Case Study: Survive Competition with Focus on Co-op Identity

the-merc-logo-newCommunity Mercantile

Lawrence, KS
Founded: 1974
Number of members: 2,250
Equity investment: $75 one-time stock purchase
Years in current location: One
Retail square footage: 10,000
Total square footage: 18,000
Number of staff: 100
Annual sales: 6.5 million

Not many people think of Lawrence, Kan. as a hotbed of cut-throat grocery competition, but all that changed in 1992 when the natural foods chain Wild Oats came to town. The chain intended to capitalize on Lawrence’s desirable college-town demographic. But then two years later Wild Oats closed their store in Lawrence.

It’s perceived as a victory for cooperators, but ultimately, the market wasn’t big enough at the time for both stores. Wild Oats cut its losses and left. What’s more relevant about this story relates to underestimation, and how that is what really closes stores. Both Wild Oats and Community Mercantile itself underestimated the meaning cooperation had for the community of Lawrence.

“Wild Oats came because the market looked wide open to them. We were at less than $1 million in annual sales. We didn’t look like a threat. We had little market share, the co-op was clique-ish, not real open,” said Jeanie Wells, current general manager.

Although the co-op had moved to a bigger location months after the Wild Oats opening (something that was in the works before Wild Oats appeared on the scene), the co-op was rapidly drained of cash. “At the time there was this sense of always being behind and reacting to Wild Oats,” Wells said. The political climate at the co-op was also difficult; the co-op lacked management and board direction.

In order to change the leadership culture, the board of directors adopted Policy Governance™. Dennis Highberger, board chair, said, “Before we implemented policy governance, our board routinely became involved in minor operational decisions…by removing ourselves from these decisions, we now have more time to spend on long-term goals.”

“That whole era forced the co-op to look at its identity. Our identity now is a direct result of that time. We had to survive, so we put the emphasis on co-op and community,” said Wells. It was the one sure thing that differentiated them from Wild Oats.

“The marketing and membership people were keenly aware of the co-op as a rallying point,” Wells noted. The co-op had many community dinners, asked members for loans, and later asked them to forgive them or take an extended payment plan. The members, community and greater co-op movement responded with their help.

Meanwhile, the co-op dug in and developed a strategic direction, did a thorough assessment and market analysis, and just recently proceeded with a successful expansion and relocation. Wells credits her staff, the community of Lawrence, work with variousCDS consultants, the Co-op Grocers Association Midwest, CoCoFiSt and the Co-op Advantage Program with helping them get to where they are now. “Before we were an island in the middle of nowhere, with no one to turn to for help. The connections we’ve made have been very meaningful and helpful and a big part of why we’ve made it,” said Wells.

Nine years later, the store is now thriving. However, they will be forever cautious, and will never underestimate themselves or market forces again. Wild Oats is now ensconced nearby in Kansas City—but cooperators at Community Mercantile still wonder if they’ll attempt a Lawrence comeback (while clearly recognizing that’s not the only competition). Wells said, “Are we ready? I don’t know, but we’re in a far better place to handle it.”

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