Grocery Store Cooperative

Iqbal Basyari

· 5 minutes read

Despite growing competition from minimarket chains, grocery stores in Surabaya are maintaining their existence by establishing cooperatives, purchasing goods together and increasing their capacity to retain consumers.

Minimarket chains have become a real threat to grocery stores. Strategic locations, diverse products and an attractive store layout are some of the advantages minimarkets have in winning consumers\' hearts, whereas minimarkets do not always offer goods at lower prices than grocery stores.

Grocery stores in Surabaya, East Java, strive to survive and gain competitiveness through various strategies. One of these is by establishing the Grocery Store Cooperative, which was initiated by the Surabaya trade office.

Grocery store owners are working together to gather funds and form cooperatives. The money they gather is used as capital to buy merchandise directly from distributors.

In this way, the grocery store owners obtain lower prices because they bypass several stages in the distribution chain. Their bargaining power is stronger against agents and distributors because they buy large quantities of goods with cash. They can also sell goods at lower prices.

Seven grocery store cooperatives were established in seven of 31 districts in Surabaya from 2017 to 2019, comprising a total membership of more than 250 grocery store owners. These cooperatives are located in the districts of Rungkut, Genteng, Sawahan, Sambikerep, Tambaksari, Krembangan and Tenggilis.

Koperasi Rungkut Makmur Sejahtera secretary Sutik, 48, said on Saturday in Surabaya that the cooperatives greatly helped their members to compete with minimarkets. As they purchased merchandise at lower prices, they were able to retain their consumers.

Competitive price

Some of the items they purchase directly from distributors include palm sugar, rice, cooking oil, refined sugar and instant noodles. The cooperatives purchase these goods at prices that are generally 20 percent lower than if they bought the goods from an agent or at a traditional market. At present, the cooperatives already have more than 10 distributors to buy their merchandises.

"The prices at my store can be compared with those of the minimarket next door. I guarantee it\'s cheaper," said Sutik, owner of the Della Jaya grocery store in Rungkut, which is located about 100 meters from a minimarket.

The grocery store on Jl. Kedung Asem, Rungkut, sells about 400 goods. The store’s layout is similar to those of minimarkets. It obtains most of its merchandise through the grocery store cooperative, and has an average daily turnover of Rp 3 million (US$200).

Goods are delivered almost daily to his store, which is temporarily being used as the cooperative’s warehouse. The goods are delivered in bulk, like 1 ton of sugar and 500 sacks of rice per delivery. The two employees repack the goods in smaller volumes for redistribution to the cooperative’s members.

"Each member comes to collect their merchandise about four times a week on average. The cooperative’s monthly turnover is now about Rp 60 million. The profits are divided among the members at the end of the year," Sutik added.

Koperasi Rungkut Makmur Sejahtera has 57 members. To become a member, a grocery store owner pays a membership fee of Rp 100,000 and makes a mandatory deposit of Rp 25,000 per month. The money is used as capital to buy merchandise.

When the members\' needs were large but the initial capital was small, Sutik applied for a bank loan of Rp 60 million. The loan was used to supplement the cooperative\'s initial capital. All members contribute to repaying the loan in installments.

Sutik said that there were many advantages for grocery store owners in forging a partnership. "The minimarket chains are able to compete because they have strong capital. Now we can, too," he said.

Facilitation

The Surabaya municipal administration introduced the cooperatives to direct distributors so they could obtain lower prices than from other kinds of distributors.

Surabaya trade office head Wiwiek Widayati said that the municipal administration had a duty to help grocery store owners so they could compete with the minimarkets

"We help introduce the cooperatives to [direct] distributors to shorten the distribution chain. If capital is a problem, we also introduce them to financial institutions," she said.

To attract consumers, the grocery store owners are given training to improve their services. The merchandise must be displayed well to attract buyers. Grocery store owners are also encouraged to offer promotions like their competitors.

At the same time, said Wiwiek, the trade office enforced the regulations for minimarket chains. It closely monitored the minimarkets’ regulatory compliance, including the requirement that minimarkets must be located at least 500 meters away from traditional markets. Minimarkets must also be located on a road that is more than 8 meters wide and must have a supermarket business permit.

The trade office also helps develop grocery stores through the economic mentorship program, under which each trained staff mentors 10 grocery store owners.

"Grocery traders receive a mentoring program on financial, retail and distribution management," said Wiwiek.

Surabaya Mayor Tri Rismaharini expressed hope that more grocery store owners will become a cooperative member, as only 12.5 percent of the 2,000 or so grocery stores in this city of 3 million were registered as active cooperative members.

Editor:

Regional Innovation