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IJCOMA
22,2 Location as a strategic retail
decision: the case of the retail
cooperative
152
Rosmimah Mohd Roslin and Herwina Rosnan
Faculty of Business Management, Universiti Teknologi MARA,
Shah Alam, Malaysia

Abstract
Purpose This paper is a case study of a cooperative whose involvement in the retail business was
exemplary of a successful cooperative, bold enough to venture into the retail business. Known as the
Johor Cooperative Supermarket ( JCS), it was established in 1976 with the support of a firm number of
cooperative members, totaling 15,000 at its peak. The purpose of this paper is to examine the success
story of JCS and the eventual demise of such an outstanding cooperative.
Design/methodology/approach Using the case study method through in-depth interviews with
the board of directors of the cooperative, information was accumulated to conceptualize the story and
trace the chronological events relevant to the case.
Findings Unlike other business entities, JCS was established on the foundation of a cooperative
that seeks to attain profitable standing for the benefit of its members. Located strategically in the
southern tip of Johor Bahru in Malaysias southern state of Johor, the supermarket attracted a large
number of Singaporeans who find the assortment of merchandise and the pricing of the vast array of
goods offered by JCS an attractive lure to shop in this cosy and neighbourly supermarket. However,
a strategic decision on its location eventually led to the closure of this once supreme supermarket.
Originality/value The paper traced the history of the supermarket and trailed the strategies which
the management took that led to its ultimate demise. This case is also a reflection of the brave move
undertaken by the members of the cooperative board to venture into a big retail business that makes it
susceptible to the peculiarities and erratic movement of the business environment.
Keywords Malaysia, Retail management, Cooperative marketing, Supermarkets, Retail strategies,
Cooperatives, Retail location
Paper type Case study

International Journal of Commerce
and Management
Vol. 22 No. 2, 2012
pp. 152-158
q Emerald Group Publishing Limited
1056-9219
DOI 10.1108/10569211211239458
Introduction
Cooperative societies have developed in Malaysia since the early 1900s when the British
were rulers of the country. Initially, a small holding farming sector of the country was the
main target for the setting up of cooperative societies as this sector was seen as the most
viable for such a set up and would benefit from the cooperative implementations.
In addition, it was also the most prominent contributor to the economy of Malaya, as the
country was then known. It was only in 1922, however, that the Federal Legislative
Council passed the Cooperative Societies Enactment which was based loosely on
the Indian Cooperative Act of 1912 (Shenoy and Sulaiman, 1996). This then was
the beginning of the cooperative movement in Malaysia and more and more parties
became attracted to the principle of the cooperatives which strived to promote
The authors wish to express their gratitude to the Cooperative College of Malaysia for the
assistance given in the writing of the case.
the economic interests of its members. The underlying philosophy of cooperatives is Location as a
service maximization to its members in ensuring that their welfare is well taken care of. strategic retail
Thus, cooperatives are not generally profit oriented, not oppressive, and uphold honesty
in executing their business activities (Stoel, 2002). decision
Generally, cooperatives are social enterprises that are formed and owned by a group
of individuals for the purpose of improving their standard of living, and the underlying
philosophy of cooperatives is essentially service and the well-being of members 153
(Tchami, 2007). Therefore, cooperatives are regarded as non-profit oriented and will
always consider the welfare of the members as its priority. Most cooperatives are
governed by seven cooperative principles that have been universally accepted and
adopted by the International Cooperative Alliance. The principles are voluntary and
include open membership; democratic member control; member economic participation;
autonomy and independence; education, training and information; co-operation among
cooperatives; and concern for the community. Kakuchi (1995) observed Japanese
cooperatives and reiterates how cooperatives are essentially obligated to the society in
offering goods of high quality and of reasonable prices. Thus, cooperatives are social
engines that actually work for the good of the community and therefore integrity must
be always observed.
In Malaysia, there were 7,215 registered cooperatives in 2009 and the most active
20 cooperatives alone accounted for almost 6.8 million people in membership
(Cooperatives Commission of Malaysia, 2010). Cooperatives involved themselves in
various business undertakings as means of acquiring profitable outcomes which could
be shared among the members. Nevertheless, like other economic entities, cooperatives
are not spared from environmental impacts and, in particular, the effects of the economic
environment. The economic crisis that occurred in late 1997 affected many countries in
Southeast Asia and many cooperatives in Malaysia were affected by the negative impact
of the unexpected economic quandary. Most of them, however, managed to limit the
adverse impact because they had used their own capital and surplus funds for the
business activities they had undertaken. Only those too dependent on external sources of
funds were badly impacted (Halim, 2004). Recently, the integrity of the movement in
preserving its concept and ideology is being challenged by current trends in the area of
information and communications technology, impact of globalization and liberalization
of trade, and deregulation and changes in national and global policies. Cooperatives also
face challenges in improving their stature as well organized cooperatives and the quality
of services and products to members. At the same time, they face the challenge of
competing with the private sector in a fair and competitive environment.

