PROGRAM ASSOCIATED WHOLESALE GROCERS 2014 Gravitec Store Location Conference Presented by AWG Real...

PROGRAM

ASSOCIATED WHOLESALE GROCERS

2014 Gravitec Store Location Conference

Presented by AWG Real Estate Department

ABOUT AWG

• 2nd largest retailer-owned grocery cooperative• Headquartered in Kansas City, KS

• Fort Worth, TX• Kansas City, KS• Oklahoma City, OK• Pearl River, LA (Gulf Coast)• Southaven, MS (Memphis)• Springfield, MO• Goodlettsville, TN (Nashville)

NOTABLE AWG RETAILERS

HISTORY OF CASH SAVER

• 1958 Cost Plus World Market

• 1988 Food Depot Cost Plus, Conyers, GA

• The first AWG-supplied Cost Plus was Froogel’s, Biloxi, MS

CASH SAVER

• Store concept/format developed in the Memphis Division in early 2010

• Project image of value/savings (COGS + 10%) • Fresh, high quality perishables• Convenient store layout and front-end operation• Clean, friendly, contemporary conditions and décor• High merchandising and operational standards• Variety - SKUs

CASH SAVER PROGRAM

• Due to increasing competition, the great recession and the need to develop

a turn-key program for our underperforming stores that faced closure• Gary Jennings, AWG Memphis Division, developed the Cash Saver program

• Design/Decor

• Operational standards

• Training

• Merchandising recommendation

• Advertising support

• Dedicated support team to manage format conversion and post openings

WHAT IS “COST”?Cost of Goods

+Freight (zone)

+Markup %

=Shelf price (cost)

PROFORMA HIGHLIGHTS• Sales increase: Year 1 = 30%+

Years 2-3 = 10%+• Gross margin = 17.0 – 18.4% before

patronage and includes 10% at the register

• Payroll = 6.5 - 8.5%• Rent target = 1.5% or less• Advertising = .35% or less• Supplies = 1.1 - 1.3%

• Stores are freestanding or strip

• Range from 20,000 to 50,000 square feet

• No bakery/deli

• $30,000 to $50,000 to convert• Décor• Paint• Signage – hard and soft

CASH SAVER OPERATIONS

BEST SUCCESS STORY

Memphis division has been fortunate to have all but one location be successful. Really the best success story is the fact that 5 of these locations probably would have been closed. Of the 5 stores mentioned, our Midtown Memphis location has had a 325% increase over 4 years. Gulf Coast identified one of their recently converted Cash Savers recently converted has had a 100% increase with AGBR retailers next to the location and a Walmart less than 10 miles away.

WHAT IS THE SUCCESS RATE?WHY DO SOME NOT WORK?

Success rate is really high. Not everyone has the rate of increases as the examples mentioned but the majority do have double digit increases.Most of successful retailers have bought into program. Stayed true to program markups…kept it simple Negotiated a working lease Controlled all expenses / payroll Better understanding how to buy and bridge deal product Changed mindset from services and conditions to low price and fully stocked store Discontinue or reduce advertising while growing sales

OTHER NAMES UNDER THE “COST PLUS” FORMAT

• Memphis…Foodwise and Gordin’s Butcher Shop

• Gulf Coast…Simoneaude’s Cost Pluls, Food 4 Less, Pic N Sav, Cost Plus, Food Champs, Grocery Advantage, Mizer’s Budget Saver, Froogel’s

CASH SAVER LOCATIONSLicensed areas for more than 130+ stores:• Alabama• Arkansas• Florida• Illinois• Indiana

10

• Kansas • Kentucky• Louisiana• Missouri• Mississippi

• Ohio• Oklahoma• Tennessee• Texas

STORE/SITE CHARACTERISTICS

• Cash Savers can either be new market entries or conversions of underperforming conventionals

• New market entries are usually housed in second-use retail facilities

• Majority of stores operate under the Cash Saver banner although there are additional names in use (i.e., Froogel’s, Mizer’s, Price Less Foods)

• Box sizes and offerings vary by location• All “Cash Savers” have a standardized exterior and

interior decor

AWG ASSISTANCE• Store development/real estate/market

research functionsStore engineering, fixture layout and equipment procurement

Exterior/interior decor and signageFinancingEmployee training• AdvertisingRetail pricing maintenanceSystems upgrades•Ongoing retail support

• Find sites (new stores)• Conduct Customer Origin Studies

(conversion stores)• Define trade areas• Define current and future customer population bases• Understand trade area customer

demographics• Assess the competition• Develop sales projections based on size and location• Assist retailers in making an informed decisions

AWG MARKET ANALYSIS

• Cash Saver primary trade areas are typically larger than conventional store primary trade areas• 3-mile urban radius• 5+-mile rural radius

• Conversion stores require a Customer Origin Study

• Retailers vary by performance and acceptance (images typical range between 90 and 110)

• Pulling powers of Cash Savers can have up to a 10-point advantage

SALES FORECASTING

RESULTS• Does not work everywhere!• Retailers must adhere to strict operating

standards• 100% sales increase in select areas for some

operators

QUESTIONS?