providing products and services that correspond to the characteristics of the region .
- 1 Similarities and differences with the franchise
- 2 Types of Retailers’ cooperative
- 3 Advantages of Retailers’ cooperative
- 3.1 Since there is a high degree of freedom in the products handled and sales methods, it is possible to offer prices and product lineups that match the characteristics of the region and customers.
- 3.2 Cost reduction is possible by “joint bulk purchasing” between member stores
- 3.3 Service improvement is possible based on information sharing between stores
- 4 Disadvantages of Retailers’ cooperative
- 5 Mechanism of Retailers’ cooperative
- 6 How to make a voluntary chain mechanism
- 7 Flow of joining Retailers’ cooperative
- 8 Retailers’ cooperative company example
Similarities and differences with the franchise
Below, we will explain what the differences and similarities are between franchise chains and Retailers’ cooperative.
Common points with franchises
Franchise chains and voluntary chains have two things in common: they “operate businesses such as the head office and headquarters together” and “the position of a member store that operates stores”.
Since the member stores purchase products from the headquarters and operate the stores, they can operate efficiently and reduce costs in both cases.
Difference from franchise
The two positions of the franchise chain and Retailers’ cooperative headquarters and their affiliated stores are the same, but the franchise and voluntary chains have different headquarters structures. Since the headquarters of Retailers’ cooperative is formed by member stores investing in each other , it maintains an equal relationship between member stores rather than a hierarchical relationship with the headquarters.
On the other hand, it can be said that the headquarters of the franchise chain is collectively managed by the headquarters in order to conclude a contract with a member store. By concluding a franchise agreement with the franchise, the headquarters can develop its business larger and faster than the Retailers’ cooperative.
Types of Retailers’ cooperative
There are two types of voluntary chains: “comprehensive function chain headquarters” and “limited function chain headquarters” that provide only the functions that they are good at.
Comprehensive functional chain headquarters
The comprehensive functional chain headquarters is a form that provides all the functions of product supply (product development, product purchasing, logistics) and retail support (IT support, human resources education, sales promotion).
Limited Function Chain Headquarters
The limited-function chain headquarters is a form that provides only the functions that it is good at, and in product supply, it is decided whether to focus on development, purchasing, distribution internally or outsourced. We will support member stores by dividing them into several patterns depending on whether IT support is provided.
Advantages of Retailers’ cooperative
Since there is a high degree of freedom in the products handled and sales methods, it is possible to offer prices and product lineups that match the characteristics of the region and customers.
Retailers’ cooperative have the advantage that the products and sales methods handled by each member store can be selected relatively freely.
In the case of franchise chains, the organization is completely pyramidal, and merchants basically have to follow the instructions and rules of the headquarters, while in the case of voluntary chains, the rules of the headquarters etc. The binding is relatively weak, and the degree of freedom of franchisees is high .
Therefore, even among member stores of the same voluntary chain, it is easy to show the uniqueness of each store, such as handling products that are different from other member stores. In addition, since the voluntary chain is formed mainly by affiliated stores, if the stores make efforts by utilizing the information from each affiliated store, responding to the needs of local consumers in the neighborhood. Can be reflected in the sales floor .
Cost reduction is possible by “joint bulk purchasing” between member stores
The cost of purchasing products is a major issue in running a retail store, but joining Retailers’ cooperative has the advantage of reducing this cost.
In Retailers’ cooperative, the headquarters will purchase products collectively, but in the case of such large-scale purchases, it is relatively easy to have the unit price lowered due to the high price bargaining power of economies of scale. It will be . As a wholesaler, dealing with large customers has many advantages, so we are willing to accept somewhat unreasonable orders.
As a result, the cost of purchasing products will decrease and the profit margin of affiliated stores will increase.
Service improvement is possible based on information sharing between stores
One of the advantages of Retailers’ cooperative is that it is easy to share information between stores.
Compared to franchise chains, Retailers’ cooperative have the characteristic of strong horizontal connections between member stores , and various information is frequently exchanged, so it is an advantage to be able to operate stores by making full use of them. there is.
Information may be shared directly between owners, but POS systems (systems that collect information at the time of product sales) are becoming more common, and this system provides detailed information on consumer needs. Data analysis is possible.
Disadvantages of Retailers’ cooperative
High cost and free management
Generally, Retailers’ cooperative are targeted at individual stores, so if the subscription fee and fixed operating cost for joining the headquarters exceed the cost of reducing purchasing and distribution costs. It will be difficult to establish .
In addition, it is necessary to consider how to unify the intentions among the members, because the management style of the members who are too free becomes a risk that leads to a decrease in brand power .
Management power is required
In the case of franchise chain franchisees, by providing the know-how that they have accumulated so far, it will be possible to operate the stores smoothly at a relatively early stage, and most franchise franchisees are well known. Many customers will use it from the day it opens.
However, in the case of Retailers’ cooperative member stores, since they are a collection of independent stores, there are naturally some stores that have just started and do not have any management know-how. Like a franchise where everything is unified, you cannot get the right guidance for the store, and you have to solve many problems on your own. If you have little know-how and experience, there is a risk of bankruptcy at the earliest possible stage.
