The Long Road Back
For background on the shaky start to Mississippi Market's second store, see "A Near Miss at Mississippi Market," in CG #92, Jan.-Feb. 2001.
On October of 1999 I became Interim General Manager at Mississippi Market, a position I assumed permanently in January 2000. The co-op had opened a second store six months earlier, and the organization was in rough shape. Its store on Randolph Ave. had an established location with 3600 sq. ft. in retail; the new Selby Ave. store had nearly twice as much retail and loads of debt.
Morale was bad, customer service spotty at best. At our new Selby store sales had declined each month since the April opening, and labor was running out of control. At Randolph, our store manager was inexperienced, poorly trained and unsupported in his role. The store was dirty, the staff demoralized, and the sales suffering.
People knew things weren't going well, but no one realized just how bad the situation was. The store's accounting staff had quit, and the department was running with temps, supervised by a consultant. No financial statements had been prepared since the new store opened. The Board of Directors finally contracted with LOTTSA Financial Services to generate statements which, once prepared, revealed staggering losses and payables.
Both stores needed immediate attention. I met regularly with the manager at Randolph, but my initial focus was at Selby, which was hemorrhaging cash. Within a few weeks I cut staffing, ended agreements with two of three consultants, and reviewed and cut operating expenses. It took us three months of discounting to work through excess HBC inventory that was tying up cash. I consolidated buyers into a common office, sold the extra office furniture and rented out the space. Everyone was on a short leash. New vendor requests, initiating a hiring, and purchasing anything other than cost of goods required my approval.
Mississippi Market Cooperative
|Randolph store||Selby store||Combined|
|Staff||29 (21 p.t., 8 f.t.)||63 (33 p.t, 30 f.t.)||8 administrative|
|Square feet||5900 total, 3595 retail||14,762 total, 7150 retail|
|Previous fiscal year||$7,368,508|
|Projected this fiscal year||$8,249,075|
|Member-owners||3920 active members, 1683 added since the Selby opened in April 1999|
At the same time, we began the arduous process of securing more working capital. First year losses had burned through all of the co-op's reserves and then some. The board launched a successful member loan drive that brought in $185,000. That money kept us open while we worked other avenues. We renegotiated the terms of a $100,000 loan with our neighborhood community development corporation, converted past due payables from our two primary vendors into long- term debt with favorable terms, and began negotiations with our lenders and the city for additional operating capital. Nearly a year later, in September of 2000, the lenders advanced $64,000 for operating capital, and the city lent us $105,000 to cover capital leases at Selby and a modest reset at the Randolph store.
Since that time, the co-op's fate has been up to us. In the current fiscal year, our budget calls for combined sales growth of 12%, a 34.9% margin, and personnel costs of 22.5%. If we hit these targets, and control expenses, we will have an operating income of $87,150. After other expense (mainly interest expense) is offset by other income (primarily rental income from our second story office space), we end the year with a net loss of $92,523. Our cash flow on the budgeted $8.2 million of sales is a mere $28,000. If we beat our budget in key areas, the results could be significantly improved. I am happy to report that at the end of our first quarter (July-September), we are ahead of budget!
At Selby, we continue to see strong sales growth. Sales are up 17% over last year, and last year was 25% over the one previous. The September 2000 remodel of our Randolph store replaced the service deli case with a grab and go case, capturing more space for grocery. We also changed our entire management team. We haven't seen sales increases, but sales have stabilized. At fiscal year end on June 30, 2001, our combined sales were up 66.6% from 1998 levels, the last full year prior to the opening of the second store. Sales at our Randolph store started to slip even before the second store was built. They are down 38% from 1998 levels, compared to a projected decline of 10-15%.
The need to survive as an organization can be a powerful motivator, but only for a while. Over the long haul, keeping the doors open is not enough; staff need a positive vision of achieving excellence and success. We regularly celebrate our successes and reinforce our vision of excellence with our staff, while continuing to operate in a parsimonious fashion within our cash constraints.
Results have steadily improved. Our financial manager rebuilt the reporting infrastructure and produces accurate, timely financial information that helps us stay on top of things. Both of our stores are looking great. Thoughtful resets have improved merchandising, and we continue to find creative, low-cost ways to keep the stores looking fresh.
Our focus on training on all levels has paid off, and our customer service keeps getting better. I participate in all new staff orientations, welcoming staff and reinforcing our customer service standards. We revised Sacramento Natural Food Co-op's modular staff training, and have been working the staff through a series designed to sharpen their ability to provide top-notch service.
We are developing our leadership as well. Nine of our thirteen administrative and department managers are new to their positions in the last two years. Carolee Colter has conducted a number of workshops on team building and supervision. Next month our HR manager begins a series of "Brown Bag Lunch" lectures for supervisors, to help us develop their skills and have a uniform approach to the basic supervisory duties. Two of our managers have been in the Leadership Development Program of Twin Cities Natural Food Co-ops (TCNFC, our local co-op grocers association); and I have found scholarship money that has allowed us to send a manager to the Consumer Cooperative Management Association conference each year.
We have had substantial help in getting our cooperative back on track. Our members rallied in our hour of need, our board and staff remain committed, and all the people we owe money to have been supportive...not to mention patient!
Additionally, the co-op community has been a wonderful partner. The CGIN website provides us with excellent ideas and tools, CoCoFiSt allows us to examine our results and set goals in the light of industry standards, and TCNFC has played a key role in our efforts. We have benefited greatly not only from their services, but also from the moral support and advice of managers in our area co-ops. We remain optimistic that this year we will truly see that Mississippi Market has a bright future.