Definition: Consumer Cooperatives or Consumer Cooperative Store implies an autonomous association that is set up, owned and managed by a group of consumers who share a common interest. For this, the consumers come together voluntarily and form cooperatives to meet the needs and expectations of its members, i.e. the consumers.
These are registered under the Cooperative Societies Act, 1912. This is because it is one of the types of cooperative societies.
The basic motive of these stores is to provide the best quality goods and services to their consumers at reasonable prices and safeguard their interests from being exploited by intermediaries.
Hence, to obtain this objective, middlemen are eliminated from the supply chain. The elimination of middlemen is necessary because they add up their profit to the price of final goods and services and sell these goods to consumers at an inflated price. For this purpose, society buys goods directly from the manufacturer at a wholesale rate. After that, it sells those goods to the members at a reasonable price on a retail basis.
In this way, it eliminates the profit and commission of the middlemen to a great extent. Hence, consumer cooperatives aim to provide services rather than make profits.
Consumer cooperatives establish retail outlets at various locations to sell goods and avail trade discounts from producers.
Super Bazar and Apna Bazar are the two popular consumer cooperative stores operating in India.
Structure of Consumer Cooperative Society
- Primary Societies
- Central Wholesale Societies
- Cooperative Federations
- National Cooperative Consumers Federation
Characteristics of Consumer Cooperatives
- Retail Enterprise: Consumer Cooperatives is the retail enterprise wherein a group of consumers invest money in the enterprise.
- Capital: The capital is raised by issuing low denominational shares to its members. The members also get dividends on the shares.
- Management by members: It elects the executives to manage the operations of the cooperative.
- Consumers are king: It is based on the principle that the consumers of the business are also the owners of the business.
- Open Membership: There is no restriction on the membership of these stores. This implies that any person can join the consumer cooperative and become a member by buying the shares. In doing so, they agree to abide by the rules of society.
- Democratic Set-up: Every member of the organization has a single vote, regardless of the number of shares they hold.
- Cash Sales: It is to note that the members can buy goods from the store on a cash basis only.
- Surplus Distribution: There is a fixed system of sharing of profits and accumulated savings among the consumers. A portion of the surplus is kept aside to create reserves and also to provide basic amenities to its members. The rest of the profit is distributed among the members. The distribution will be based on the purchases made by them from the store.
- To make sure that there is a continuous supply of essential goods.
- To stop malpractices such as profiteering, black-marketing etc.
- To supply high-quality goods and services at fair prices to the members that match their requirements by eliminating the profit margin of middlemen.
- To improve the purchasing power of its members.
- To help lower and middle-class people from exploitation by businessmen who work to make a profit.
Advantages of Consumer Cooperatives
- Easy availability of articles of daily use in good quality and at fair prices
- Keeps a check on the prices of essential items by reducing monopoly.
- Safeguards the interest of weaker sections of the society
Limitations of Consumer Cooperatives
There are a few limitations concerning the performance of consumer cooperatives. These are:
- The consumers lack the expertise in buying, handling and selling products. In other words, we could say that consumers are not experts in retailing functions.
- There are some cases when the savings in cost and reduction in the selling prices is not as expected.
- Frequent occurrences of consumer boredom in running the cooperative.
A word from Business Jargons
Consumer Cooperatives are successful in the sense that they offer valuable services and facilitate saving of the consumer’s money. It combines the demand of various members to offer better availability, selection and pricing of goods and services. When it comes to size, they are small. However, in terms of number, there are many consumer cooperatives.