Earlier this year we reported on Patrick Shabram’s deep data drive—market analysis that supports co-op startups and expansions (it’s available in the Columinate online Library). Expanding on that theme, I recently spoke again with Shabram, who discussed some of the key elements of market studies and noted his collaboration with key cooperative allies.

Shabram is a Columinate member, working mostly from home. He also is a professor at Front Range Community College in Loveland, Colorado, where he enjoys the students, contact with professional colleagues, and the benefit of healthcare coverage. Within Columinate, Shabram says he especially appreciates being able to refer co-ops to other consultants who have specific skills and services beyond what he provides. He also appreciates reciprocal recognition and referrals for his market studies.

Shabram’s market-study clients frequently also benefit from the follow-up development of pro forma financials by Columinate’s Sarah Lebherz (whose financial consulting work we will soon profile separately).

Currently, Shabram’s work with co-ops is divided roughly sixty percent with startup co-ops and forty percent with expansions or relocations of existing stores. Whatever the scenario, Shabram states he is dedicated to providing accurate numbers that support informed decisions. We discussed key elements of market studies.

Trade area

A deep understanding of a store’s trade area, whether for a startup or expansion of an existing co-op, is essential. The trade area defines the source of 65 to 85 percent of store sales, or even more in a small market. It will measure the sales potential by grocery segment or department and may suggest some product line decisions; for example, are a good selection of conventional foods at lower prices points important in this trade area, or would the area be better served by a natural foods co-op? The market study will enable close comparison, based on census tract data, with stores having similar demographic data and other key market characteristics, such as income, educational attainment, traffic, and growth trends. The study of potential grocery sales in the trade area should precede and be the basis for sound financial projections in the pro formas.

Competition analysis

The impact of competitor stores in the trade area will depend on several factors including their proximity and relative location along access points as well as their sales in the new store’s anticipated grocery categories. Sometimes the impact may be counterintuitive. For example, if nearby supermarkets carry a good supply of natural/organic products, that may indicate more market potential rather than too much competition for a natural foods co-op. A co-op may be able to offer more selection and better service in those segments. A competition analysis will offer insight on price points and product mix in the trade area. It will indicate which geographic areas offer the most promise for customers, and which competitor stores are “interceptors” that limit the number of customers from further away in that direction.

Feasibility and risk

Market studies reduce risk and clarify next steps. Ambitions and projections for the new or expanded co-op must be supported by careful analysis of a store’s potential and its market limits. Shabram must at the same time maintain professional caution in making recommendations. He describes his market studies as the “front end” of feasibility analysis, providing local leaders with a foundation for the pro formas and strategic financial decisions.

Compared to startups, existing co-ops that propose expansion and want to understand their market potential better have more of their own data on which to base their decisions. The co-op’s information might be revealed through a CAT survey—Customer/Address/Transaction—detailing sales distribution within the store’s market that will help inform the market analysis.

Market studies for startups must of course rely on data from other stores, but the study nevertheless is crucial in providing local planners with the grounds for realistic expectations. And if the proposed store site changes from the store’s location in an earlier study, an update to the market study is needed—but updated studies are often quicker and less costly.

With existing co-ops, Shabram frequently has consulting relations extending over several years, but typically only for a few weeks at great intervals. Yet these return engagements are rewarding and can allow helpful familiarity and stronger collaboration with the local co-op.

Shabram has several key organizational allies in his work. He has worked with Debbie Suassuna for many years and continues to work under both the G2G and Columinate monikers. He also has collaborated on market studies with National Co+op Grocers on several occasions.

For his work with startup co-ops, Food Co-op Initiative (FCI) is a key partner. He frequently will provide startups with preliminary or ballpark estimates on potential sales; this may be followed later with a full market study, and sometimes an update to the study. Shabram recently was an online presenter on the online free series, “FCI Live!”—sharing his in-depth knowledge of understanding your market.

For people attending the May 28-30 CCMA conference in Tacoma, Patrick will be present—you can reach him at patrickshabram@columinate.coop or through the conference online network.