21 September 2009

Principle 6: Trading together, do we?

When I first learnt about co-operatives, I thought Principle 6: Co-operating with other Co-operatives was the most powerful of all the principles and gave co-operatives a serious competitive advantage against other forms of business and other social enterprises for that matter.

I imagined this to be like being in the Freemasons, or going to the right University. The right handshake, name dropping Horace, George, or the Fenwick Weavers and you would be instantly given all the advice, business contacts and co-operation you required from fellow members of the movement.

Now that I have been "in the movement" for 18 months and talked to a lot of co-operatives, I find that this is not always the case, particularly the trading together aspect of Principle 6. There is interest though: for some a genuine commitment to a stronger movement and helping fellow co-ops, for others its just good business sense.

People do try and are successful, but this is mainly the larger co-operatives or in an informal way. There are some who try to inter-trade, market to fellow co-operatives and don't meet with much success. There has even been a proposal put forward to develop a business referral network called "principle six". So does it work? Can co-operatives trade together?

Some examples of success:
  • Fair trade & supporting producers in developing countries - A good example is Palestinian Olive Producers supported by Zaytoun & Olive Co-op are selling under the Equal Exchange label in Co-operative retailers like the Co-operative Group and the many smaller retailers. The wider fair trade work done by the co-operative movement has helped 1000s of farmer co-operatives round the world.
  • Initial growth in Co-operative Sector - Historically the consumer societies had a strong tradition of co-operating with each other, the formation of the Co-operative Wholesale Society and CRTG.
  • The Co-operative - The Renaissance in the Co-operative Brand and the sector as a whole is in part down to the continuing co-operation between the consumer societies.
  • The Phone Coop - has been particularly successful at using other co-operatives to promote its services, Co-operatives UK members for example get a 6% discount and we promote this as part of our membership offer.
Through formal co-operating (CRTG) , to the less formal (worker co-op wholesaler selling each other products), co-operatives can and do co-operate. What I am interested in, is why small and medium sized co-operatives and in particular worker co-operatives find it difficult to trade together. This is not just about inter-trading but doing joint projects, making business referrals to each other.

Here's one idea for doing using Principle 6 to trade together, (send me more):
Joint marketing is the process of promoting your co-op to the customers of other co-ops. For example, suppose you wholesale ethical products to small ethical retailers, your customers, probably have a website, bank account, phone line, and you would hope accounts.

You could ask co-op providers of these services to offer a benefit to your customers (of course with an extra discount if these customers are co-ops themselves). If your products are relevant to their customers you could mirror the deal and promote to their customers. This could result in a win-win situation for both of you.

Step 1 - Understand your numbers. You'll need these to demonstrate how much money your fellow co-op could make. For instance, work out what your response rate is for a typical direct-mail campaign and the value of each new customer.

Step 2 - List products and services that are complementary or related to your own, and that you would like to offer your customers. Don't leave out products or services that aren't necessarily related but in which your customers might still be interested.

Step 3 - Search for co-ops that sell those products and services. Then contact those people and propose a meeting to explain your strategy further or get in touch with me to make the link.

Step 4 - Get an agreement. When negotiating your deal, always try to get an agreement to extend your relationship and be clear what you both expect from each other.

Step 5 - Contact Co-operatives UK so we can promote what you have achieved, share the learning or even better get us involved in the idea from the start.

Before you go and start looking for opportunities:

How much trade do we already do with each other?
What stops us from doing more?
What things could we do to improve it?

If you are as interested in the answers to these questions as I am please fill in this quick survey and I will publish the results at the end of October. Together we can look at improving our Principle 6 behaviour. Please leave any comments on this blog or start a discussion here.

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