RapidClean

Rapid Group Co-operative (RapidClean), which has over 60 member stores located throughout Australia and New Zealand, provides a cost-effective 'one-stop-shop' for its customers to source cleaning products. These include cleaning fluids and materials, as well as equipment (e.g. floor polishers, vacuums, sweepers and scrubbers), and ‘consumables’ (for example, plates, paper towels, tea and coffee).

Founded in 1985, RapidClean began operations as a buying group within Rotobic commercial floor polisher suppliers in NSW who wished to collaborate to gain greater bargaining power in sourcing chemicals, floor polish, floor polishing equipment and consumables. According to RapidClean General Manager Bruce Lees, it was a good business model for members in solving the problem of how to increase their bargaining power in the market:

I think that it was simple, they all could own shares in it, and they could manage it… just half a dozen small businesses trying to buy something better than they could individually. Nothing more sophisticated than that.

Making the member value proposition

Bruce Lees notes the challenge of delivering value to all members:

Because Australia is so big, it is one of the challenges that we still face today: how do you make sure that every member is better of for being a member? That’s what nearly tore it apart.

Tension between regional and urban members built up during the late 2000s, leading to a split within the co-operative. In 2007–08, a subgroup of members based in the cities set up a rival operation known as SmartClean, motivated largely by their dissatisfaction with the co-operative’s subsidising freight costs for regional members. SmartClean did not survive.

By 2010 RapidClean had 26 members located only in Australia and no representation in Sydney or Melbourne. At that time Bruce Lees had just taken up the role of CEO, and he says he did so primarily based on what he saw the company could achieve rather than what it had been doing. Lees visited members and found that while they saw the logic of buying together, they weren’t sure they were really getting value from membership.

According to Lees, the first step in communicating the MVP to members is to get a full understanding of members’ businesses. For example, members in capital cities are typically frustrated by their lack of ability to win business on their own. Also, most members are small firms with between 3 and 15 employees. The co-operative helps here by preparing marketing and sales materials that members can quickly customise to add their contact details and other specific attributes, to give them a professional appearance at low cost.

RapidClean also offers its members greater access to suppliers. This can be particularly valuable for members located in regional areas, who often find it difficult to access specific brands. RapidClean can source and supply these products to them due to its bulk purchasing power. The co-operative requires all its suppliers to sell to all members regardless of where they are located.

Managing a co-operative is not like managing other businesses

Member diversity is a main distinguishing feature of the co-operative, according to Lees:

Each of our member businesses within the co-operative are individually unique. So trying to make them all the same is pointless. We’re not a franchise; in fact, we’re very separate from a franchise model.

But this was not always recognised by the management of RapidClean, Lees says.

Before he took on the CEO role, management had tried to impose more uniform and centralised systems across the network in relation to stock and marketing, as might be found within corporate or franchise business models. However, Lees notes that management approaches that might be relevant to corporate or franchise business models don’t apply well within co-operatives.

One example of where a corporate approach is inappropriate is when the co-operative seeks to win large national group accounts where the customer wants a uniform distribution of products across the country at the same price. Often, members will not agree to stock a given product or to sell it at a standard price across the network. Lees’ comments show that it can be best not to force them:

I’ve spoken to some international co-operatives’ CEOs who manage much bigger groups in the United States and Britain, and they say to me, just focus on making every member better o being a member and you’ll be able to achieve things.

International expansion

Relatively few co-operatives expand outside their country of origin, and the expansion of RapidClean into New Zealand only took place recently, in 2017.

To consolidate its rapid expansion in New Zealand, RapidClean hired a new manager to look after the network there.

This manager was an expatriate New Zealander, living in Australia, who wanted to return home to live with his family. In Lees’ view, this was a ‘perfect scenario’, ensuring that a New Zealander would represent the Kiwi members within the co-operative. In fact, RapidClean held its 2018 conference in New Zealand to recognise the importance of the newly international nature of the co-operative.

Competing in an increasingly concentrated and national market

According to Lees, centralisation has changed the dynamics of how small suppliers need to operate. This has been a problem because the key differentiator for RapidClean’s members was their personal relationships and service quality.

This realisation of the changing nature of the market environment led RapidClean to employ professional national account managers who have taken on the responsibility of winning tenders and then co-ordinating national supply contracts. These contracts are then allocated to members, usually on the basis of geographic location and area of speciality or product range. Once a contract is in place, the national account customer sends its orders for supplies to the co-operative, which in turn distributes these to the members to supply the goods.

However, as important as national accounts are, this type of business is still only around 10% of total turnover. Most of the co-operative’s revenue flows from its members winning contracts in their own right, and the value added by RapidClean comes from helping members to establish better buying power in sourcing their products, and increasing their access to suppliers.

Another way that RapidClean assists its members and suppliers is through the centralised processing of invoices. As Lees explains:

Our member will place an order to a supplier for the goods, and the supplier will invoice us at the head office, and then we will invoice the member … the supplier, like the national account program customers, wants simplicity.

The co-operative also serves as a support for its members, for example in helping resolve disputes with suppliers or major customers.

Marketing the RapidClean brand

In its quest to secure national and international contracts for its members, RapidClean has invested in the development of its brand. This is viewed strategically as a key asset in successfully competing for national accounts. Lees says:

Marketing is the big thing that I think many people underestimate. We spend a lot of time and money building the RapidClean brand through the co-operative’s website, as well as via trade shows and other activities in order to build the recognition so that when our members knock on the door and say they’re from RapidClean, it actually means something.

Positioning the RapidClean brand is a potential challenge, as is often the case for co-operatives. As a purchasing co-operative supporting a network of small cleaning equipment and products distributors, RapidClean must negotiate with its members over whether or not they carry the co-operative brand. This, in turn, evokes different responses from members.

RapidClean gives all members space on its website, which includes a ‘find a store’ locator designed to help guide potential customers to members’ websites. Lees says the RapidClean website attracts over 1,000 hits a month on its find a store page, and the volume of online traffic has been growing at 20–25% per year.

Social capital and networking

Although much of members’ initial motivation to join RapidClean is driven by financial issues, the co-operative also sees its importance in terms of building social capital by facilitating networking. Lees explains:

That collegiate environment is something that is really strong. You notice it most in people who aren’t part of the group. One of the things that they are desperate for is someone to talk to. That is, someone who doesn’t have an agenda.

RapidClean holds regular annual conferences designed to bring its members together to meet, network and share ideas while having a good time. These events are generally well attended and have high profile keynote speakers who serve as informative and inspirational role models.

Looking to the future

RapidClean has developed a five-year strategic plan that seeks to double the co-operative’s total purchasing volume. It also seeks to build its national accounts segment, partially because this is an area it feels will assist growth, but also because it sees a trend towards significant centralisation of cleaning contracts. This effort will not be without its challenges for the co-operative:

So, where we compete with a multinational, they can wash through a loss in a region; they can say, well, I don’t care if I am losing money in Kalgoorlie, Geraldton and Albany, because I’m making a profit in Sydney, Perth and Brisbane. However, with our model, we can’t do that. We can’t have a guy in Kalgoorlie losing money because a guy located in Sydney is making a fortune. So, that’s a weakness in our model. Yet the strength we have is much higher service levels … so we push our branding as ‘National Strength, Local Service’, and that is really our differentiator.

The extended version of this case study is presented in Australia’s Leading Co-operative and Mutual Enterprises in 2018, which is part of the CEMI Discussion Paper series.