Question

Why are consumers cooperatives stores considered to be less expensive? What are its relative advantages over other large scale retailers?

Answer 1

Consumer cooperative stores are formed by groups of consumers to provide goods at reasonable prices to members of consumer societies. In such societies, the role of middlemen is eliminated as these societies purchase goods from manufacturers or wholesalers directly and sell them to society members at reasonable rates. As consumer cooperative stores do not aim at profit-making, the prices of goods offered by them are much lower than the prices of goods at retail shops. Compared with large-scale retailers, the capital requirement for starting a consumer cooperative society is very low. Thus, consumer cooperative stores do not require much investment, and the goods sold by them are priced lower.

The following are some advantages that consumer cooperative stores have over large-scale retailers:

(a) Democratic management: Consumer cooperative stores are democratic organisations as they are managed and controlled by elected managing committees of consumer societies. The members of managing committees are elected by the members of consumer societies on the principle of ‘one member, one vote’.

(b) Limited liability: The liability of the members of consumer cooperative societies is limited to the amount of shares held by them. Thus, in case a society’s liabilities increase beyond the assets, the members will not be liable to repay the debts using their personal assets.

(c) Low price of goods: As the goods offered by consumer cooperatives are directly purchased from manufacturers and wholesalers, the role of middlemen is eliminated. Therefore, consumer societies are able to sell goods at lower prices.