In retail, it pays to be part of something bigger

In sport, everyone wants to belong to a winning team, and at work everyone wants the pride and satisfaction that comes from being part of a successful organisation. This is why teams and companies that are good at what they do are more likely to attract and retain good people.

One of the interesting dynamics in modern retail organisations is the need for a balance between efficiency and engagement. Bigger, centrally run retailers with more rules can operate more efficiently. But without caring, motivated staff at the branches, service and customer satisfaction will suffer.

In a co-operative business model where the branch owners or members collectively have control of the decisions made by their central support office team, there is a healthy tension between what is good for the individual vs what is best for the group. At its best this model combines the resources and best-practices of each local business into group processes, which help the small parts compete with much bigger corporates. The goal is to help the owner-operator be more successful but there is always a trade-off. This is often experienced by the member as a loss of control and an increased cost of compliance.

A recurring challenge for cooperative businesses is how to harness the best practices of their leading edge members while catering for the majority in the middle. This is usually addressed by inviting the outspoken, revolutionary or advanced owners onto an advisory committee so that their voice is heard, and so that they can better understand the different needs and capabilities of their mainstream colleagues.  A real test of the group's leadership is to decide on policies and practices which advance the best interests of the whole group, without being either held back or influenced too much by the likes and dislikes of outspoken individuals. Just like a good sports team, the best results are achieved when talented individuals don't try to win the game on their own, and forgo some of the limelight for the good of everyone.

I am often asked by independent retailers whether they would be better off joining a retail group. I used to have a saying that "the best independent retailer can out-perform any group retailer" but now my views have changed.

For years I resisted joining a retail group because it would dumb down my business. I believed that my way of doing things was better than the group-mandated process. So what changed?

Margins have shrunk as operating costs have risen. The cost of doing business is now very close to the profit margin available - so there is increased pressure to optimise every activity. Group buying power is an essential ingredient.

Customers have become more sophisticated - they now notice the difference between national or local promotions, merchandising and branding, and they expect a higher quality in every interaction with every store.

Marketing and sales channels have expanded.  Modern shoppers expect instore, traditional media, mobile, social media, loyalty programmes and  online touchpoints. The complexity of doing all of this well requires skill sets that are beyond owner-operators.

Looking back now, one of the unexpected benefits of belonging to a retail group was the recognition I received from my peers for contributing ideas, practices and solutions that would benefit the whole group. This payback satisfied two basic human needs: to belong and to make a difference, and is a key way for groups to retain and reward the best store operators.

Eventually the need for more sophisticated marketing, operations and buying than I could achieve as a standalone business overcame my desire to be different.  The future of specialty retailing combines the best from both models: engaged, local operators working within a cooperative framework provided by their national support office.

John Saywell is chief executive of RPM Retail and blogs at Retail Scientist

Idealog has been covering the most interesting people, businesses and issues from the fields of innovation, design, technology and urban development for over 12 years. And we're asking for your support so we can keep telling those stories, inspire more entrepreneurs to start their own businesses and keep pushing New Zealand forward. Give over $5 a month and you will not only be supporting New Zealand innovation, but you’ll also receive a print subscription and a copy of the new book by David Downs and Dr. Michelle Dickinson, No. 8 Recharged (while stocks last).