Tuesday, August 28, 2007

Dishing on the Co-op

Discussion on HPP of late has centered on groceries, supermarkets, and how the Hyde Park Co-op got itself into the mess it's currently in on 47th, 53rd, and 55th Streets. A recent meeting of the Co-Op Board (Monday, August 27), which had the electronic rumor-mills of the Golden Rectangle abuzz with speculation about a University-led restructuring, turned out to be only the guilty fantasy of old-time die-hards who know in their heart-of-hearts that it's time to take old Bess out behind the shed. But lo, the University landlord would not perform the mercy-killing, at least not this time. Though the Co-op owes its landlord some $800,000 in back rent, the University would continue to "work with it."

Thinking some background and a few facts were in order, I did a little digging and came up with the following, courtesy of Crain's Chicago Business.

According to a Crain's article of July, 2004 ("Lean times at Hyde Park Co-op," Julie Jargon, August 9, 2004), the decision to go into the 47th St. location was a preemptive move to stave off potential competition.

The non-profit Co-op gave into a decidedly monopolistic impulse, snapping up a nearby store space a few years back to block a potential competitor from entering its turf. Costs went up. And now Hyde Park's only full-service grocery store is struggling to hold onto customers and keep its shelves stocked at both locations — some say because it's competing with itself...

But was there really ever any turf to defend on 47th St. in the first place? And even if so, was it good business sense to block competition by expanding operations into an unproven market, rather than improving the core business? The article cites a former Board member on the rationale for expansion.

When a new shopping center was proposed for East 47th Street in the nearby North Kenwood-Oakland neighborhood, [Lake Park Pointe Shopping Center at 47th and Lake Park] "the board and the manager thought that if another grocery store went in there, it would hurt the Co-op, so they felt they had to get a lease," Mr. Orlikoff recalls.

We know what the results were. Instead of two supermarkets in healthy competition, we have one on the verge of death.

Today [2004], the Co-op is working to refinance its debt and lure back shoppers. Co-op staffer Ernie Griffin says that as of June, membership data showed roughly 16,000 members hadn't shopped at the Co-op in the previous six months. Mr. Cooley, the Co-op board member, confirms that customer traffic has dropped, but couldn't provide specific numbers.

That number is roughly half the membership in the Co-op -- and certainly more than the number of professors likely to be on sabbatical at any one time. While the then Board president attributed the drop in sales to competition from local convenience stores selling a few cabbages on the side, a suburban food-retail consultant puts it all in proper perspective. "Consumers are more price-sensitive now, and I wouldn't be surprised if Hyde Park residents are driving long distances to other stores with expanded variety."

When you insist on local business, you're stuck with local talent. In the case of major commercial operations run by committee, that, as we now know, can be a major problem.


Elizabeth Fama said...

A couple of years ago I decided to pull out our Co-Op "shares" because I don't shop there anymore, and I wanted to convey my disappointment in some tangible way.

The customer service fellow told me that it would take up to 18 months to receive my $300 (which it did). He explained they had a special account for that, and it was a year and a half in arrears.

I don't know why, but the whole thing reminded me of the scene in It's a Wonderful Life when there's a run on the Building and Loan and the customer says to George Bailey, "I've got two hundred and forty two dollars in here, and two hundred and forty-two dollars isn't going to break anybody."

My three hundred dollars apparently didn't break the Co-Op, though I half thought it might.

SR said...

I think a lot of carless people are using Peapod. The other newish factor is the I-Go cars. My husband and a friend of mine actually found it economical for a while to take an I-Go car together up to the nearest Jewel every couple of weeks. It pays for itself if you’re doing a big enough shop and taking advantage of sales. (It requires deep pockets though, to be able buy enough at once to make it worthwhile; said friend is currently between jobs so I-Go is off for now, and we’re back to Peapod).

Even so, I end up dropping by the Coop every few weeks or so for emergency items that can’t be found at Village Foods or HP Produce, so I’m still showing up as a shopping member on their books. I wonder how often they purge them? (U of C students often buy memberships; how long after they leave the neighborhood do they stay on the membership rolls, I wonder?) One should never underestimate the impact of terrible mismanagement on the Coop’s affairs.

Speaking of which, I did some Googling around of my own trying to figure out the origins of the 47th St. debacle, and found the archive about the Coop at the HPKCC. I found a summary of an “October 25 2006 HPKCC independent forum on the Future of the Co-op”, in which one person commented “the Coop stayed open during the scanner crisis even though it was losing $80,000/week. Dominic[k']s would have let its customers and employees hang, but the Coop didn't,” apparently unaware that Dominicks or any other real for-profit business probably would have sorted out the computer problem in a couple of days rather than weeks. From the point of view of a customer, it was just another instance of the Coop expecting you to suck it up, because what choice did you have? (Except now we do: Thanks, Peapod.)

I’m not sure I’m convinced that a Jewel or Dominicks couldn’t have made a go of it in the same space. I thought the major problems with the 47th St. store was that it 1) had all the problems of the main store (higher prices and lower quality than most chain groceries) and 2) deliberately tried to go upscale. I was only up there a couple of times, but I remember being amazed at how much floor space was devoted to high-end (but still not very good) prepared foods like sushi. Not enough rich people in those nearby condos to support it out of convenience, too expensive for lower-income residents nearby, who probably mostly continued to shop at Village Foods, no reason at all for a carless person like me to make a trip up there with a rolly-cart, and no reason for people with cars not to keep right on driving up to the South Loop.

It probably would take a massive bribe (in the form of reduced rent) to get a chain grocery store to move in there, but I bet one would do okay once it was there.

curtsy said...

As for the "massive bribe", are you suggesting that all a major grocery chain would need is to be SUBSIDIZED in order to be successful at 47th Street? The logic here has my head spinning. I thought this was the First Church of the Free and Unfettered Market!