This article first appeared in The Times.
Being owned by its customers and members means that the Co-op does things rather differently to other supermarkets, as Matt Atkinson, the group’s chief customer officer, explains.
“In ‘PLC land’ decision-making is pretty straightforward – what is your return on capital, your return on sales, your net promoter score? So long as the shareholder is happy, and I meet my target, everyone is happy.”
He continues: “At the Co-op our decisions usually start with, ‘What’s the overall community benefit here – and is it also commercial?’ It’s much more complicated because we are often making an ethical choice as well as a commercial one.”
The focus on balancing community and commercial priorities runs right through the business like the writing in a stick of rock, he says. “One of my favourite examples is our relatively large store footprint. If it were other large grocers, that footprint would be a lot smaller. That’s because there are Co-op stores that are on the fringes [of commercial viability], but if we weren’t there that community wouldn’t have a shop at all.”
Atkinson knows what he’s talking about. Before joining the Co-op in 2017 he worked for a number of publicly owned firms, including Tesco itself, where he was group CMO and also a director of the Dunnhumby data division, responsible for the store’s Clubcard loyalty scheme.
He’s now not only in charge of looking after the Co-op’s five million-plus members, each of whom owns a least a £1 share of the business, but also has responsibility for digital products and customer marketing. Many of the projects Atkinson now leads at the Co-op are based around working with charity and community groups to build local engagement.
The restrictions around Covid-19 have created an opportunity for Atkinson to extend the Co-op’s local engagement remit into new digital territory. One example is the new platform, Co-operate, designed to help connect community groups and local charities with people who want to take part, but don’t know where to look. “It’s a community marketplace – a digital tool to get organisers and their local communities together to do things that the community really values,” Atkinson explains.
It fills a gap that the giant platforms like Facebook and Google don’t entirely address, he says, because they are commercial in nature. “We used it in lockdown to help look after vulnerable shoppers – people jumped on the platform to say, ‘Yes, I can deliver food for a vulnerable person.’ But they might also go on there to offer fitness classes, or to read stories. There’s no business case for it, but we know that it’s something people really value.”
The lack of a clear commercial return means this would have been a hard sell in Atkinson’s previous PLC life. “I’d never have got them past the capital committee. They’d have laughed at me and said, ‘Go away, you crazy man.’”
Take education funding, for example – the Co-op Academies Trust runs 26 schools and colleges across the Manchester-based group’s north of England heartland; or wellbeing – the Co-op produces a Community Wellbeing Index using multiple data sources (including what would be regarded as commercially sensitive internal data by many other organisations) to profile more than 28,000 local areas across the country. It’s used by third parties including charities, government and the NHS to help identify specific local policy priorities. “Because we try to co-operate a bit more than others, it’s open data,” Atkinson explains. “We’ve made it available as an API [application programming interface] to anyone who might want to use it.”
This view that a business is about more than its balance sheet does resonate with customers, especially during the current Covid-19 pandemic as people increasingly work, live and shop near to their homes. “We’ve seen that our brand metrics have really strengthened through the period as a result of us being front-footed, generous and community-orientated,” Atkinson says. “Shoppers are going local and we’ve seen new customers and bigger baskets as a result. There’s definitely a recognition that our intentions and actions are different.”
There’s an element of enlightened self-interest here, as the group’s recent interim results for the year to July show. Total revenues across the business (which includes funeral care and legal operations as well as the 4,000-strong food store network) were up 7.6 per cent to £5.8 billion. Pre-tax profits rose 35 per cent to £27 million.
Consequently, at a moment when the high streets appears to be facing a tough future, the Co-op is expanding, pledging to open 50 new stores and create 1,000 new jobs. It has also given a wage rise to 35,000 of its lowest paid employees, who will all now receive at least the Real Living Wage, which is above the statutory minimum wage.
It’s also developing an in-house technology to help make employees’ lives easier, including a new workforce management app called Shifts. “It puts colleagues in control of managing their own shifts – they can see who is on a shift, swap with someone else, clock in and out,” Atkinson explains. “Now everyone uses it, it’s a brilliant digital product and a very democratic way of empowering colleagues.”
