The American Prospect, which to be clear, is described as a “liberal, progressive” publication, has an interesting story about S Group, a Finland retailer that operates “completely unremarkable” grocery stores, “somewhat fancier than Albertsons but less fancy than Whole Foods.”
But here’s the context, from writer Ryan Cooper:
“The interesting thing about S Market, and what brought me all the way to Finland, is not this bog-standard grocery store. It’s the parent entity S Group, a cooperative network owned by its members – and one of the biggest and most successful companies in Finland.
“S Group has about 2.5 million members – in a country of just 5.6 million inhabitants – representing 78 percent of Finnish households, along with 41,000 employees, 1,984 business locations, and an annual revenue of €13.5 billion last year. S Group accounts for fully 47 percent of the Finnish grocery market.
“While nowhere near Walmart in absolute terms, relative to the size of the Finnish economy, it’s about twice as large as Walmart’s U.S. operations, which controls about a quarter of domestic grocery spending. And it’s member-owned.
“From an American perspective, this is difficult to understand. Practically our whole society is built on the assumption that the only way to have a wealthy, productive economy is for entrepreneurs to be incentivized with massive rewards for building efficient businesses. It is necessary for people like Jeff Bezos and Elon Musk to become rich beyond the dreams of avarice, so the theory goes, because otherwise we wouldn’t have Amazon or Tesla.
“One might attack this narrative empirically – Amazon was helped tremendously in its early days by not paying state sales taxes, while Tesla has relied on large government subsidies for most of its existence – but S Group poses a more fundamental challenge. Here we have a hyper-efficient retail operation, run with cutting-edge management and logistics, dominating half the grocery market of a wealthy country, without minting a single billionaire in the process.”
The company is more than a century old, and has gone through some trials and tribulations – it almost went out of business some four decades ago. But it was revived by a “ruthless” approach to making the business economically viable, and an understanding that its greatest strength could be the things that makes it different:
“Since a co-op has no shareholders, and hence no strict need for profit maximization, it can compete quite ruthlessly on price. For another, cooperatives can inspire deeper customer loyalty than an ordinary business. Starting in the mid-2000s, S Group rolled out a new marketing strategy aimed at the upcoming generation of Finns, who did not have the emotional attachment to cooperative enterprises of prior generations, under the slogan of ‘Your Own Store.’ The idea was to present the co-op as both a rational, money-saving decision, and something that would assist both local communities and Finnish society as a whole.”
It worked: “Today, S Group owns the hypermarket chain Prisma, the supermarket chain S Market, the small grocery store chain Sale, the gas station/convenience store chain ABC, the department store Sokos, plus various hotels and restaurants. It has its own bank, unsurprisingly called S Bank. The 19 regional co-op societies own SOK, which provides services to the regional cooperatives, as well as planning and management advice.”
KC’s View:
To be clear, I am not suggesting that every retailer adopt the S Group model; I’m an American and a capitalist, and “rich beyond the dreams of avarice” doesn’t sound all that bad. (Though I have a problem with unrestrained greed and social irresponsibility. But that’s another column.)
I bring this up because I admire the co-op model in general, and because “Your Own Store” strikes me as a construct with extraordinary potential power. “Your Own Store” can envelop both customers and employees, and fostering that kind of attitude doesn’t require a co-op business model. It does demand a culture of caring, however. It demands servant leadership. And it demands understanding that the people on the front lines are the most important factor in the retail experience.
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