Study objectives
The study sets out to trace the life span of the Johor Cooperative Supermarket ( JCS),
a supermarket totally managed by a cooperative whose orientation was not merely
profit attainment but also to ensure that its members will gain adequate remuneration
through the activities of the cooperative. As such, this study seeks to:
.
Understand the evolvement of JCS from its inception up to the point of its closure.
.
Assess the reasons behind the closure of the supermarket.
.
Determine the strategic direction taken by the cooperative that led to the closure
and its plans for the future.
IJCOMA Research method
22,2 A case study approach was adopted for this study as it seeks out to understand in
a more in depth manner the events leading to the closure of the supermarket. The Board
of Directors were interviewed through a focus group exercise where the researchers
were given an audience with key members of the board responsible for initiating and
developing the supermarket until it became a household name in the area.
154 Three of the board members who are now in their senior years are still holding the
post as members of the Johor Cooperative Society, although the supermarket has now
ceased its operation. Although the cooperative is now saddled with unpaid debts to its
suppliers, the cooperative is still in existence and doing what it can to repay back its
accumulating debts. This face-to-face session, which lasted a good two hours, led to an
accumulation of information which allowed the researchers to conceptualize the flow of
events. This case study is developed from the primary data collected through the record
of events given by the board of directors of the cooperative.

The study Johor Cooperative Supermarket

JCS was a cooperative entity, very much like other consumer cooperatives, which was set
up with its members welfare at heart. Although it was not initially aiming at attaining
mega financial performance, it did just that through its lucrative retail venture. Its very
prominent and well known supermarket was then located in Johor Bahru, the
southernmost city in Peninsula Malaysia which borders Singapore. The location was
often regarded as one of the contributors of its success as its target market extended to
the public, including the Singaporeans who often frequented Johor Bahru for the variety
of products and services which the traders of this city offered. At its peak, the
cooperative had 15,000 members. In addition, there were 14 institutional members and
400 individual members and, together, they made up 35,000 members in total.
Established in 1976, JCS was managed by 15 board members who did not directly
partake in the daily running of the supermarkets operation. This they left to the able
hands of the store managers. With a size of 9,000 square feet, the supermarket was ideal
for a neighborhood location where accessibility to the residents of surrounding housing
areas was easy and Singaporeans who frequented the city could readily visit without
facing many parking woes or transportation difficulties. During its prime, JCS was able
to gain a gross profit of 13 percent of sales and pilferage was , 1 percent. These were
indeed good figures in the retail business and the dividend contribution to its members
exceeded those given by other cooperatives. This lucrative situation continued for
several years and made a distinct mark on JCSs position as a successful cooperative. JCS
was also credited for its management policies of not taking loans or depending on
overdrafts as a means of operating the supermarket. The operation of the store was
managed by experienced personnel who understood the need to keep costs down while
seeking supplies that were relevant to the needs of the target market at the most optimal
prices. The non-involvement of the cooperatives board members in the daily running
of the store was often seen as a plus point as there was no interference on tactical matters.
The board members were involved mostly in key decision matters which were mainly at
the strategic level.
This seemingly ideal situation was disrupted when the building which housed the
supermarket undertook a massive renovation. Trouble began when the owners of
the building dictated the need for most of the major occupants to vacate the building or
seek alternative locations during the massive construction. Should they insist on Location as a
staying, the occupants would have to withstand the noisy and inconvenient disruption strategic retail
brought about from the construction work? The management of JCS had to make the
decision of whether to stay while construction work was carried out or find an decision
alternative location. Indeed, the decision of location was a critical aspect for a retail
venture as there were a string of implications that could make or break the retail venture.
155
The new beginning
For a few months, while construction was carried out, JCS still operated at its present
location. Despite the chaotic environment, loyal customers still frequented the
supermarket but this proved to be too overwhelming when customers began
complaining of the messy and disorganized store ambience and the difficulties of
accessing the store at times when construction work was carried out at the exterior of the
building. This situation led to a decision by the store managers to convey their concern to
the board members on how to best to tackle the situation. In the past, there was never a
need for JCS to insist on a specific long-term lease with the owners of the building. There
had been a cordial relationship between the building owners and JCS, and the board
members had complete trust in the owners of the building with whom they had a
long-term relationship. However, this situation began to put a strain on the relationship
between JCS and the owners and negotiations began with the owners, again reiterating the
option for JCS, as the anchor tenant, to move out of the building and find another location
more suitable than the present one. The owners even suggested another location in a new
shopping complex in the heart of Johor Bharu city which was also owned by them.
This new proposed location was a newer building located in the city center right
beside the causeway which linked Johor Bharu and Singapore. Although it did not have
similar convenient accessibility for neighborhood customers as existed in the present
building, the owners convinced the board members that there was ample pedestrian
traffic, especially those walking from the immigration check point near the causeway.
Thus, JCS would not lose its Singaporean customers as they would still find it accessible
to visit JCS. The board members debated over this new alternative location. The owners
were giving rental options that were far better than the present one, and being in the
heart of the city meant that a new set of potential customers might be attracted to visit
JCS. Being in the new location also implied better and more modern facilities, a cleaner
environment, more pedestrian traffic and, most importantly, being away from the
current chaotic environment. The board member realized that the renovation work was
keeping some of their customers away from the store and, if this persisted over a long
period of time, JCS would indeed suffer badly. Thus, the board members together with
the store managers agreed that relocating would be the best option at that point in time
as this would remove them from the chaotic and unhygienic environment that customers
had to face in the present location. The fate of JCS was sealed with this relocation
decision.

