SALT LAKE CITY — To move out of their comfort zone is the greatest challenge facing independents, said Rich Parkinson, president of Salt Lake City-based Associated Food Stores at the co-op's recent annual meeting here.
Parkinson said he is optimistic that the cooperative's members can successfully navigate new horizons in retailing, not only through their own entrepreneurial “drive and spirit,” but also through a variety of Associated programs designed to guide them through the “gateway to greatness.”
Professing Associated's ambition to be “a great company, not just a good company,” Parkinson pointed to its positive financial performance, as well as to its current focus on training and “localization — the next frontier in retailing.”
Associated has stepped up its commitment to training with the construction of a 25,000-square-foot training center at its headquarters here. Set to open in August, this facility, with broadcast capabilities, will host seminars for up to 200 people.
In January, Associated launched a three-day Partners in Leadership session attended by 34 store leaders from various Associated retailers. They met in June to discuss how the leadership training affected their roles within their respective organizations. In addition, Associated Retail Stores (ARS), the corporate store holding company, has recently increased the number of store-level positions with leadership opportunities, Parkinson said.
Retailers must “actively seek out and take full advantage” of these educational and store-enhancing opportunities, urged Lee Badger, chairman of the board and president of Lee's Markets in Logan and Smithfield, Utah. Another option for retailer self-improvement is embodied in the Differentiation Margin Enhancement Rebate program, a self-liquidating loan plan designed to encourage retailers to update various perishables departments' fixtures and presentations. Citing his Smithfield store's success, Badger told members how this store used DMER money to increase sales by “turning the perishables area into an exciting shopping experience.”
DMER loans self-liquidate through increased rebates generated by increased sales, explained Parkinson, reporting that some 125 stores have participated in the program.
Retailer participation in such programs as DMER, customized merchandising and training is the key to sustaining growth, both for retailers and Associated, Badger implied in his annual report message.
Associated is now compiling and analyzing demographic data on member stores to facilitate “customizing retail to match local needs and preferences,” Parkinson said. This is a formidable task, given Associated's 450 retail members in six states: Utah, Idaho, Colorado, Montana, Wyoming and Nevada. Associated also operates 23 corporate stores and supplies about 150 retailers who are not co-op members.
'SOURCES OF GRATIFICATION'
Combined with a pleasing, comfortable store atmosphere, demographics-based market segmentation can potentially be used to merchandise stores that satisfy customers' human need for acceptance and validation, said Parkinson. Such stores can be “sources of gratification” for customers where they repeatedly shop to the point of “bringing their friends,” he added.
Associated has been collecting demographic and other census-based information — including age, income, household size and ethnicity — to develop customized merchandising schemes that retailers will use to replace traditional, standardized formats.
Store-specific merchandising will entail “a lot more work,” Parkinson told SN, but will pay off well in increased sales. Customized merchandising actually reflects a simple retail axiom “to give the people what they want,” he said.
This year Associated will launch localized merchandising through its corporate stores, with plans to offer it by next year to the entire membership. An 18-member implementation team has been assembled to provide counsel and advice as stores make the transition from standardized to customized merchandising.
Parkinson believes independents are inherently well-suited for localized merchandising because they are “locally owned and community-involved to begin with.” He also cited their “passionate, entrepreneurial spirit,” expressed through their flexibility “to change course on a dime.”
For the 53-week 2007 fiscal year ending March 31, 2007, Associated turned in a “very good” performance, Parkinson told members. Consolidated sales rose 6% to $1.523 billion, up from fiscal 2006's $1.436 billion. Included in this figure are corporate (ARS) sales, which rose 5% from $473 million in fiscal 2006 to $498 million. Corporate sales account for about 33% of total Associated volume. This past year Parkinson stepped down as ARS president. The post was assumed by David Wirthlin, formerly ARS vice president of finance.
Retained earnings, which derive primarily from corporate stores, totaled $81.4 million, up 23% from the previous year's $66.4 million. Along with $23 million in Class C common stock, Associated uses retained earnings as its source of investment capital. Patronage allocation to non-corporate member stores was $30.7 million, up 7.3% from the previous year's $28.6 million.