The document discusses trends affecting startup food co-ops opening in recent years. It finds that while 76% of startups opening 2008-2017 remained open, only 72% of startups opening recently have remained open, indicating tougher odds. Common reasons for startup failures include poor location, undercapitalization, and reliance on owner labor over professional staff. Emerging challenges include higher capital needs, more conservative market studies, an end to soft openings, and increased importance of branding and marketing. While trends like delivery and online ordering show promise for established co-ops, startups should focus first on opening a successful brick-and-mortar store before pursuing such innovations. Overall the environment is tougher but startups can still succeed with
3. Why do startups fail?
We’ve studied our data on the closed startups twice now, in 2012 and 2017, and the reasons were consistent:
Poor location.
Too small for the
market. Inadequate
parking.
Under-capitalized.
Cut corners,
underestimated costs.
Pushed Timeline.
Moved forward too fast
with too few owners. Not
enough community
awareness and buy in.
Reliant on Owner
Labor.
Professional, trained
staff are a must to meet
customer expectations,
competently run the
store.
5. What are the odds ?
2008 - 2017
76%Of startups that
opened were still
open.
As of 2019
Of startups that
opened are still
open.
72%
6. It’s a little less sunny.
And it’s NOT all gloom and doom, but you have to know the odds and factors.
Then we’ll get to the sunshine stuff!
7. Recent Closures
Startups that closed in the last two years, some key reasons why.
Closed
Startup #1
Biggest reasons:
LOCATION
Going First
Closed
Startup #2
Biggest reasons:
LOCATION
Going First
Board Muscle
Owner Connection
Closed
Startup #3
Biggest reasons:
Market Study
Marketing
Location
GM Talent
New Model
Closed
Startup #4
Biggest reasons:
LOCATION
Location
Location
8. Struggling Recent Opens
Startups that opened in the last two years that are way under on sales, some key reasons why.
Startup #1
Biggest reasons:
poor store design
Weak Board
Very Soft Opening
GM talent
Startup #2
Biggest reasons:
Market Study Execution
Board Dysfunction
Marketing
Owner Connection
GM Talent
Location
Green Top FC
Biggest reasons:
last minute competition
Marketing
Soft Opening
Visibility
Startup #4
Biggest reasons:
Market Study Execution
Weak Board
GM Talent
Marketing
Weak Board
Visibility
STRONG,
HEALTHY BOARD
9. New storm fronts to
be aware of:
Capital
Market Studies
No Soft Openings
Marketing
10. Capital:
Be weather prepared!
• Expect to need to raise more from owners –
Fredericksburg/$1.8 million, Prairie/$2 million
• Court multiple lenders
• Grants – you won’t get there without them, period. Go
after them earlier, harder, get a fiscal sponsor
• Cooperative lenders are lending less to startups across
the country
• Collateral – a bigger and bigger issue. Understand it.
• Costs continue to go up – trade issues driving up
prices. Don’t go low on equipment/build out costs!
11. Market Studies:
Be weather prepared!
• Use our Market Study Action Guide process, identify
assumptions, know them, adjust if not meeting them
• Interview the providers in depth, make sure they truly
understand your plan/community, pick for fit
• Preliminary market studies are a MUST in stage 1/early 2A,
don’t wait, know what you are up against
• We cannot currently recommend using any but the “big
two” as others have been far more off or are unproven
• There’s less room to wiggle, you must meet the assumptions
laid out OR prepare for less sales
• Market study providers are getting *far* more conservative, it’s
going to impact your pro forma
• More variability between results from trusted providers
12. NO Soft Openings:
Be weather prepared!
• Set the expectation – the GM needs to know coming in that
a soft opening is not acceptable and plan for it; share with
the the FCI memo
• Budget for it – don’t cut opening staff budget, ever. Plan for
the time needed to do it right.
• Opening Day = Grand Opening – be ready to “kill it” the first
day open to the public
• We use to do a “soft opening” and the perfect/finish the store
until grand opening
• New trends – less chances to impress a shopper “1-2 shopping
trips”
• Consumer expectations are up, willingness to shop down; yes,
even core cooperators
13. Brand/Marketing:
Be weather prepared!
• Court owners too – bring them along during construction,
do targeted marketing to get them excited
• Budget for it – don’t cut opening marketing budget, ever.
Spend every dollar, strategically.
• Retail branding – get professional help making the transition
from startup branding to retail store branding, invest in
branding the store exterior and interior
• Marketing Plan – must have a strong one, invest in it
• We used to assume owners would show up without being
courted, not true anymore
• Weak marketing can be corrected for, but it’s a short window
and the lost sales will hurt for years
• Brand recognition is WAY UP as a factor with all shoppers and
you don’t have it, you need a strong brand at opening!
16. The trends reality:
On-line shopping
Delivery
Meal kits
Large, urban-density,
established co-ops
are starting to see
success.
Large co-ops with
commissary kitchens
are working out the
kinks of this idea
now.
17. Focus on opening your cooperative grocery store –
it will take all your resources!
• If you want a successful retail grocery co-op, focus on opening in the right
location, with the right product mix, with the right leadership - that’ll take all
you have for at least the first two years, even if things go great.
• Your startup will be small to medium volume, you will not have the volume, in
the beginning, to support these trends; you could in the future
• As established co-ops with resources work out the kinks in these trends you
can adopt what’s working, let them do the R&D while you learn to be a solid
grocery store for your community!
18. Yes, it’s getting tougher to open startup food co-ops than it once was,
and not all startups will or should go forward.
But many still will get open – and innovate, and lead!