From The Source: Peter Knock, The Co-Op
Joining the Co-op in 2012, Peter Knock has been instrumental in leading the business as it experiences a major brand and cultural change.Peter has been a retailer for most of his working career, in both small and large public and privately owned businesses, including Myer, Dymocks and Thrifty.
Peter is a founding director and board member of the Business Council of Co-operatives and Mutuals (BCCM), which represents 13 million Australian Co-op and Mutual members.The Co-op was founded by university students in 1958. Today, it is Australia’s largest member-owned retailer, with 1.8 million members and 60 physical stores, mostly on university and TAFE campuses.
While The Co-op’s core business is selling educational, professional and learning resources, it now also offers a wide range of products, from technology and electronic goods to games, software, clothing, stationery, beauty products, travel accessories and much more.The Co-op has sold its products online for nearly 20 years now, making it one of Australia’s longest serving online retailers.
Justin Grey: How was FY15 for The Co-op?
PK: Our end of financial year was actually last Sunday night [August 30]. We run from September to August because it encompasses the two semesters.
Business is pretty solid. We’ve come off the back of a good year and had good growth, and next year is looking pretty good. Overall, we’re in the third year of really solid growth. Over the last three years, since we transformed from being a textbook distributor – textbooks were about 95 per cent of our business – we’re now tracking nearly 50 per cent higher in turnover revenue.
In the last three years, we started with 39 stores, and we’ve opened another 21. So we’ve got 60 stores now. At any one time, on the universities of Australia, there’s nearly a million students. And if you look at universities like UTS in Sydney or Sydney University, they’ve got around 40,000 students and about 8000 staff. So we treat a university campus in much the same way another retailer might look at a Westfield centre.
So we go in, we have a similar customer draw and a similar trading circle and we try to ensure we meet the needs of our academic staff and students in each of those trading circles.
JG: The Co-op has recently moved into a number of new product lines that aren’t typical of a bookseller – wearable technology, electronic goods, clothing. What motivated such a broad product expansion?
PK: [We’re] not a straight book distributor like we used to be. We’ve really gone into all of these other areas – and pretty significantly in most ways – because our members have really been asking for the sort of product ranges that we now have. It’s just mindboggling. But we’re trying to remain relevant to what our members really want – it’s supplying them with the right range of products and the right mix of really everything to satisfy their uni needs.
We always envisage that textbooks will be our main category. It’s a huge business, even though it’s very margin-shy. We need to make sure that we deliver our members all the learning materials that they could possibly need. And that’s a big job, to stay in stock of everything that every course at university requires.
We ensure that we bring all of that stuff together from around the world and have it available; that’s really our unique selling proposition. That’s such a massive job, and nobody else can do that.The thing is, there’s 39 universities in Australia, and, say, they each might offer Accounting 101, but they don’t all use the same textbook. They might use books from a dozen different authors and five different publishers. So there’s a huge matrix you’ve got to run.
JG: With The Co-op now increasingly pursuing non-book avenues, how is this informing The Co-op’s physical stores?
PK: We will continue to invest where we can sell all the range of merchandise. That make the whole business viable. In books in general, and certainly textbooks, there’s no growth.
There’s no growth in physical textbooks. So we’re doing a number of things. We have the license for most universities to sell their crest, so we can now produce logo ranges of sweatshirts, hoodies, and all the university apparel much cheaper than we’ve ever been able to, because the quantities now are getting quite significant.
And we can produce those for all the different universities, and just deliver a better product – and a better product range – at a lower price and better quality.Those things are really important. If we get offered a campus, or especially some TAFEs, and they just want us to be the bookstore, then no. That’s not a business opportunity we’re interested in. There are just low margins; long-gone are the days when you can just do that.
JG: The Co-op is one of the largest book retailers in Australia, but arguably it doesn’t get recognition as such, given it’s mostly textbooks that you sell. What do you say about that assertion?
PK: It is interesting. We don’t aspire to be a Dymocks, we don’t aspire to be a general bookseller. We really concentrate on being very good at what we do, because it’s a really complicated business. It’s not straightforward and simple, like just ranging the new Harry Potter of the new 50 Shades Of Grey series.
It’s a very complex business. However, our general book sales are very strong, and that continues to grow very strongly. Because making them available, and merchandising well, are core aspects of the business. And we’ll continue to grow in that regard.
But we don’t aspire to be a Dymocks and we’re quite happy to let Dymocks have that market. General books are around 20 per cent of the business. We sell all the fiction titles, all the general non-fiction titles, bios and business titles do very well for us. And children’s books is a large category.
There’s no growth in general books, but what there has been is changes in categories. Children’s books, up until around five years ago, were about nine per cent of the market, and now they’re just over 20 per cent of the market. So they’ve had massive growth, and that’s really shorn up the market. And even given actual like for like growth. And that’s the first time in five or six years actually that the book industry has seen like for like growth in physical units.
JG: What are The Co-op’s plans for the rest of 2015 and beyond?
PK: We’re certainly looking at expansion opportunities and increasing the categories of merchandise that are doing particularly well for us. Some of the main growth we’ve had has been in mobile comms and tech products, and medical equipment. Most of the transformation has happened in the last three years, because the business couldn’t keep going with no growth in physical textbooks. So we had to move very quickly and do things differently to underwrite our member value proposition and whatever we needed to do to remain relevant to our customers.
Just going through the figures from last year, food and beverage will be our fastest growing category this year. We’ve now got 12 cafes and we plan to continue to open those as well and incorporate them into our stores. So we’re not standing still – we’re in catering, we’re in university services, food and beverage, and lots of other activity. We’re in a very fortunate position. The Co-Op, one if its main attributes is ‘trust’, and there’s only a handful of brands in the world that can say that their first and number one attribute that their customers attach to their brand is ‘trust’. So we’re fortunate to be able to build on that.
JG: What other product and service areas is The Co-op looking to move into?
PK: Being customer-centric, our customers are students, they’re after valuable products and services. So we’ve entered into a joint-arrangement with Members Equity Bank [ME Bank], and we’re producing a whole range of products, from debit cards and credit cards to a whole range of micro-loans services.
All with absolutely minimum interest rates. Our new [membership] card is also a debit Mastercard and has all of these other services attached to it. And we’re also teaming up with the ISIC [International Student Identity Card], so from January all new members will automatically get a free bank account that they can use for free anywhere in the world. It’s an ISIC within their Co-Op card and gives them discounts at 250,000 businesses across the world where students travel.
And STA Travel is the other partnership we’ve entered into to provide all of those services from a one-stop shop, and Vodafone products. There’s special offers that come out, so anybody that joins up as a [Co-Op] member can get 30-day or 60-day free Vodafone plans. And we work with Vodafone on store in store offers and they have kiosks in our stores.
It makes our whole membership value proposition very attractive. And that’s important for us because when they’re a member it’s like a huge loyalty program. As long as you offer the most relevant products and services with the right value equation, you’ll just keep continuing doing business.