The group has taken a similarly 21st-century approach to scaling up its online and delivery services in response to the pandemic demand spike. Why build a costly distribution centre and delivery fleet, when you can team up with those who already have them? “The value here is in commercial co-operation,” Atkinson says. “Our stores now have the capability to act as shops you can go into yourself or as places that others can collect from – we’re very good at running our stores and we are now leveraging those core assets to gain incremental sales.”
So the business has partnered with a range of third party providers including Deliveroo, Pinga and Buymie as part of its plan to offer same-day online deliveries across 650 stores by the end of the year. It’s also trialling a number of innovative delivery schemes including eco-friendly cargo bikes and even robots. “The robot comes, a colleague puts the order in and the robot goes off and makes the delivery. We’ve been doing it in Milton Keynes and people love them.”
But for Atkinson, innovation is ultimately a means to an end – the Co-op’s digital journey is more about customer-centred evolution than revolution. “What we’re trying to do is overlay digital channels on to a very good set of businesses, to make them more available. For me that’s the role of data and digital – to make what the Co-op does more available in the right ways to our customers in their communities.”
The KPMG view
During the pandemic, consumers have increasingly chosen products and services not only because of traditional factors like price, quality and convenience but also because of the values and behaviour of the firms that stand behind them – their social purpose.
The fact that the Co-op has such a strong track record of being purpose-led and community-minded is one of the key reasons it has had such a successful six months, says Nathan Beaver, customer and digital partner at KPMG. “At its core, the Co-op brand really stands for purpose and integrity,” he explains. “That’s what consumers are looking for – brands which really stepped up at the height of the pandemic and continue to do so now.”
This view is backed up by KPMG’s latest Customer Experience Excellence report. “Consumers are more local, and more home-aware. The data shows that brands with integrity and purpose have really jumped up the rankings,” Beaver adds.
The Co-op’s store footprint has also helped it to capitalise on the rise of localism – many branches are in residential areas, staffed by local people and more accessible than larger out-of-town or city-centre alternatives to those who have been living, working and shopping in the same neighbourhood.
The next big challenge for the group will be how to hang onto as many of those new customers as possible, as the Covid-19 situation gradually stabilises. That means having good data, and using it wisely. “It depends on your ability to intelligently mine customer data to personalise the brand, the product or service, and the experience,” Beaver says. The Co-op’s membership-led ethos helps it avoid the most common data pitfall – not giving fair value to the customer. “Where many others fall down is on the value exchange – what am I getting as a customer in return for letting you use my data? I fully agree with the Co-op’s mantra that the data belongs to the individual member.”
“The other major pandemic shopping trend has been the rise of ecommerce. Partnering with a range of third party providers as the Co-op has done makes sense for any business that doesn’t have the heavyweight distribution infrastructure of larger rivals,” says Beaver. “It’s also ideal for trialling sustainable ‘last mile’ options such as robot and ebike delivery,” he adds, which are only set to become more important to shoppers. “I think the consumer is waking up to the fact that using a car to deliver a £10 shopping order doesn’t seem particularly green.”
And tech innovation is increasingly crucial to the Co-op employee experience too. The old adage that happy staff means happy customers remains pertinent in our digital world, and giving employees workplace technology that is as slick as the apps they use to run their personal lives certainly helps. Even the thorny issue of clunky legacy tech is not the problem it once was, says Beaver. “Technology is increasingly low-code and democratised. Most enterprise tech providers now offer applications that allow you to put user friendly wrappers on less user-friendly historical corporate systems.”
Growing evidence of the power of purpose to engage both customers and employees means that others are starting to follow the Co-op’s lead, concludes Beaver. “We’ve seen some of the most fundamental shifts in customer behaviour since the Second World War, and a lot of our clients, from big ‘blue chips’ down, are now starting to think about what their purpose is, and their role in society. These are questions that they haven’t really asked themselves before.”