Co-op’s new partnership with Amazon is a risky necessity

The GMB has cried foul over a deal Co-op hopes will more than double online sales along with its robot experiments. James Moore explains why the move is a risk for the retailer, but they’d be foolish to snub the opportunity

Co-op is investing in its partnership with a robot company and has also struck a deal with Amazon (Co-op/PA)

“Really disappointing to see a company with a proud ethical heritage like Co-op teaming up with Amazon,” said the GMB Union.

Britain’s favourite ethical, customer owned retailer has sealed a deal that will see Amazon Prime customers able to order Co-op products through the tech giant’s website and have them delivered for free if the basket is above £40, or for £3.99 for smaller orders.

The deal has proved controversial because of the Co-op’s status, history and brand.

The institution is big on things like localism and ethically sourced products. It pays its workers well by industry standards and has been investing in them too.

Amazon is, by contrast, a regular cause of controversy over issues ranging from the tax it pays (not much) to the treatment of those who earn their crust in its vast fulfilment centres, which the GMB has repeatedly raised. This, and the Co-op’s history with the labour movement, helps to explain its unhappiness with the tie-up. And it is far from alone in finding it jarring.

However, there is another side to the story.

The Co-op hitched its wagon to convenience as part of a turnaround process necessary to revive its fortunes after the group managed to get itself into a terrible mess. There were times when the very future of the business looked to be at stake, the legacy of some dreadful mismanagement. There were also some decidedly unethical goings-on at the institution.

Its disappearance from the high street would have represented a great shame. Fortunately, the business was brought down to size and saved, and the strategic road it chose to go down proved a roaring success.

However, after starring during the pandemic, the Co-op has started to lose market share, which reached a high of 7.4 per cent by June 2020 but had fallen to 6.5 per cent by the beginning of this month, per Kantar’s regular survey of the nation’s shopping baskets.

The lack of an online offer with heft is a notable weakness, and a strategic dilemma given that is where customers increasingly want to shop.

Most online grocers rely on chunky basket sizes to make the economics of the channel work, which favours specialists, like Ocado, or traditional big supermarkets, like Tesco, where customers do big shops.

The Co-op isn’t going to return to the days when it was in that space and can’t realistically launch an online business on its own given the logistical problems, the crowded field and the cost. It would be prohibitive at a time when the group is already in the red (as a result of Covid and various investments) with a rising level of debt.

Seeking a partner to add to an existing arrangement with Deliveroo and the robots it has been trialling with Starship Technologies (that tie up is being extended) therefore made sense. Amazon clearly offered the best opportunity for Co-op to grow its online business.

There is already a mutually beneficial relationship there through the Co-op hosting Amazon lockers, which allow customers to pick up their orders along with whatever bits and pieces of shopping they might want.

The group will still need to keep its eyes open.

The people working as part of this and other partnerships, especially “self-employed” deliverers, have every right to expect to be treated with decency.

Amazon claims that the GMB’s concerns are over blown and that its workers are looked after and paid well. In that case, why the resistance to letting this, or for that matter, any other union in? Paying a fair level of tax would also count as an investment in the communities Amazon operates in and profits from.

Needless to say, either or both would do Co-op a big favour because while the potential rewards to it from this partnership are substantial, the risk to its brand is also real.