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The Goldilocks Solution
Finding a Just Right Store Size
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AgendaFairy Tales & Co-ops: What should you believe?
• Once Upon a Time• Goldilocks (& the Three Bears)• The Three Little Pigs• The Moral of the Story• Happily Ever After
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Myths & Misconceptions
• Co-ops can start small and grow– haven’t they always?
• People will support us because we are a co-op
• Small stores don’t require as much organizing and planning to be successful.
• Bigger store = bigger risk• If we don’t do something soon, our
members will abandon us.
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Updating a few fairy tales
Grocery stores:• Have very low profit margins– WHEN
SUCCESSFUL• Your competitors invest in state of the art
equipment, information systems, merchandising and promotion.
• Economies of scale matter• You can buy Silk ® at Walmart ® cheaper
than through your distributor
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Goldilocks as Mentor
• Review the Options• Test the Fit• (Avoid Angry Bears)
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Too Small• Revenues are low, expenses are
disproportionately high• Unlikely to qualify for NCGA membership • Limited ability to meet the community’s needs
and expectations• Perishables (local food) require lots of space and
high turnover• Susceptible to competition• Even if profitable, capital will accrue verrrrrrry
slowly.• Future expansion will look a lot like starting over.
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Too Big
• Overhead costs not covered by sales volume
• Empty space/empty feel• Rare
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Just Right• Inventory mix and selection matches market
needs• Enough space to operate efficiently and shop
comfortably• Room to grow into mature sales projections• Sales revenue and margins can cover expenses
and generate surplus
Store size should be a business decision, based on hard numbers, analysis, and vision.
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Porridge
• Yelm Food Co-op, Yelm, WApopulation 7,000
• Spiral Natural Foods Co-op & Grocery, Hastings, MN
population 23,000
• Common Ground Food Cooperative, Champaign-Urbana, IL
population. 82,000/41,500
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Yelm Food Co-op
Retail square feet 1,000Year open 2007First year sales $400,000Current sales $912,000Employees None until 2008Volunteers YesHours of Operation Mon -Sat 9 am - 7
pmSun 10 am - 5:30 pm
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Spiral Natural Foods
First Store(s)(3 downtown locations)
New Store
1979 2011
3,150 ft2 retail 1,855 ft2 retail
$400,000 $765,000
$1M projected this year
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Common Ground
First Store New store Expansion
Opened in 1984 2008 2012
900 ft2 retail 2150 ft2 retail 5700 ft2 retail
$650,000 (in 2008)
$1.9 million (yr. 1) $7.2 million (projected)
$3.9 million (yr.4)
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Goldilocks Revisited
Finding “Just Right”o Visiono Market Studyo Feasibility Researcho Community Surveyo Site Selection
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3 Little Pigs• House of Straw
o Quick & Easy!o Immediate gratificationo Huff and puff…
• House of Stickso Recognition of need for more structure…o … but inadequate executiono Huff and puff…
• House of Stoneo Extra care and investmento Built to lasto Wolf Kabobs
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What if Small is the Only Option?
• Careful business planning is critical• Are there potential reductions to operating
expenses?• How long will they exist?• Is the competitive environment stable?• Do you have the best possible site?
• Is a buying club a better option?
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The Moral of the Story
Use good business plans,Get professional advice,Build the right sized co-
op,And…
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Questions?