Case Study: Addressing Competition and Growth with Trade Area Analysis

Case Study: Addressing Competition and Growth with Trade Area Analysis

Columinate | 30-11-2009

toad-laneDavis Food Co-op
Year founded: 1972
Number of members: 9,000
Number of employees: 130
Retail square feet:15,000
Equity investment:$300 per household

The Davis Food Co-op has long been a grocery store mainstay of its California community — a place driven by highly educated people working for the university or local government agencies. They’re a rather homogenous group of baby boomers, students and townies. The city of Davis has adopted “no-growth” policies, so most development takes place as infill to the city, rather than as expansion. Residents tend to like it that way, even if their decisions mean real-estate costs are unusually high. The city’s surrounding geography, a big river, a flood plain, and two highways, contribute to the sense that the 25,000 households in Davis are a contained community.

The co-op’s general manager, Eric Stromberg, has been with the co-op for a decade and feels like he has a deep understanding of the co-op’s customer base as well as the greater geographic area. He places a lot of value on this information, and considers it his competitive advantage. He continues to commission regular research, like CAT surveys and demographic and psychographic info, because as much as Davis is “static,” he believes there are still ways to close the gap in more consumers choosing the food co-op as their primary grocery store. “We want to build top-of-mind awareness that we are the place for natural foods,” Stromberg said. Not only that, a lot is also changing in terms of social attitudes and the economy.

“We use the data to set specific goals,” Stromberg said, and these include targeting certain zip codes and demographics, as well as determining what techniques and language the co-op uses to communicate with different groups. One of the big changes in Davis in recent years is how the 18-24 year old student population has sought out the co-op. “Our last CAT survey showed us a real increase in shoppers and dollars spent per shopper in the campus area,” Stromberg said.

Prior to those results, their CAT survey from four years ago showed a big gap in sales to campus areas, and now they know their efforts at outreach to students was working. Validating the decision to close the gap in sales to student populations was information Stromberg also gained from reading trade journals, and learning that the age group was resonating with messages of sustainability. “Now we do a lot of outreach to campus groups and events, and sponsor the campus farmers’ market,” he said. It also might sound amusing, but having the city’s best beer selection was also a conscious choice, based on the research. “We can use it as another opportunity to talk about local production and co-op values,” Stromberg said.

“Having this kind of knowledge gives me comfort and confidence. Sometimes marketing can seem like a crapshoot. This gives me real specific data. I feel like I know who I am talking to,” Stromberg said. He added that because concern for community is one of the co-op principles, doing research that gives you a better understanding of it is imperative. “If we’re not reading the community effectively, how can we change or manage our approach to it?”

Like other retailers around the country, the food co-op is facing increasing competition. Trader Joes is planning to open a store near campus next year. The activities of the last four years in those student areas have strengthened their position because they did their homework early and made inroads into the university as a partner.

They’ve also done other things to prepare, including a store renovation and undertaking research of areas that the co-op shows strength and weaknesses against such a competitor. “We have to find those people who have a high interest in what we’re doing and show them we can meet their needs,” Stromberg said.

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