CHAPTER ONE

         1.0   INTRODUCTION

         1.1    BACKGROUND OF THE STUDY

 Cooperative is a form of economic organization based on certain human values. The International Cooperative Alliance has defined cooperative as ‘an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise’. 

 According to Kattookaran (2002) cooperatives are service-oriented institution based on the principles of each for all and all for each. It is an organization of the people, by the people and for the people. The basic objective of the cooperative movement is to achieve the welfare of the members concerned and to protect them from exploitation. In developing countries, cooperatives have been assigned some important role as instrument of economic and social transformation. Cooperative aims to remedy the economic inequality and the evils of concentration of the weaker section by the strong. 

Cooperative came as an aftermath of industrial revolution which took place in Britain as a reaction to the capitalist exploitation such as hike in price, profiteering, adulteration of goods, offering to the market goods with incorrect weight and measures. The first workable cooperative society was founded in England by the Rochdale pioneers group of weavers. The policy and organization they adopted later became the principle of cooperation. The principles of cooperation formulated by Rochdale pioneer were: democratic control, open membership, limited interest on capital, patronage divided, cash trading, sale of pure and unadulterated goods, education of members and political and religious neutrality. The London Congress (1934) and Vienna Congress (1966) of the International Cooperative Alliances have revised the principles of cooperative formulated by Rochdale pioneers. The ICA general assembly met in the occasion of ICA’s centennial congress in Manchester in September 1995 and approved the ICA 1995 principles which include; voluntary and open membership, democratic management and control, member economic participation, autonomy and independence, education, training and information, cooperation among cooperatives, concern for community,

Uchendu (1998) noted.

The cooperatives have enlarged its activities in all spheres of human life namely production, distribution, housing, education and so on.

1.1.1 CONSUMER COOPERATIVE SOCIETIES

 Since time immemorial, middlemen have been exploiting the consumers. It is the consumers who ultimately bear all the burden of the various middlemen who engaged in the distributive channel of trade. These middlemen also indulge in the variety malpractices such as underweight, adulteration, black marketing, hoarding and profiteering. As long as these nefarious activities of the middlemen are not checked, price line cannot be brought under control, Himachalam (1991). Under this situation, consumer cooperative was the only answer to protect the interest of the consumers as a whole. 

 Consumer cooperative is a business enterprise run by consumers who are members as well as owners of the business. According to Guelp (1993), Consumer cooperative is a cooperative business owned by its customers for their mutual benefit. The consumers of the goods and services which the business provides are often the individuals who provide the capital required for establishing the enterprises.

In the words of Igwe (1999), consumer cooperative provides unlimited opportunities for helping to solve consumers’ problems and improving the quality of their lives. Consumer cooperative is organization, which intends to support the economy of member household through the acquisition of merchandise from wholesalers for sales to members at a fair price, Igwe (2006) noted. In carrying out their commercial activities, they are consciously guided ethically by values such as honesty in business, sales of high quality goods and services, fair prices and advice to consumers so as to get the best possible decision for the satisfaction of their needs.

 A consumer cooperative store is a voluntary organization of consumers, organized to obtain their requirements of consumer goods and services on the terms of greatest advantages to them Mathur (1991). Consumer cooperative stores also sell to non-members and the cost savings that result from their largescale operation are onto members.   According to Kattookaran (2002), consumer cooperatives are supposed to serve as the best custodian of the consumers by supplying quality products and services at reasonable price and in correct weight.

Consumer cooperative society is one of the types of retail outlets.   According to Agbonifoh et al (1998), consumer cooperative societies are economic associations of consumers for the purposes of purchasing goods from manufacturers or wholesalers to a retailer to members of the cooperative who, by definition, are final consumers. Retailing is the process of selling goods directly to the ultimate consumers. A retailer is a specialized marketing functionary linking the wholesaler or the producer with the final consumer. As a specialist in selling to the final consumers, he buys the assortment of goods demanded by the consumers and makes them available to the consumers at convenient points from numerous sources. He convinces the consumer to buy, employs all the marketing variables at his disposal, Agbonifoh et al (1998).

 According to , Agbonifoh et al (1998), retailing has evolved over the years as is evident in the different types of retailers and the different functions performed by them over time. Three theories have been advanced to explain the evolution of retail institutions. The theory of natural selection maintains that retail institution that adapts best to its environment will survive and grow. Another theory asserts that retailing institutions that pass through a life cycle begins with low margin, low price and minimum services. The next stage in the life cycle sees the retailer upgrading his facilities and offerings and adding more services in a bid to increase the volume of sales and hopefully profit.

