ESSA

ESSA

Is the Co-op Bookshop providing value for its members?


Lachlan Walden

By

March 17th, 2014


Monopolies so often get away with price gouging their customers. Examples are all around us and one particular instance seems to go beyond simply prices. Lachlan Walden investigates.


Economics 101 is that a monopoly is fundamentally any enterprise with substantial ‘market power’ – that is, the capacity to set prices and cut back on quantity with little, if any, response from customers.  While most monopolies arise through natural monopoly conditions (for example, essential services including water and electricity distribution), others simply develop when circumstances facilitate their entrenched establishment. Such conditions include high barriers to entry for potential competitors, legislative encouragement and context-specific advancement.

Context-specific advancement is relatively uncommon yet still a form of monopoly whereby consumers receive less value from transactions than otherwise would be the case. An illustration of a non-natural monopoly that has arisen largely through the aforementioned context-specific advancement is that of the Co-op Bookshop that so many of us rely on to source our university textbooks each semester. The Co-op describes itself as “an Australian-owned, membership-based not-for-profit organisation, dedicated to providing the widest range of products and learning resources for our Members at the best possible price”. However, while the Co-op continuously implies to its more than 1.8 million members (more on that total member number later) across its 50 plus stores through its advertising and promotions that its prices are competitive, most students seem to quickly work out that most textbooks are priced uncompetitively. It only takes a quick online comparison to realise the consistent substantial difference between prices at the Co-op and other Australian-based and international online book retailers.

Students in some courses are fairly lucky in the sense that they are able to obtain many of their required textbooks from alternative sources to the Co-op. However, the Co-op has strong affiliations within many universities that essentially make specific (often ‘custom’ produced) books and/or product lines exclusive (i.e. where the Co-op has a perfect monopoly). To illustrate this, the accounting subject Intermediate Financial Accounting (ACCT20002) has a customised textbook that is only available from the Co-op Bookshop at a Co-op member price of $95.74.  Without any competition, students for many subjects are left with no other option but to purchase from the Co-op even though they know they are being gouged on price – even with ‘member pricing’ that is! This is all in addition to the fact that the Co-op generally is generally the only retail book store on university campuses and is often granted exclusive access to university booklists. As the Co-op’s then chief marketing officer, Greg Smith, suggested in an interview last year, “we [the Co-op] are pretty much the one and only retailer on campus”. This is certainly true at The University of Melbourne’s Parkville campus since it replaced the Melbourne University Bookshop in 2012.

Perhaps the Co-op gets a few questions about its pricing because they now explain on their website under the “Customer Service” tab their pricing policy as follows: “The Co-op sells books and software sourced from Australian suppliers at the Recommended Retail Price or lower. Items ordered from overseas are priced at the conversion rate at the time of import and include freight and GST”. Sounds great, doesn’t it? It’s a shame it doesn’t stack up to a quick price check using any search engine though. A quick search of a few books reveals that the Co-op routinely charges 20-50% more than other sources such as Book Depository, Amazon and eBay. A perfect example of this is shown through the second-year Microeconomics subject ECON20002 Intermediate Microeconomics. For that subject the required textbook is currently $148.54 at the Co-op (member price), $107.04 at the Book Depository and from about $60 on eBay (still new!). All prices include free shipping and are in Australian currency. Justifying what this Commerce student would call an ‘excessive’ mark-up by referencing the RRP and a potential 10% GST price advantage from some international retailers is ludicrous in any competitive market. And there lies the fundamental problem here: there is very often no competitive market when it comes to the Co-op.

Should the price gouging be overlooked though because the Co-op, as a cooperative, is technically ‘owned’ by its members and purports that “all [of their] profits are returned to Members through: amazing member-only discounts, sponsorship and support for campus activities and universities, and funding for student scholarships”? This student believes not and here’s why: the Co-op is simply not adequately accountable to its members.

The Co-op claims to offer so many benefits and support many student-orientated causes and yet no specific details are on their website or publicly available elsewhere. In addition, no annual reports and/or financial details are available for any time period despite claims that “in 2014 we returned more than $8 million to our Members through scholarships, Member pricing and support for many university campus activities and organisations through sponsorships and donations”. Seeing as the 2014 calendar year is just over two months in and the financial year has almost four months to go, this writer is sceptical as to the accuracy of the $8 million figure quoted from the Co-op’s website. Perhaps it is actually a forecast based on the inclusion of member discount coupons and other questionable methods of financial ‘return’ to members using predicted take-up rates. In any case, this student and Co-op member believes that it would be reassuring for members to readily have access to annual reports on the Co-op’s website that detail exactly where the scholarships and grants are being allocated – not to mention executive remuneration.

Dubious “programs we support” listed on the Co-op’s website include “advertising in student and university publications which play an integral role in the student experience” and “hosting and attending book launches and events, many of which are titles written by authors on our campuses”. If these examples are meant to impress the members (an overwhelming majority ostensibly being students) this student must be the exception. How exactly can it be reasonable for the Co-op to suggest their advertising somehow supports students? As for the “book launches and events”, the admission that the authors are generally the academics on university campuses shows that the Co-op’s focus has fundamentally deviated from delivering value to students.

Furthermore, the management team at the Co-op is almost entirely unknown and unknowable to the members. With the exception of the “CEO Welcome” from Peter Knock, no other individual is listed on the website as being on the executive team at the Co-op. Transparency to the public from small Pty Ltd companies is usually greater than what members get at their Co-op bookshop. As a democratically-controlled and member-owned cooperative as stated on their website, it is standard practice that internal structures be communicated to members. Despite a lack of transparency, however, the executive team – whoever they are – can hardly be suggested as managing inactively: in 2013 business names were registered for “CoTravel Australia”, “CoMoney Australia”, “CoCommunications Australia”, “CoBooks Australia”, “CoMedical”, “Co-op Travel”, Co-op Money”, “Co-op Mobile”, “Co-op Medical” and “Co-op Insurance”.  By the look of things, the existing Co-op management team plans to be selling a fair bit more than just textbooks and ancillary product lines in the years to come.

This writer is also questioning of the Co-op’s membership system whereby there is no recurring annual sign-up required after initially joining as a financial member and almost everyone is incentivised to sign up when purchasing because of their (still overpriced) ‘member pricing’ structure. To quote 1.8 million members seems excessive given that it would seem likely that a large percentage is inactive. Again, however, there’s no transparency so speculation is resorted to by this author.

Another important aspect of the Co-op is that because it is not a company but rather an ‘other incorporated entity’, the same level of access by the public to records on the Australian Business Register and ASIC websites as is available for other large scale organisations is largely inaccessible.

As the Co-op explains on its website, “because co-operatives are owned and democratically-controlled by their members, the decisions taken by co-operatives balance the need for profitability with the needs of their members and the wider interests of the community”. This student believes that there exists a fundamental imbalance between these needs and that the Co-op needs to immediately improve its transparency and accountability to its members. While the Co-op Bookshop – formally trading as University Co-operative Bookshop Limited – was established in 1958 by a group of students from Sydney University working in a garage and originally ostensibly intended to deliver bona fide value to its members, today it does not seem to deliver anything other than uncompetitively priced textbooks – albeit currently with free delivery.

The University Co-operative Bookshop was contacted by the author for comment more than seven business days before publication. No reply was forthcoming. Disclosure: the author has been a member of University Co-operative Bookshop Limited since 2012.

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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