The Co-op’s decision to reintroduce its clover logo may have grabbed the headlines, but the mutual’s move is far more than just a rebrand.
The business truly is going “back to the future”, food boss Steve Murrells says, by putting membership of the Co-op back at the centre of its proposition.
The Co-op aims to recruit 1 million new members, who earn points and a share of the profits directly related to how much they spend. It also wants to double food sales to these participants from 25% of overall sales to more than half.
Members will receive a 5% reward on any own-brand purchases they make, which they can spend not just in food stores, but across the Co-op’s electricals, funerals, insurance and legal services businesses.
“We’re going back to the future. We are doing what’s important to our members and their communities”
Steve Murrells, Co-op
They will also be granted an additional 1% of spend on own-brand goods and services to be donated to a charitable cause of their choosing in the local community, while the dividend will also return, handing a share of profits to its members for the first time since it was abandoned in 2013.
The revamped package means the Co-op will dish out more than £100m every year to members and local communities by 2018.
Murrells tells Retail Week: “We’re going back to the future. We are doing what’s important to our members and their communities by reinforcing the commitment to place membership back at the heart of the business again.
“This is something that only the Co-op could have done,” he boasts. “No other business could do this – it is a unique proposition that a plc wouldn’t have been able to do.
“We think, as a consequence, this will connect with people up and down the country who will be excited and want to become a member.”
Retail Remedy managing partner Phil Dorrell agrees that the revamped membership provides the Co-op with a unique and “compelling” proposition.
“The Co-op have left off recruiting new members for five or six years now – they’ve just not been bothered.
“The fact that they are now in a position to talk positively about the benefits of being a member again is a good plus for them and it will make people drive past a little Tesco and go to a Co-op instead, no doubt about it.”
But how much emphasis do modern-day consumers place on their retailer of choice being an ethical business?
The milk crisis proved that today’s shoppers, although value-hungry, consider more than just price when deciding where to shop.
In an ICM poll conducted exclusively for Retail Week last summer, more than three quarters of consumers said they would be willing to pay more for their milk so that farmers received a “fair” price.
Shoppers with a similar mind-set would certainly consider a Co-op membership in the knowledge that charitable causes in their community are benefiting from their custom.
“The benefits of being a member again will make people drive past a little Tesco and go to a Co-op instead, no doubt about it”
Phil Dorrell, Retail Remedy
Murrells says any retailer’s ethical and community commitments make up “an important part of the decision tree customers make in terms of where they shop, as long as you are doing all the basics right and giving them a great shopping trip.”
But Dorrell warns it is those basics – including price, availability and customer service – that will play the biggest part in shaping the Co-op’s fortunes, despite its revitalised membership package.
“Largely customers shop because it’s convenient to shop at a given place and secondly there will be a consideration on price,” Dorrell suggests.
“The Co-op has a good depth of local shops that can be put in front of customers ahead of other brands, so they tick that box, and their pricing architecture has improved over the past two years. They used to be out of line on things like bread and milk, but you don’t notice that any more.
“So if you take those two factors out, but add in the consideration that, ‘if I shop here, the local RSPCA or the local hospice gets money directly from my purchases’, I think that’s compelling.”
Murrells believes that added incentive for shopping at the mutual, which he dubs “the Co-op difference”, will “register with people up and down the country”, building further momentum in his rapidly-recovering food business.
Like-for-like sales advanced 1.6% in the year to January 2, with same store sales in its core convenience business climbing at the quicker rate of 3.8%.
“Over the course of the past few months, people have started to see that something quite exciting is going on within the Co-op again”
Steve Murrells, Co-op
As sales growth slows within the c-store businesses of principal rivals Tesco and Sainsbury’s – which posted a much lower 0.4% rise in like-for-like convenience sales in its latest full-year figures – the Co-op’s rebrand has the potential to heap further pressure on the wider sector.
While Dorrell believes its big four rivals will be less concerned than symbol group operators including Spar, Nisa, Londis and Budgens, he admits that the Co-op is “on to a winner”.
Murrells clearly thinks so too.
“I certainly would be intrigued if I was a competitor reading about us,” he suggests.
“Over the course of the past few months, people have started to see that something quite exciting is going on within the Co-op again.
“We are leveraging the group’s muscle right across the business, from food stores to the consumer services businesses.”
Having already proven its strength and endurance by bouncing back from the brink of collapse, the Co-op has gained the confidence required to flex its muscles once again.
The relaunch of its membership proposition has laid down the gauntlet to its convenience rivals to bulk up their offers in the ongoing battle to build shopper loyalty.