Chasing the Gap


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CoCoGAP is a data sharing program, a tool that measures a co-op’s perform­ance in key operational areas against the top 25 percent of other co-ops with similar sales. The “Gap” is the amount of additional profit your co-op might be able to realize each year if the target department performed at benchmark levels. (For background, see

For years, River Market (Stillwater, Minn.) had been diligently submitting quarterly information to CoCoGAP and receiving comparison reports in return. As general manager, I would show each manager the department information, and maybe we’d talk. But I really hadn’t used the tool until January 2008.

For many reasons, a lot of co-ops face the necessity of improving financial performance. River Market is one. Every year was a battle for profitability and cash-even seven years after opening in our new, downtown location on the beautiful St. Croix River. Once the equipment was fully depreciated, cash basically came with profits. We needed to be more profitable, operate better, and use our money more wisely.

We’d had two consecutive years of declining sales, and in October 2007 cash was down to $24,500. Sales were strengthening, but financial performance was mediocre. Occupancy ran over 6 percent, meaning we had to perform better in order to make an “ordinary” profit and grow cash. Patronage refunds had not been declared since 1997. We were paying staff well, but we were not achieving the financial results the
co-op and members needed.

A modest proposal
I am a believer in gradual, incremental progress. But when progress hasn’t been made over a long period of time, what do you do? In December 2007 I made a decision to use CoCoGAP as a tool to improve River Market’s financial performance. Sales managers were achieving so-so results, and these results needed improvement. We decided we would set goals in the upper quartile of CoCoGAP figures, and each quarter the goals would be increased.

Our third quarter began in January 2008. Our GAP goal that quarter was an average of two areas in the upper quartile for each department managed. So, if a manager was responsible for three departments, those departments needed six areas in the upper 25th percentile of co-op data. I gave credit to departments in which sales growth exceeded the co-op’s total sales growth. A tie was also worth a point. It didn’t matter where the points fell; I was looking for an overall average of the areas each manager was responsible for.

The goal for the fourth quarter would be attaining an average of three areas in the upper quartile, and for the first quarter of fiscal 2009 (July–September) the goal was four. Managers could choose the areas in which they wanted to accumulate upper quartile points. To strengthen financial success, we didn’t need to be outstanding in just one or two areas. We needed to do a lot of things well.

There is an overall goal: Total store results need to be in the upper quartile in the key areas of Margin, Inventory Turns, and Margin Minus Labor. If we hit these, several other areas would naturally be in the upper quartile. We’re not there yet.

While the goals for improvement were aggressive, when River Market’s December 2007 (second quarter) CoCoGAP results came in, all departments had already made their third quarter upper quartile goals-if they could only maintain! So, sales managers had well over a quarter to prepare for the next level of performance in the fouth quarter.

River Market’s board surprised me with its enthusiastic reception of the plan. I had found a way to objectively measure performance and to hold sales managers accountable.

The first area to deal with was training. Stuart Reid, a “CoCo-Mentor,” led key staff in a CoCoGAP session. Stuart gave a terrific department-by-department training, not only to our sales managers but also to their assistants and anyone who had a hand in ordering product. In all, 14 of our 31 people attended the training.

The second area was working one-on-one with each sales manager, discussing areas they would focus on during the quarter and how they would achieve their goals. Because we were low on cash, we initially focused on inventory levels. Simply put, we had too much in the store for the sales volume we were doing.

With clear goals established, it was astonishing to watch a great group of managers go to work. For each month of the quarter, we set purchasing limits in all but two departments (produce and floral). I posted department purchases and sales gains or losses weekly in the department manager’s office.

Because we were close to achieving a 3 percent cost reduction from our distributor, UNFI, I talked to key people about trying to order more products from UNFI and posted average weekly UNFI purchases in the department managers’ office.

