North Dakota Rural Electric Cooperative Foundation
Report date
January 2023
What has been most instrumental to your progress?
1. The primary focus during the past year was to work with FTS Solutions to develop an online shopping platform for the cooperative that could be shared by members. This is a new development for both FTS (the only online grocery company in the U.S. that focuses on small retailers) and the cooperative. By having the cooperative as the member, there is one online platform fee split among members bringing affordability to rural online shopping. In addition, the cooperative worked with T4 Solutions and FTS to integrate the climate-controlled lockers to the local online shopping platform. Additionally, the climate-controlled lockers were installed in Fordville and Park River. The system is ready for testing but delayed as December is an extremely busy season for grocers.
2. It has taken persistence to keep the project moving forward. The cooperative members are fully engaged in the businesses they own, and the cooperative is an additional effort. The NDREC Foundation has experience in cooperative and business development and has been engaging the group in the necessary steps to emerge as a sustainable business. These steps, during the past year, have involved strategic planning, developing projected cash flows, frequent meetings, keeping records, developing health inspection and delivery processes, and keeping the group connected and moving forward.
3. We have continued to find ways to include and educate communities on the values of RAD within the region and beyond Walsh County. The board members launched an annual advertising campaign selling advertising space on the delivery truck, generating an additional $6,000 in revenue. Co-op members participated in training of the online software and management of lockers and are in the process of developing local training to help ease customer wariness to trying the new locker system. Meetings have been held with communities interested in joining RAD and developing a customer base for the cooperative. The project was selected as a keynote for the National Rural Grocery Summit in Wichita, KS, this past June where conference sponsors engaged their grocers to replicate the project. The work was presented to the National Association of Rural Rehabilitation where the concept was shared with 30 rural states and was selected for an award. Board members and resource providers have participated in several live talk-radio shows to share their story. NDREC staff worked with Nebraska co-op development leaders to develop a legislative bill for funding to replicate the project.
Key lessons learned
1. Rural grocers have been slow to implement online shopping processes and other technologies that lead to a more consumer friendly experience. The common theory was the technology was too expensive because providers charge an across-the-board fee regardless of the retailer’s customer base. While this is true, it is also more difficult to develop software applications for rural retailers because they do not have the capacity to bring on an employee dedicated to technology and maintenance. The development and launching of the cooperative’s online shopping platform has been painfully slow. We also experienced the effects of rural labor shortages. As much as rural grocers would like to try new ventures, the underlying question continues to be “who will do the work”. Even with available funding, it is a continual struggle to find workers in rural areas. It’s difficult to pay competitive salaries given a smaller customer base and limited revenues.
2. An underlying principle to cooperative development (and community innovation, too) is the risk taker theory that brings understanding and acceptance to the way people come together for a common cause. Only 3% of the population is willing to take a risk before seeing evidence that something will work. This theory proved true time and again, initially as we brought the board together and continually as we worked to bring on other stakeholders. This understanding of the human aversion to risk brought compassion to the process as people hedged on becoming a part of the effort. In one instance, RAD needed to find a new location for its second locker system. Adams, the intended community, had an entrepreneur interested in opening a small store. With the small population, there wasn’t room for both the store and the lockers. The community was hesitant to receive the gift of the new lockers, even with set up costs covered and one year paid utilities. They didn’t want to appear silly by trying something new. They turned the offer down and regretted their decision later.
3. Despite emerging with a model that demonstrates the value of cooperation among independent retailers, there remains a prevalent thought among people outside the pilot project that you cannot both cooperate and be independent. More clear education is needed on this issue.
Reflections on the community innovation process
All three! They are interrelated and essential for this project and will be long into the future. To keep communities interested and involved there is continued need for increasing the collective understanding of rural food access. To keep the cooperative viable and sustainable, the board will need to continue focusing on new ideas, new customers, and new processes and each new idea or process will need to be tested. For a project like this to be successful, they need to be inclusive, collaborative, and resourceful. As a community-based project, opportunities continue to present themselves. The cooperative has the strength of a regionalized distribution system for food and other locally retailed and produced products that can be used in the manner that serves the member communities best. Each time a customer or member is added, the members split the delivery fee which decreases the cost for all. There are opportunities for hospitals, childcare, senior centers, and restaurants to become members and source their food together. There may even be opportunities for commodity food programs to use the cooperative to have food delivered more widely for easier access for those in need.
Progress toward an innovation
I feel the cooperative is much closer. All the key components are in place for this pilot project, what remains is the testing and evaluation of the model we have developed. If this system can cash flow with the assumptions made then we have demonstrated that a slight shift in the supply chain can serve rural America in a more efficient, equitable and sustainable manner. Currently, this model is providing access to food where the free market failed (food access in Fordville; food supply to unserved rural school districts). This model is predicated on the distance you are from the hub, not who you are. Community size and race do not matter. A tribally-owned grocery store can be a member of a cooperative just as easily as a rural, white grocer. Within the cooperative, all members receive equal access to products.
What's next?
While we will continue to provide technical assistance to the RAD cooperative during its startup years, we have also begun the early stages of replicating the project, but on a broader scale. We have pulled together an interested “steering committee” that will begin investigating the financial feasibility of a nonprofit warehousing system in the Minot, ND, area. The steering committee will use lessons learned from the RAD cooperative to guide the collaboration process. Sparsely populated rural communities lack warehouse capacity. Warehousing is needed for storage, distribution, packing, processing, assembling, and light manufacturing of goods. A nonprofit warehousing system would provide an aggregation/distribution site for locally produced foods that could be distributed with conventional foods to multiple customers (grocery, schools, hospitals, etc.) within small communities. It also paves the way for the development of purchasing or shared services cooperatives to improve the volume and product selection for rural grocers and communities. This could also improve the distribution channel for food security agencies, like food banks. No No
If you could do it all over again...
As a cooperative developer, I had a lot of uncertainty over whether to initiate this project. It is counter to accepted cooperative development principles in which you wait for concepts to rise from the grassroots level. In this case, the project was not iniated at the local level. Initially, grocers were hesitant to acknowledge they had a supply problem but there was a significant decline in stores that suggested otherwise. There was also skepticism that we could influence major suppliers to change their business model to better serve rural places and consequently grocers feared the push for change could lead to the loss of suppliers. Knowing the grocers had negative emotions behind any proposed change made it difficult to step forward to lead the change, especially since I have never worked in the grocery sector. My advice to myself would be to stop worrying about looking silly about leading in the wrong direction. You can discover whether you are on the right track by taking time to engage grassroots people in the proposed change. It gets them meaningfully involved in an effort that can bring about positive change. If it’s a good effort, trust that people will step up to lead.
One last thought
With your guidance, we have extended the agreement with NDSU to complete the final analysis to July 31, 2023. Due to delays in project launch, evaluation activities are on hold until all systems are operational. NDSU did make contributions to the development of the keynote presentation at the National Rural Grocery Summit and contributed to the development of a proforma. When we started to work on this project, there was push back from suppliers because we were challenging their business model and seeking change. The rural food supply environment has quickly changed over the past several years with the pandemic, labor shortages and high fuel costs. During this time, some suppliers dropped small customers in favor of keeping their larger, more profitable customers. RAD’s model slightly disrupts the supply chain to serve rural areas more effectively. Left uninterrupted, major suppliers will continue to consolidate, favoring urban and leaving rural behind. The key to financial sustainability of this cooperative and rural retailers in general, in the current supply environment, is volume and aggregation. One way to achieve that in a rural area is to work together.