 According to Uchendu (1998), consumer cooperative store is a retail store that is put up by group of people who come together as a sociological group to pursue common objectives of:  

1.                 Buying in large quantities to reduce unit cost.

2.                 Buying directly from producers to reduce the incidence of buying  adulterated goods.

3.                 Enjoy other economies of scale associated with bulk purchases.

 Consumer cooperative came as an aftermath of industrial revolution which took place in Britain as a reaction to the capitalist exploitation such as hike in price, profiteering, adulteration of goods, offering to the market goods with incorrect weight and measures. The first successful consumer cooperative was the Rochdale Equitable Pioneers.

 In Nigeria, the establishment of consumer cooperative was prompted by the scarcity of consumer goods after the Second World War. It started as a village store with meager resources. People pull their resources and stocked consumer shop so that they can buy from the manufactures or importers at same price as their counterparts, the competitors.

Members derive a lot of benefits by joining a consumer cooperative society which urges them to patronize the consumer cooperative store.  Some of the benefits according to Igwe (2006) are that the membership affords one the opportunity of buying goods at a very cheaper price. The cheapness of the goods helps the members to save money thereby contributing to improvement of the socio-economic status of members. The goods bought are free from adulteration, shortage of weights and measure and other bad practices in inherent in capitalist trade. The consumers are sure of getting what they bargained for at consumer store without fear. There is also regular payment of dividend to members in form of patronage to the consumer store, Chukwu (1990). Consumer cooperative protects members from being exploited by middlemen. The idea of cooperative is in the forefront of upholding this stand in the interest of the consumers.

 More so, consumer cooperative makes goods available to consumers at all times which implies that consumers are sure of getting what they want at all times. The interests of consumers are highly protected.

         1.2    STATEMENT OF THE PROBLEM

 The need for consumer cooperative in Nigeria cannot be overemphasized. Consumer cooperative stores are much needed in a country where majority of the citizens are workers, civil servants, and so do not produce what they consume.

It has been observed that little attention has been given to this aspect of cooperative unlike agricultural cooperative. Over the times, there have been a lot of attentions on agricultural produce with little or no emphasis on consumers.  There is need to study how these finished goods reach the final consumers and consumers’ satisfaction of the consumer goods which is the finished products of the agricultural goods.

According to Uchendu (1998), in a situation of rural areas, there might be less need for consumers’ cooperative stores. Most of the people produce substantial fraction of what they consume. They depend less on the open market for their basic food items. Consumer cooperatives are best needed in the urban areas where majority of the people make purchases for their basic needs and that of their families.

According to Adebayo (2005), when an economic situation is termed to be normal and goods are available at the open market, prices are very moderate without much interference from the middlemen in the chain of distribution. But in a situation where the conditions are the other way round then all hands must be on deck to evolve a system by which the consumers will get these goods at reasonable price, with the required quantity and possible reduction in the activities of the market intermediaries.

 In the words of Okonkwo (2001), today in our country, a lot of people cannot afford three square meals a day. This is because of the sky-rocketing inflation which bedeviled this country. Consumer goods are so scare and starvation widespread. This problem is made worse by the traders and middlemen who buy up the available foodstuffs and stock them to be sold at very high prices during the period of scarcity. Also in anticipation of hike in price of food items, they hoard the foodstuff apparently; make huge gain in time of scarcity. They create artificial scarcity as a result of their personal interest. People spend all their incomes in purchase of foodstuff and less or none for other basic needs.

Furthermore, the need for consumer cooperative also arose among the salary earners. The need arose out of the fact that salaries are not paid when due. For this reason, salary earners sometimes run out of cash and therefore cannot purchase from the open market or from the producers or the major distributors. These irregularities of salaries brought forth the need for establishing cooperative stores where members can purchase not only on credit but also at a fair price, unadulterated goods, goods of high quality and correct measure. Cooperative stores operate in such a way that members pool their resources together to purchase goods in bulk and directly from producers or importers. This way, the goods are offered to members at a moderate price than is obtainable at open market and pay patronage dividend to members. 

 Although the aim of cooperative stores is to make goods available to members at a cheaper rate, there is also the need to make surplus from the venture; therefore, it becomes pertinent that a study to evaluate consumers’ patronage is carried out. The study proposed here, intends to evaluate these salient reasons that may influence consumers to purchase from cooperative stores or on contrary dissuade them from doing so.

The life of any business depends on its ability to make surplus and plough it back into the business. This also applies to consumer cooperative stores. For this reasons, level of patronage becomes a very important aspect of their existence. This study will also examine level of patronage in order to evaluate consumer patronage and how it affects the life of cooperative stores.

         1.3    OBJECTIVE OF THE STUDY

 The overall purpose of this study is to evaluate consumers’ patronage of consumers’ cooperative stores in Enugu State.

