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Abstract
France harbours three large retailer cooperatives which, put together, account for more than a third of the national market share. The largest of these is Leclerc, a leading firm on the French territory. The paper presented here shows how, through the particular distribution of property rights and decision patterns, this cooperative, although hampered by an unstable size, manages to compete with integrated firms. Indeed, the processes that have been developed enable the cooperative to acquire long-term property rights on the specific assets (stores), while remaining in the cooperative framework. The system built is efficient because incentives remain high for members to increase their own performance.
Notes
1 Except if it is agreed to open the capital to other persons, non-producers, for example, which greatly modifies the institution.
2 We consider that there is an optimal size of the cooperative which is reached at the “equilibrium level”, and that there are lower costs induced when membership is stable.
3 As J. Defourny said in 1995, cooperatives only exist because they are necessary to their members.
4 Withdrawals can also be overcome by increased performance of remaining members.
5 Mergers, with the one man one vote rule, give more power to the coop having more members.
6 Hart and Moore (Citation1999) argue that in some circumstances, cooperatives are more efficient than corporate firms, notably when coop members have common preference orderings (investment decisions are more efficient than when ownership belongs to an outsider).
7 Intermarché for instance owns a number of plants producing own brands; Mondragon, the large Spanish worker cooperative producing electric appliances, also owns a number of plants which testify of a real transformation when 50 percent of workers are employees and the other 50 percent coop members.
8 Hart and Moore (Citation1999) quote the case presented in an MIT mimeo by Banerjee et al. (2001) of Indian farming cooperatives for sugar. The authors show that the dispersion in wealth increase distortions among members and increase inefficiencies arising from asymmetric information.
9 In the case of Intermarché, such crises can also occur. Recently, for instance, some members pulled out—which also meant fewer stores—after an identity crisis with the founder's departure and the arrival of a new manager. Lots of cooperatives go through such crises especially when they are confronted with changes in the policy of the group.
10 Membership fell from 195 to 120 members.
11 The Bouliac, Cannes and Paris stores (Abihssira group) and Marseilles left the Leclerc movement to join such competitors as Auchan or Promodès, Neuvilles Maisons (1995) left for Intermarché.
12 By law, considering the specific financial structure of the cooperative, part of the profit must remain in the coop for guarantee purposes.
13 The development of Intermarché for instance, is much less selective. This entails internal conflicts about the property rights of the various members and inefficiencies linked to heterogeneity (Hart and Moore Citation1999).
14 No fewer than 14 decisions by the Nanterre court of justice have confirmed that demanding a 25-year membership was not excessive. Penalties for leaving the cooperative before the end of the term were not considered unfair either. Finally, refusing to join the “preference scheme” can rightly cause the exclusion of the member before the contract is completed (the Fiscel case—Court of Nanterre 1998).
15 0.5 percent or roughly 750,000[euro] for a store with a 150,000,000[euro] turnover; this could reach about 20 percent of the selling price of a store.
16 This is an interesting feature of the Leclerc cooperative. As Hart and Moore (1999) point out, many large cooperatives are managed by managers. It is then difficult for an individual member (one vote) to exert pressure on management, and difficult to give managers an incentive scheme due to the opacity of the objectives of the cooperative (“increase pay-offs” for members) and the absence of unbundled corporate shares to allocate.
17 Criticism appears notably within Intermarché, which may be due to the number of coop members. Power is then more diluted and incentives are lower.
18 Each year, at least 30 stores change hands (and those will obviously change hands again), and this should add up to some percentage of resources immobilized.
19 The horizon constraint: when the member invests, he/she will not definately profit from the gains generated by his/her investment because return on investment can take time, or because he/she may withdraw from the cooperative.
20 The value of a store depends mainly on its turnover.
21 Together, the two cooperatives account for 25 percent of the French modern retailer market.
22 Intermarché lost 0.5 percent market share between 2004 and 2005 mainly due to withdrawals.
23 Allied to Leclerc in a buying alliance for Europe (Lucie).
24 Market share in France, May 2005, per brand name. Carrefour uses several brand names (Champion for supermarkets, ED for the hard discount business), which all together account for about 25 percent of sales.