New location a key retail strategy

It is often stated that retail success is tied to retail location. Craig et al. (1984) assert that
good locations allow ready access and attract large numbers of customers to a store.
Often the difference between selecting the wrong location and the right site can
be the difference between business failure and success (Ghosh and Craig, 1983).
IJCOMA This was exactly the situation with JCS. On the surface, the new location which was
22,2 now in the heart of the city, appeared potentially lucrative given that pedestrian traffic
was going to be the potential customers. However, JCS was not sure whether the
residential customers at the initial location would still be loyal and patronize the store
which was now located in the city center. A good retail location provides a retailer with
strategic advantages that makes it difficult for competitors to imitate. Store locations
156 represent long-term strategic investment and once a viable location has been identified,
this may become a competitive edge for retailers which competitors may find difficult
to thwart. Indeed store variables including location, size, store image and service levels
are elements that are critical in ensuring the success of the retailer. JCS had established
most of these variables effectively since they began in 1976 and to gamble on the
element of location might have a drastic impact on the successful establishment of JCS.
The decision of relocating to a new site was a decision which the board members had
to weigh carefully. The possibility of losing existing customers was apparent especially
for those customers who did not fancy doing their grocery shopping in the middle of the
city. One of JCSs main attractions in the initial location was its ability to offer an
assortment of grocery products at very competitive prices in a retail location that was
easily accessible, had ample parking facilities, and offered a multitude of benefits for its
clients. Customers who were members of the cooperative were given special privileges
including discounts and rebates. For the Singaporeans who were not cooperative
members, the competitive prices offered by JCS together with the array of grocery
products that provided a multitude of choices for the Singaporeans were the pulling
factor that attracted them to frequent JCS.
The new location however was different. Although it was located in a relatively
up-market shopping complex in the heart of Johor Bahru, the majority of the visitors to
the shopping complex did not match JCSs profile of their target market. This shopping
complex attracted teenagers and those in the younger age bracket of 25-35 years who did
not necessarily frequent a shopping complex to do large amounts of grocery shopping.
Although the board members of JCS realized this, they were optimistic that their
regular customers would still be loyal to them and therefore would follow JCS
wherever it was located. This was an erroneous assumption, as JCS found rather too late
when this new location was not pulling in its regular customers and that, in fact,
those frequenting the shopping complex including the Singaporeans were not very
keen to do grocery shopping in this new complex. That was the beginning of JCS
nightmare.
The problem faced by JCS as a result of the new site was not attributed solely to its
location decision. That was only the beginning. There were a multitude of other factors
which led to the ultimate demise of this supermarket. The relocation decision also
implied new lease terms and rental rates at the new store. There was also a need to carry
out specific renovations appropriate for the supermarket operations which, although
was not massive, still required a substantial amount of financial allocation. The
suppliers also needed to be paid while the renovation was taking place. The board
members found that relocating brought with it massive financial woes which it had not
foreseen. There were a string of other problems linked to the execution of its retail
strategies. Problems with suppliers started to surface, promotional expenses became
more pronounced as the need to communicate with the target market became a necessity.
In addition, the new location demanded constant attention in terms of monitoring shop
lifting activities and pilferages. Such a situation demanded a lot of attention from the Location as a
store personnel and this affected staff turnover rates. These were problems that JCS had strategic retail
not encountered at the previous location, but it now found itself facing these multitudes
of problems. decision
JCS continued in the new location for more than a year, but when the problems
persisted and became too burdensome so that it could no longer sustain itself, the
decision was reached to cease operation. That was indeed a difficult decision to make as 157
JCS had experienced unprecedented success earlier and to surrender at this point would
seem like a failure on the part of the board members. They were entrusted with the
responsibility of overseeing the welfare of its 35,000 members and to declare that all the
efforts put into the development of this venture were futile after all these years was a
declaration of failure. The board members had no choice as financial problems were
mounting up to the point they could not sustain retail operations any longer. For JCS, the
cooperative that was regarded by many other cooperatives as the epitome of retail
success, being declared a failure at that point was indeed embarrassing. Yet the board
members had no choice as financial liabilities were piling up. Ultimately, JCS closed its
door forever in 2002 and has not looked back at this decision.

