Sharpening Our Focus
Historically, Wheatsville was a co-op that hung on and survived in the Austin, Texas, market, with some years of losses mixed with some years of gains. Several years ago, we decided that we wanted to expand, and invited Bill Gessner in to help us out. He explained to us that we would need to be a much stronger organization financially and internally if we were going to be able to pull off an expansion.
Today, Wheatsville is a changed business due to a number of factors, including our work with the National Cooperative Grocers Association and Cooperative Development Services. These organizations helped us use data to set goals and benchmarks, primarily through the CoCoFiSt (Common Cooperative Financial Statements) program and CoCoGap. (For an earlier review of using these tools, see “Closing the Gap,” in CG #126, September-October 2006.)
With Bill’s advice, we sought membership in the Cooperative Grocers Association (CGA-Midwest)—we welcomed the Midwest into Texas when they allowed us to join! At a CGA-Midwest meeting, I realized that People’s Food Co-op in LaCrosse was a similarly sized store and up until 1998 had had sales similar to Wheatsville, but within a year or so they had outpaced us by about a million dollars! This prompted me to invite People’s general manager, Michelle Schry, to visit my store and work with us. A few months later, the CGA-Midwest general managers came to visit, conducted a store audit, and highlighted many areas that we could improve.
The following is the story of what we did with all of the suggestions and outside help that we received. Wheatsville’s success is really a story of using available tools, primarily CoCoFiSt and CoCoGap, to help sharpen our focus on the most important factors of our business.
We found that comparing where we stood with other co-ops on inventory turns was probably the key factor. Working on inventory turns helped us to lower labor, increase cash, and grow sales, too! Editing selection, adding more shelf fronts of popular items, and streamlining ordering were all part of our inventory reduction process.
Less is more
With the help of Michelle Schry of People’s Food Co-op and Mel Braverman of Cooperative Development Services, we realized that in almost all areas our turns were lagging behind the other co-ops. In particular, our bulk and vitamins turns were extremely low. This prompted us to reduce our backstock space for bulk and to focus on switching purchasing to a supplier that could deliver frequently. (Previously, we had been buying a lot of product in palettes that would sit around for months.) In just a few quarters we raised the bulk turns from around 10 to around 18.
Our supplements department was at an anemic one-and-a-half turns a year. We realized through the “inventory per linear foot” measure on CoCoFiSt that we had more than double the inventory that most co-ops had. This realization spurred us to do a full department reset, and we shrunk the department almost in half and reorganized it. This tremendous reduction in selection resulted in the best sales growth we had seen in years! That was a major breakthrough for us: the realization that edited selection helped grow sales. (I know that this is counter-intuitive, and I didn’t believe it until we did it.)
In order to reduce inventory, we basically went through a number of departments, using movement reports as a guide, and dropped slow movers in all categories. We then expanded the remaining skus to additional fronts. In one case, we expanded grocery shelf space by 12 feet but added NO new product. We even found ways to do it in bulk foods by doubling up some bins with top sellers like oats. This allowed us to drop slow movers and not run out of the fast movers, while also minimizing the number of times we had to restock a given item.
The only department that we did this in that did not result in increased sales was the bulk herb department. The reduction was called for, though, because we had items that we weren’t selling a pound of in more than 6 months to a year, so these herbs weren’t very fresh for the customer anyway.
All of these moves allowed us to reduce our backstock by having enough fronts in the aisles to put an entire case of product out when it came off the truck. This reduced the amount of labor a product required, since we didn’t have to wheel the leftover case into backstock and then restock it the next day. According to studies, maintaining backstock is three times more expensive than stocking directly to the shelves.
More fronts on the shelf also improved visibility for the customer. Sales grew greatly from this visibility, and even though we had to drop some product to do this, we received very few complaints. In almost all areas where we reduced selection, we saw sales growth. We trained staff to understand that while we hate to disappoint any customer or member, the size of our store requires us to make the selection or choices that will make the majority of our shoppers and members happy. We also made sure that everyone knew about our special-order program.
We also focused on ordering for the entire store what we would need to hold us until the next delivery day. Our mantra became, “Order Monday for Wednesday, Wednesday for Friday,” etc. This isn’t always possible, but we recognize it as the ideal that we shoot for.
The Cooperative Advantage Program (CAP) was also a big help for us. Previously, the only deals we could offer were “buy-ins” of a certain number of cases through brokers. This resulted in us having cases of product sitting in inventory from the beginning of the month until the end (or longer sometime). With CAP, we could order what we needed for the shelf, but still offer great prices.
We borrowed Michelle Schry’s approach to goal setting and used the CoCoGap program as a goal-setting tool. My grocery team head Margaret Creswell was a leader in this. We basically set the 75th percentile goals in the Gap tool as our targets for all the grocery departments, which would make our performance higher than that of at least three-fourths of all participating co-ops. Within a year, in nearly all categories, we were at or above the 75th percentile.
As a manager, the benefit of this type of goal setting is immense. It offers a specific attainable goal, and it is based on data from many stores, not just our own. With all of these improvements, we saw our sales growth improved, our labor reduced, our margins and turns increased, and our cash grew … amazingly!
I’m extremely proud of what my crew has accomplished in the past few years, and I am impressed with how quickly financial excellence was achieved when we began to work on it. Our willingness to look outside for help and to use the tools and data available in our co-op system has been a major reason for our success.
Choice or hyperhoice?
Increasingly, studies are showing that customers are looking for some relief from the vast number of choices they make in a given day. As described in the book, "The Paradox of Choice," by Barry Schwartz, people are more dissatisfied than they have ever been, despite having more material wealth than previously.
The author’s view is that while we have been given more and more choices, we find ourselves overwhelmed by the sheer number of decisions we have to make. This observation may be applied to the inundation of product selection on the grocery shelves.
"Hyperchoice" is a term coined by University of Texas professors Susan Broniarczyk, David Hoyer, and Leigh McAlister, and it is an apt description for the way many Americans are feeling about selection. Historically, selection was the reason why people choose a store, and people still cite that as a reason for their choice of store. However, it is becoming clear that, in the words of these authors, “shopping in such an environment can lead to frustration, fatigue, and regret.”
The “hyperchoice” phenomenon provides an opportunity for a store like Wheatsville to offer enough selection for shoppers, but not so much that they feel overwhelmed. We have found that our strategy of category management and product selection editing has been a large part of our current success.
Dan Gillotte is general manager at Wheatsville Co-op in Austin, Texas ([email protected]).