There are many great examples of what managers used to achieve their goals. To reduce inventory, Chuck Dusbabek and his grocery department reset nearly every section in the department, removing a shelf and selling out the slowest moving items. With our ancient POS system, Nick Hartwick was able to capture the slowest movers in all departments, and managers used these reports as product decision-­making guidelines. Kiva Sherr’s general merchandise and HBC departments dramatically reduced purchases. We decreased the numbers of shippers and floor displays in the co-op. Trista Boe removed a few produce display tables to reduce exposure. Jerry Green reduced four feet in a vendor bread reset. We got Scan Genius going in the HBC section first and then in the grocery department, after Nick had re-ticketed the entire store with compatible price tags.

It may seem counterintuitive, but as product duplication and a small amount of variety were reduced throughout the co-op, our sales grew.

As a simple method of recognizing improved performance, after each quarter I handed a $20 bill to each employee in the department with the highest number of upper quartile points. It was a surprise and well received.

Jerry’s deli department has dominated the $20 rewards so far. For the third quarter, one sales manager didn’t achieve upper quartile goals but nevertheless had improved in nearly all categories. I issued a verbal warning rather than a written one, explained the importance for the co-op of achieving strong financial performance, and also acknowledged improvements made. One manager missed by .01%-but the point was awarded.

The budgeting process arrived in the middle of the GAP program. We created a GAP-like budgeting form for sales managers to estimate sales, margin, average hourly rate, hours per week, and inventory turns. This was translated into GAP numbers, which were entered into our larger budgeting program. To ensure compliance, each manager budgeted to achieve four upper quartile points beginning with the next fiscal year. Again River Market’s supportive board allowed the department managers to own this portion of the budget, without adjustment.

*Results*Because CoCoGAP uses a rolling 12-month average, it takes time to show progress. The results we achieved as a total store through the first three quarters are shown in the chart below.

Total store co-op financial results improved each quarter in almost all areas. Because we reached a UNFI purchasing level that gives us an additional 3 percent savings on cost of goods, we are confident that this fiscal year will show a stronger gross profit.

In nine months, River Market reduced total store inventory by almost 25 percent or more than $50,000. That reduction seemed to go directly to positive cash. Cash improved from $24,500 in October 2007 to over $190,000 one year later. Sales increased 6.7 percent in January through October compared to the previous 10-month period (remember, we had lost sales during the previous two years).

For that 10-month period, River Market customer counts were up 4.9 percent. At the end of April, our profit and loss statement showed a net income of a negative $46,550. But this was a positive $9,659 by June 30th, our fiscal year-end. The net income for the first quarter of our new fiscal year was over $32,000-a record for River Market for a first quarter.

If you don’t have a goal, then you will achieve that-it’s better to have one! While CoCoGAP didn’t save my life, bring fame to River Market, or even satisfy a single customer, it did help to get our sales managers united with a common focus, and it was this focus that helped our financials begin to turn around.

Our team did well, and the results have the board beginning to discuss the exciting possibility of issuing the first patronage refund to our members in over a decade. But we are still chasing the GAP. We have made strong improvements in several areas. The reduced inventory level is one major example.

Another example is Margin Minus Labor (MML), which has improved $59,000 (rolling average) from last December. However, as far as the upper quartile goes, we have actually lost ground. In December the MML GAP was $107,000 for River Market; today it’s $118,000! This means our co-op sector continues to improve; standing still is actually losing ground.

Ideally, CoCoGAP should be used gradually, setting annual goals to close the GAP. But with cash low, we needed a jump start. To some general managers these are basics, but 75 percent of us are not in the upper quartile. Sometimes the best management tool on your workbench is overlooked. For co-ops needing to improve financial operations, increase cash, or even build management teamwork; don’t be afraid to try CoCoGAP!

Feel free to call or email (651-439-0366 or [email protected]: [email protected]) with questions.

Special thanks to Walden Swanson and Kate Sumberg at CoopMetrics.


Mead Stone is the general manager of River Market Community Co-op in Stillwater, Minnesota ([email protected]).

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