Online-co-operatives-of-traders

Setup guidelines

Local online shopping cooperatives – i.e., multiple traders located in a small geographical area operating as a single online identity are springing up left, right and centre; particularly in a rural context where food producers and artisans are banding together and exploiting online solutions to enhance their businesses. A cursory search of the Internet with terms like ‘online farm food collective’ reveals a multitude of local initiatives spread across the globe, or the westernised part of it at least; with online solutions such as Milo and Amazon’s ‘Local’ online shopping brand show there is an increasingly broad interest in the local as a key factor in consumers’ decision-making.

Our research has focused on grassroots initiatives that seek to add value to geographically bounded communities of producers, retailers and consumers by using co-operative online sales tools. We offer some insights into these challenges of setting up such enterprises both in an extended guideline-based format format and also as a quick-read list.

The guidelines

The guidelines below are the key things to consider when initially thinking about setting up an online co-operative shop. Here we present a series of things that should be considered when setting up an online co-operative shop, or developing software that might be used in this way.

Each of these issues must be worked out with respect to the local circumstances in which the cooperative online shop is to operate. Working them out can be a complex matter, which will shape a cooperative’s and technology developer’s understanding of just what needs to be supported through systems design.

Define the scope and function of the online cooperative shop

Specify the products provided by the shop – e.g., whether it is providing artisan or specialty products, generally available products, or both. This will involve specifying the kinds of producers and products to be sold online and the ‘trading zone’ or geographical availability of those products. The specification should be examined with regards to competing solutions.

Define the delivery mechanisms

Specify how products are to be delivered to customers – e.g., will generally available logistical solutions be employed, or are bespoke solutions required, including customer collection solutions. This will involve specifying product-appropriate solutions and the frequency of delivery/collection. The specification should be looked at with regards to available transport and distribution opportunities.

Define the supply mechanisms

Specify how products are to be supplied for delivery to or collection by the customer. This will involve specifying the supply chain and both the mechanisms and means of supply scheduling and coordination across multiple traders. The specification should also be framed with regards to available transport and distribution opportunities.

Define the costs of setting up and running the online shop

This will involve specifying a range of costs: software infrastructure costs (including initial set up and subsequent support costs); delivery and supply costs (including transport, distribution and handling costs); staff costs (including personnel, admin, and maintenance costs); projected customer base and spend; and subsequent cash-flow and profit margins. This specification should be examined with regards to established business calculation processes and techniques.

Define the risks associated with the online shop and risk management strategies

These need to be worked out carefully in context, but our studies suggest that key risks for the cooperative shop include supply chain management (can sufficient volume be catered for?) delivery (can it be done with sufficient frequency), and market demand (will people really use the shop?). Strategies for managing these risks include conducting market research and running a pilot of the shop with an ‘invited’ group of traders and customers to assess the initial feasibility of the enterprise.

Define how the shop will engage its customers

Specify who the target customers are and mechanisms for engaging them with the online enterprise. Generic mechanisms might be exploited – e.g., discount vouchers, sales, or loyalty and reward schemes – but insofar as the customer base is local, then consider mechanisms that promote this: e.g., badging local producers and products and reflecting the investment made by local people in the local economy.

Characteristics of co-operatives

We offer the following things to think about for anyone thinking of creating a business that pulls together traders in a cooperative manner:

  • The development of online shops to support cooperative trading in local contexts requires the development of mechanisms that enable the group of independent traders.
  • These mechanisms need to be deployed and configured locally, within the geographical areas whose boundaries can be specified by the group.
  • They need to enable groups to establish local community identities (so they will look and feel different to solutions such as the Open Food Network).
  • They need to support stock specification and control by groups of traders, and online ordering and payment by customers.
  • They need to support delivery coordination between the customer and the shop, and between the group and its individual members.
  • They need to support supply coordination between the order systems and individual traders, and between traders and order coordinators.
  • They need to engage consumers, not only through the use of generic mechanisms, but, through mechanisms that promote investment in the local economy.

We hope that this document has offered some research pointers that can help you reflect upon your business and some of the issues that might arise when you start-up.