Disadvantages of Consumers’ Cooperative Society
Whenever the consumers of a particular area collectively establish a cooperative society with a view to purchasing daily necessary commodities at the optimum price this cooperative society is called Consumers’ Cooperative Society. A consumer cooperative is a cooperative business owned by its customers for their mutual benefit. It is a form of free enterprise that is oriented toward service rather than pecuniary profit.
Consumers’ cooperative society has huge advantages. Side by side it has some disadvantages which are as follows:
- Shortage of managerial skill
The managing director is not highly educated and not highly experienced. Most of the members do not have proper managerial ability and training, so they cannot manage the affairs of the societies properly. That’s why they create various problems in operating the business. Workers are inactive in the business which is harmful to the organization. Qualified managers are not attracted to a cooperative on account of its limited capacity to pay adequate remuneration.
- Insufficient capital
Cooperatives are usually at a disadvantage in raising capital because of the low rate of return on capital invested by the members. As poor people, the members can’t manage the required capital to operate the business. The consumers’ cooperative can’t forward greatly due to lack of capital. The societies usually suffer from inadequacy of finances as a majority of the members of the societies are from middle class or low-income group people.
- Reduce inspiration
A cooperative society is formed for mutual benefit and the interest of individual members is not fully satisfied. Directors have not enough mentality to operative the activity seriously. Because their salary is low, they are not so careful about their responsibility rather it creates frustration in the organization. Hence, members are not inclined to put their best efforts into a cooperative society.
- Lack of Competition
Cooperatives, generally, do not face stiff competition. Markets for their goods and services are more or less ready and assured. Hence, there is a possibility of slackening of efforts.
- Minimum variety of products
This consumers cooperative society can’t store necessary goods due to lack of adequate capital. So the business formally fails to supply the taste and demandable goods.
- The disadvantage of maintaining account
Dividends are distributed on the total purchase ratio instead of the ratio of the number of shares. It creates a hustle as well.
- Lack of Secrecy
The affairs of a co-operative society are openly discussed in the meetings of the members. Every member is free to inspect the books and records of the society. Therefore, it becomes difficult to keep the secrets of the business.
Nepotism is a great problem to conduct such kind of business. Director’s relatives get huge advantages than others in the cooperative business.
It is the worst demerit from which co-operative societies suffer, it is the biggest hindrance in the development and growth of the business. The members may not be loyal and honest which adversely affects the smooth functioning of the societies.
Above all, though it has a few disadvantages, the advantages are great. So consumers’ cooperative society must tackle these disadvantages for the betterment of the business. Otherwise, it may fail to achieve the objective of the business.