In other words, it requires more store management efforts than franchises. Since it is not managed as the headquarters says, it is possible to operate with a relatively high degree of freedom, but on the other hand, the owner has to manage it with his own head, which is an immediate profit. It is important not only to pursue the above, but also to firmly formulate a long-term strategy.
Since major franchise chains have outstanding name recognition, they can raise their signboards by joining the chain, and it is possible to attract customers without having to advertise the name of the store. On the other hand, Retailers’ cooperative do not have a name.
Currently, there are only a few retailers in the voluntary chain that are so well known, so it is not possible to rely on the signboard. You can think of it as rewarding, but first of all, you need to self-enhance your store .
Mechanism of Retailers’ cooperative
Centralized management of purchasing
In Retailers’ cooperative, product purchasing is centrally managed at the headquarters in order to aggregate information and scale efficiency in merchandising of the entire chain. By doing so, by joining Retailers’ cooperative, the department will be able to make large-scale bulk purchases, which has the advantage of reducing purchasing costs . In addition, by centrally managing the purchase of products at the headquarters, the entire merchandising information can be centrally managed, and the purchasing work becomes more efficient.
Aggregation of information and feedback to merchants
At the headquarters of Retailers’ cooperative, the location and store scale of the franchisees are organized and analyzed in a book by centralizing and managing the consumer trends of the franchisees, information on the site of store management and success stories in the headquarters. While adapting to the type of business, business type, etc., we make it suitable for practical work and give feedback to member stores in the guidance activities.
Headquarters grasping and instructing member stores’ performance
Retailers’ cooperative headquarters are required to keep track of and evaluate the performance of all merchants. By monitoring in this way, it is obligatory for member stores to report the performance of their own stores correctly and positively, and management can be made transparent.
In this way, since the headquarters also has a complete grasp of the business conditions of the member stores, the headquarters can also decide the direction of the strategy and provide effective management guidance.
How to make a voluntary chain mechanism
Providing the benefits of cooperating with other companies in the same industry
Retailers’ cooperative gain a business advantage depending on the size of the merchant, so how to gain size determines how successful they are. Many of the merchants are mid-sized independent retailers, and if the region is close, they are in the same industry. Even in such a relationship, we need a mechanism that enables us to manage each other efficiently, such as reducing purchasing costs and enhancing the product lineup by cooperating.
Mechanism for collecting affiliated stores with unique know-how
For member stores that have knowledge and management know-how about product lineups that match the characteristics of each region and customer, it is necessary to create mechanisms such as “joint purchasing” and “system provision” that are beneficial to membership.
Balance between the degree of freedom of each business operator and the maintenance of brand power
When joint ventures use a particular brand name, there is a risk that “excessive freedom” in the product lineup and management style will lead to a decline in brand power .It has gained fans through a free selection of products, but if the product selection is too free, it may lose the meaning of jointly supporting the business, so caution is required.
Flow of joining Retailers’ cooperative
The general flow until a general retailer joins Retailers’ cooperative is as follows.
- Application for membership
- Admission examination / decision by headquarters
- Payment of admission fee and membership fee
Application for membership
In order to join the Retailers’ cooperative, it is necessary to prepare necessary documents such as a membership application form and a copy of the store registry. Contact Retailers’ cooperative Headquarters to find out what kind of documents you need by requesting materials .
Admission examination / decision by headquarters
Retailers’ cooperative headquarters conducts an independent survey of stores based on the documents submitted by the applicants on the member store side, and decides whether or not to join based on the survey results.
Payment of admission fee and membership fee
After passing the examination and deciding to join the chain, you will join the chain by paying the membership fee, membership fee, investment, etc. to the chain headquarters. After that, management as a member store of the chain will begin with guidance and assistance such as training on management know-how and store renovation.
When considering joining a member store, it is necessary to confirm in advance what kind of management policy Retailers’ cooperative Headquarters has and to look at the actual store.
Retailers’ cooperative company example
CGC Japan, an independent division of Santoku, which operates 28 stores in central Tokyo, mainly in Shinjuku-ku, Tokyo, and several stores in other prefectures, has mid-sized supermarkets nationwide as member stores for joint purchases and products. It is an organization that develops. The number of participating companies in Japan is 208, the number of stores is 4119, and the total annual sales of the group is about $ 46 billion. It is the largest Retailers’ cooperative in Japan and the second largest in the world . (As of 2015)
CGC is an abbreviation of “Co-operative Grocer Chain”, which means “a chain that handles food products jointly”, but has four voluntary businesses as its pillars.
The first is “joint purchasing” and “development of private products” that utilize the economies of scale of the group, the second is “joint operation of distribution centers”, and the third is “joint operation of distribution centers”, and the third is “supporting product purchasing and distribution planning”. “Joint business of information systems”, and the fourth and final one is the maintenance and management of the chain by utilizing “cooperation for service expansion” for the final users such as the credit business common to the group and the installation of bank ATMs.
The characteristic of the CGC Group is that it has the ability to negotiate prices with manufacturers and wholesalers against the background of the size of the group, but on the other hand, it is a mid-sized company with friendly clerk and product lineup that meets local needs. It can be said that we are doing “good points” that take advantage of the unique advantages of retail stores.