Bigger Is Better
Some people thought we were crazy to go from a 4,000-square-foot store to an 18,000-square-foot store. It definitely took a lot of courage from all levels of our organization. We just knew we could do it. Now that we have gotten through it, opening the doors on May 17 of this year, I can say that we shouldn’t have gone any smaller.
From initial concept to completed project, our expansion took about seven years, and it was seven years well spent on developing both physically and organizationally. Sales at our store were just about $5.5 million prior to our move and we had enjoyed many years of profitability.
The need to expand had become extremely evident to our staff and our customers. We served 500 customers per day and the aisles were narrow, the floor was falling apart, equipment was dated, the shelving was horrible, and the front door was user unfriendly. Staff were stressed by the lack of workspace both in the stock room and the aisles. The kitchen that was intended for grab-and-go deli prep was also used for bulk bagging, cheese cutting, and produce prep. We had two registers, which was a nightmare during the holidays and worse if one of them broke down. The office trailer we rented to create more office space also was unbearably cramped.
We were afraid to do any active advertising, concerned that bringing in new customers would stress our operations even further. Basically, we ran a very successful store out of a hole in the wall, and our customers patiently awaited our move.
Making this expansion successful started with planning for the physical move. One of the first steps we took was to bring in Bill Gessner of Cooperative Development Services (CDS) to talk to the board of directors about expansion. Bill’s experience and advice motivated the board and management to hire Pete Davis of CDS to perform a market study. This report became the backbone of our project. We realized from the market study that the majority of our sales (51 percent) were coming from outside of our trade area. We looked for a site in the 10,000–15,000 square-foot range, and we knew we needed to be highly accessible to the highways, given that many of our customers traveled some distance to get to our store.
In addition, the results of a customer survey we had conducted showed that our customers wanted a more full-service store with fresh meat and seafood, fresh cut cheese, more local products, a community room, and an expanded food service department with indoor and outdoor seating
Once we had about 5 or 6 sites identified, we brought Pete Davis back to review the sites and help identify a preferred site. One site was in a shopping center across the street with ample parking and a fitness center moving in next door. The site was 18,000 square feet, and mostly a shell needing significant construction to meet our needs. Given the expanded needs of the customers, the board voted unanimously in support of the site. We then met with PJ Hoffman to help design the store plan using the results of the survey and industry trends.
Raising the capital
Financing our expansion occurred in two phases. The first step occurred when we changed from our annual dues system to an equity structure, another recommendation by Bill Gessner. We had been operating under a $15 and $30/year dues structure, but in 2002 our owners approved an equity structure with a share cost of $200. In addition to many other benefits, this allowed us to raise significant funds for our expansion; coupled with our savings from previous years’ profits, we had $1 million to put towards the project.
Prior to construction we finalized our financing with National Cooperative Bank, and we ran a short member loan campaign that raised $225,000. This fell short of our goal, but we had ample funds internally and didn’t want to delay. Construction began in October of 2005 and ran about six weeks longer than expected, but the site was completed about four weeks before our planned opening.
Early on, we started looking at our staff structure and making modifications to support a larger operation. One significant hire was a marketing and owner services manager. This position was very instrumental in bringing a brand awareness to our store that was consistent with our customer survey results, helping support the introduction of a new logo and improving our publications and events. Next we added the position of a merchandising manager. This position also brought us to the next level with our promotions, category management and vendor relations. Finally, nine months prior to our move we hired a human resources manager to begin plans for the ‘big hire’ for the new store and the training needs. This position was also very supportive in helping with staff communications.
We also went through a considerable culture change consisting of policy revisions and more layers of leadership. For years our co-op struggled with familiar co-op issues. We had a culture of laxity on productivity issues, we weren’t savvy with profit margin or category management, and some members of our organization thought profit was a dirty word. We ran a profitable store with healthy sales growth, but we weren’t challenging ourselves to reach the next level.
Our leadership team, consisting of all of the managers, met every other week and sometimes weekly. We soaked up as much as we could from the resources that were out there. We also hired a local facilitator and consultant that helped us work together as a team and get through the tough stuff, and we did have our share. We tried to anticipate and prepare staff for the upcoming operational changes, but at times, having never been through the experience ourselves, we didn’t have all the answers. We just tried to be honest and empowered staff to make decisions for themselves if they were ready for what was ahead.
Leading up to our opening day, we continued to ensure that the operations at the existing store never faltered. We closed the store for three days to set up inventory at the new store. We had also installed a new POS system at the new store, a major undertaking with transferring our product files and learning the new system. It was one of the greatest challenges of our opening, but we knew it was better to have the new system instead of investing money in an old one that wouldn’t meet our needs.
Opening day was amazing. Customer’s jaws dropped when they walked in the front door. Some of them clapped. It was hard to take a breath because we were immediately getting slammed with $45,000 in sales for the day. Since then, our sales have climbed to $190,000 per week. With projected first year sales of 8 million, we are currently running 17 percent over projections.
Our grand opening was another big day. We offered free goodie bags to the first 500 customers and we ran out in about 30 minutes. Our biggest day yet was our Owner Appreciation Day on August 17 that brought sales of $61,000. We are now gearing up for the holidays and are excited about each new opportunity we experience in our expanded site.
I am excited by the fact that we serve so much more of our community with the expanded store. Every day I see new customers who are just becoming interested in natural foods and I am thrilled that we have created a welcome environment for them. Some afternoons, when I look out my office window onto the store floor, I can see people eating in the café or enjoying a meal sitting outside on our patio and I think that this is just what we wanted…and then I start thinking about what will be our next project.
Sarah Lebherz is general manager of Common Market in Frederick, Maryland ([email protected]).