Recently at the Texas Agricultural Cooperative Council’s Farm Store Summit, cooperative farm store managers held a roundtable discussion on the challenges they face. While issues such as the lack of skilled labor and loss of farmland were discussed, participants described a worrisome cycle regarding the farm store’s value proposition.
The cycle can be described something like this:
- Cooperatives sometimes struggle with a fear or inability to invest in activities that will broaden their value proposition
- As a result, they engage in more price-focused competition
- The cooperative struggles with a fear or inability to maintain or increase price margins
- The co-op becomes less profitable, which in turn causes an inability to invest in value-adding activities (back to step 1).
When a cooperative farm store is experiencing cost inflation and is not willing to pass some or all of the increase on to member-owners by maintaining price margins, they experience a financial strain that can result in a reduced power to invest in the co-op. This means less labor that can be hired, or less customer service training for existing employees. Well-trained labor is an investment that can generate greater sales, and not a simple expense to be written off by managers or boards. Finally, boards must adopt the expectation that the cooperative farm store should make a profit. Developing a value proposition focused on service is essential for success.
The cooperative’s ability to maintain member loyalty is ultimately tied to its value proposition. If the only value that members can see in cooperative ownership is rooted in price, their loyalty will lie with the best price, whether it be at the co-op or a competitor. Developing member value that is based on customer service, convenience, or other customer-centric factors will allow for a healthy, long-term business relationship with patrons.
Author: Conner Neumann
Graduate Assistant- Agricultural Economics – Texas A&M University
Author: John Park
Roy B. Davis Professor of Agricultural Cooperation and Extension Specialist
Neumann, Conner, and John Park. “Cooperative Farm Stores and the Challenge of Member Loyalty.” Southern Ag Today 3(4.5). January 27, 2023. Permalink
Top photo Credit to Wendy Wei