Case Study: Building a New Equity Strategy

 

 

Lexington Cooperative Market
Buffalo, N.Y.

Year founded: 1971
Equity requirement: $80
Number of members: 10,000
Number of employees: 90
Retail square footage: 4,500

About a decade ago, when the Lexington Cooperative Market was looking to expand, it realized that membership was low for a co-op that was almost 30 years old (600) and that member benefits were out of whack.

It was time to overhaul the benefit system and give new member recruitment a jump-start. It turned out that doing this did more than just provide better-looking numbers. It has incalculably changed the co-op’s “capital culture.”

Lexington realized what a lot of co-ops have learned. Discounts at the cash register are not as attractive to members as had once been supposed, and that they have a deleterious effect on the bottom line. They decided that they wanted to change their benefits to being exciting for owners, sustainable for the co-op, and equitable for both. As the co-op leadership worked to address this issue, they made a simple and effective three-point plan to make membership more beneficial:

  • Improve customer service levels to reach “phenomenal.”
  • Simplify and consistently use the membership pitch.
  • Emphasize the benefits of the patronage dividend system.

tim-lexington-vTim Bartlett, the co-op’s general manager, said it doesn’t have to be complicated. “A lot of owners, shopping often, is our model,” he said.

When people are willing to invest in the co-op, either as a member or a lender, they are taking their connection to the co-op to the next level. “We had to do a lot of education regarding ownership, that’s it’s a different kind of relationship,” Bartlett said. The result is that membership went up as did the co-op’s retained patronage. “Internally it changed things,” he said. “Retained patronage works like magic. Our equity position has grown so much over the last five years,” he said. “Our equity strategy ties in with our business strategy which is to get a lot of people involved. Higher equity also helps us reduce the need for outside debt.”

When Lexington did their loan drive for the expansion, the work they’d put into reframing ownership and changing member benefits also contributed to that campaign’s success. “It was such a powerful momentum generator. It weaves the whole co-op together in this venture,” Bartlett said. “The membership is clearly coming forward with their support of the co-op.”

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By |March 9th, 2014|Categories: Solutions|Tags: , |

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