The specific objectives are to:

1.                    examine the socio-economic profiles of the members of  consumers cooperative;

2.                    determine the    socio-economic   functions/activities      of        consumer  cooperative stores;

3.                    determine the nature and varieties of goods sold in consumer         cooperative stores;

4.                    examine the level of patronage of consumer cooperative stores         and   the    perception of     the    members   regarding        patronage of     consumer stores;

5.                    determine socio-economic and market factors affecting  patronage    of the consumer cooperative stores;

6.                    examine the problems that the consumer cooperative stores face;

7.                    and make appropriate recommendations based on the findings.

1.4    RESEARCH QUESTIONS

1.                    What are the socio-economic profiles of the members of consumer

                 stores?

2.                    What type of socio-economic activities do cooperative stores    engage in?

3.                    What types of goods are sold in cooperatives stores?

4.                    What are the factors that affect the patronage of the consumers?

5.                    What are the perceptions of the members of consumer stores  toward patronage of consumer stores?

6.                    Are there any problems encountered by the consumer stores?

7.                    What can be done to improve the patronage of the consumers?

         1.5    STATEMENT OF RESEARCH HYPOTHESES

The following hypotheses have been formulated to guide the study.   

Ho – Socio-economic profile of consumers including age, sex, marital  status, income levels and education have no influence on the  patronage of consumer cooperative stores.

H₁ – Socio-economic profiles of consumers including age, sex, marital  status, income levels and education have influence on the  patronage of consumer cooperative stores.

Ho – Market variables such as price, quality, accessibility, availability of  goods, services rendered and level of awareness has no influence    on the patronage of consumer cooperative stores.

H₁ – Market variables such as price, quality, accessibility, availability of  goods, services rendered and level of awareness has influence on  patronage of consumer cooperative stores.

         1.6   SIGNIFICANCE OF THE STUDY

 The Ministry of Commerce and Cooperative, consumer cooperative societies, owners/members of consumer cooperative societies and scholars of cooperative department or college will find the study relevant. Information on consumers’ patronage of consumer cooperative stores can guide in the management and operations of consumers cooperative.

 The study will help to assess how consumer cooperative societies have helped in promoting the socio-economic well being of the members as well as the owners. As a cooperative society and also as a retail outlet, there is need to evaluate and assess the level of patronage of consumer cooperative stores to know the level of patronage which is the live wire of the cooperative

sustainability and continuity. 

 The findings of the study will also help to promote the economic activities of the consumer stores and enable them to survive the competitive market environment.

 Such findings will also benefit the owners of consumer cooperatives in terms of enhancing the operations and management of the consumer cooperative stores. More so, the result will enable them to promote consumer cooperatives more than other retail outlets.

 The study will help in laying a groundwork/foundation for more models which seek to describe and explain consumer patronage (buying behavior) as a major perspective in market analysis.

 As a step forward, all those interested in the study will have a stand to identify other relevant issues not covered and add to existing knowledge on this topic.

 Finally, this study will add to the literature on this topic and related topics for further studies.

         1.7   LIMITATIONS OF THE STUDY

              The problems encountered in the course of this project are:

First, there was problem of identifying functional Consumer Cooperative Stores due to the fact that majority of such Cooperative Societies have wound up. Secondly, there was problem of inadequate information with regard to the topic of study. Thirdly, the researcher encountered financial difficulty in travelling to these areas to source information and administer questionnaire. Lastly, there was the problem of time constraint.

DEFINITION OF TERMS

       Cooperative    –        The International Cooperative Alliance has defined

cooperative as ‘an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly       owned        and   democratically    controlled

enterprise’.

Consumer Cooperative –  A consumer cooperative store is a voluntary 

         store                      Organization of consumers organized to obtain their

requirements of consumer goods and services on the terms of greatest advantages to them

        Consumer Market –   A consumer market is a market that         

                                           consists of individuals and households       

          who buy for the purpose of personal  domestic consumption

   Patronage refund –     This is also called patronage rebate. This is         

                       dividend works out from substantial sum of                             money, depending on the amount of                                             

purchases made by the member.

         1.8    SCOPE OF THE STUDY  

 The scope of this study covers three selected Consumer Cooperative Societies in three Local Government Areas of Enugu State namely, Enugu North, Oji River and Nsukka. 

             The Consumer Cooperative Societies selected are Project Development

Institute Consumer Cooperative Society Enugu, Federal Cooperative College Consumer Cooperative Society Oji, University of Nigeria Nsukka Staff Consumer Cooperative and Nigeria Union of Teachers Staff Consumer Cooperative Society.