Lessons learned the future for JCS

Recently, JCS as a cooperative is still very much alive, albeit in name only. The key
board members are still at the helm of the cooperative although not much activity is
carried out now. Creditors are still pursuing them and what little they have, they have
spent on reducing their liabilities. But JCS still has a long way to go to clear its name
and till then the board members are not giving up on the dreams to see the rise again of
JCS in the retail arena. The retail sector, however, has become very competitive in
Malaysia with the emergence of more and more international players. Hypermarkets
have now replaced the small supermarkets and names like Tesco, Carrefour, and Giant
dominate the retail scene (Mohd Roslin and Melewar, 2008). For JCS to rise again at this
juncture would imply more aggressive strategies to challenge the much bigger and
well established names in the grocery retail sector. Indeed, the retail scene has become
hypercompetitive and JCS needs more than just its cooperative background to
challenge these more established players.
As a cooperative, JCS is bound by specific legal requirements which require them to
be accountable to the members through greater transparency and accountability in the
management of the cooperatives. This is carried out through internal audit and reports
by the board of directors to the members through annual general meetings. This,
however, has not been carried out regularly by JCSs team as the cooperative has
somewhat disintegrated and members are no longer united through regular meetings.
As an entity, JCS still exists, however, and will continue to seek means of getting itself
out of the current predicament. This will be a long process.
Much is learned from the retail experience. JCS can at least pride itself on being one of
the few cooperatives that had carved a name in the retail arena. None has yet reached the
level that JCS had, and therefore such retail experiences may prove worthwhile if JCS
manages to get itself out of the present predicament. Although competition is stiff, there
has not been a cooperative daring enough to venture into large retail undertakings.
Failures often bring plenteous knowledge. With the experience it has gained from all the
wrong strategies implemented, JCS is now wiser and understands the demand of retailing.
IJCOMA There is no turning back, but JCSs board members are optimistic that they will bounce
back one day and will make a mark in the retail sector again. The future looks bleak for
22,2 JCS in terms of reviving the supermarket right now, but the board members are confident
that there will come a day when their debts will be settled and they can once again emerge
as the cooperative which others look up to.

158 References
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Journal of Retailing, Vol. 60, pp. 5-36.
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http://findarticles.com/p/articles/mi_qn6207/ (accessed 30 May 2009).
Kakuchi, S. (1995), Japan: consumer coops make it big, available at: www.uwcc.wise.edu/icic/
today/consumer/big.html (accessed 30 May 2009).
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About the authors

Professor Dr Rosmimah Mohd Roslin is currently the Chief Editor of the Journal of International
Business & Entrepreneurship published by Universiti Teknologi MARA. Her research interests
are in the areas of marketing channels, channel relationships, relationship marketing, qualitative
research and retail development. She has published in several journals including the Journal of
Global Marketing, International Journal of Retail & Distribution Management and Journal of
Asia Pacific Business. Professor Dr Rosmimah Mohd Roslin is the corresponding author and can
be contacted at: rosmimah@salam.uitm.edu.my
Dr Herwina Rosnan is currently a Lecturer at the Faculty of Business Management,
Universiti Teknologi MARA. She teaches various subjects in the areas of International Business
and Management. She is also well versed in the qualitative research method and has carried out
research assignments using this research design.

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