by Kirsten Moore, Cooperative Services Director
The Co-op (including our employees, customers, and community) enters the New Year continuing to bear the physical, emotional, and financial stresses that come with the coronavirus pandemic. As General Manager Anya Firszt mentioned in the December Reader, “I don’t know one business that is not struggling in some manner because of COVID-19.” Recently, the Greater Madison Chamber of Commerce, Destination Madison, Downtown Madison, Inc., the Madison Black Chamber of Commerce, and the Latino Chamber of Commerce surveyed 503 Madison area businesses (including the Co-op) about COVID-19’s impact. 78% reported a decline in revenue, 30% reported losing more than half their revenue since the beginning of the pandemic, 91% reported reducing their local spending, over a dozen respondents closed this year, and 30% say they expect to close by June under existing regulations. Only 13% rated Dane County’s business climate as above average or excellent compared to 81% pre-pandemic. The outlook is not great: local businesses as well as their customers and all of us in the workforce continue to feel the heat.
Financial Struggles Related to Pandemic at the Co-op
It’s no secret that the pandemic has had a negative effect on the Co-op’s financial outlook. Last month, our Board of Directors’ Vice President Ann Hoyt reminded Owners of our Fiscal Year (FY) 2020 Annual Report showing losses 91% greater than budgeted due to reduced sales and increased expenses related to COVID-19. In the same issue of the Reader, Finance Director Paige Wickline noted our FY 2021 sales projections (made in spring of 2020) were “based on the assumption that COVID-19 would continue to suppress sales in the first quarter and then slowly increase back to pre-COVID-19 levels.” Now at the end of our second quarter in December, we have seen little improvement in the road to pandemic recovery. To the contrary, all the same health concerns and safety regulations remain in place today. While we continue to support the County’s recovery plan, it still results in negative sales growth and transactions. Our gross margin, or as Paige defined it, “the percent of sales remaining after subtracting the cost of goods sold,” remains down from the previous year and is not making ends meet. While we continue to manage labor to sales as best as possible, it simply costs more to do the work that is necessary to sell groceries and serve our community in pandemic times.
Ann noted the Co-op is responsible to “consider the needs of a variety of people who have a stake in the success of our cooperative,” including our “Owners, customers, employees, suppliers, the community, the government, and the employee Union.” This means we have some tough decisions to make with regard to competing stakeholder needs, and we must evaluate how the advantages of cooperation and the burdens of the pandemic (with the financial strife that comes along with it) are spread among our Co-op community.
Monthly 10% Off Wellness Program Suspended Starting February 2021
Pre-pandemic, your Co-op offered Wellness Wednesday as an Owner benefit. The idea was simple: On the first Wednesday of every month, Owners would receive 10% off on bodycare products and supplements. This benefit was a win-win for your Co-op: Owners would get an opportunity to enjoy a discount and, because Owners would often stock up, transactions and sales at the Co-op would always be up on Wellness Wednesdays. The efficiencies in offering this discount and giving these products a lot of visibility one day a month supported our labor, largely paid for the discount, and provided a head start to our achieving your Co-op’s monthly projected sales.
We realized early in the pandemic that offering a promotion that increased foot traffic at the Co-op on one given day would make it harder to keep social distance and therefore make that shopping day less safe for our employees and customers. It would also create a burden for our customers who would likely have to wait longer in line due to the building capacity restrictions in place. So, we tried something new: the 10% off Any Day Wellness Coupon—a virtual coupon that Owners could choose to use any one day a month on bodycare products and supplements. Previously, we were able to offer these a few times a year, but we were unsure whether we could sustain offering the virtual coupon month after month all year long.
On one hand, this coupon had the desired effect: we were continuing to offer an Owner benefit without driving traffic to one day a month and risking safety to do so. On the other hand, providing the coupon to use any day of the month has resulted in no sales boost, and no incentive to stock up. That means that instead of benefiting from the efficiency of greater sales during a promotion, your Co-op is actually seeing regular income loss by offering this coupon.
We need to make a tough decision, and suspend the monthly 10% off wellness program until further notice. The January 2021 Wellness Any Day Coupon will be the last one offered, and is an opportunity for you to stock up for the New Year (that “win-win” that I mentioned above—you get more products at a discounted price and we see a needed boost in sales). The benefit will remain suspended until we begin to see an economic recovery, at which time we will evaluate if and how we can bring this or another wellness benefit back for our Owners to enjoy.
Changes to E-Commerce Pricing
Our online shopping and delivery service, as previously reported, has grown tremendously through the pandemic, and has reached its maximum capacity with existing resources. At the same time, we have been unable to consistently meet demand, resulting in longer waits to receive delivery and pickup timeslots. In order to increase delivery and pickup capacity in the future, we have to improve our financial ability to add labor. Therefore, we had to reevaluate our pricing structure.
The delivery and pickup fee for using shop.willystreet.coop will remain the same as it has always been. The flat fee covers your Co-op’s capital investments and costs associated with the program: gas, mileage, vehicle wear and tear, and the costs of the shopping website’s maintenance, development, and improvements. The Access Discount for Owners with low income will also still apply to both the delivery and pickup fees, as well as the Owner’s purchases.
While the delivery and pickup fee is the same as it ever was, we have re-evaluated product pricing on the website based on the labor it takes to provide those products to customers using the service. There is a difference between the amount of labor it takes to stock groceries to a shelf so that a customer can find those products in the store themselves for purchase versus the amount of labor it takes for an employee to gather those products for the customer to receive at the customer service desk, in the parking lot, or at home. In addition to stocking and prepping products, employees are shopping the products for the customers and bringing it to the customer, which means it is more expensive for the Co-op to offer the program than to have shoppers shopping in-store. Therefore, the margin for a product purchased in store vs. the margin for a product to be shopped by an employee for pickup or delivery needs to be greater to cover the work involved. That means that as soon as we are able, we will be applying a higher margin on products available on shop.willystreet.coop (and the price for a product in the store may be different than how it is priced online). Products that are part of the Co+op Basics, Co+op Deals, or Owner Rewards promotions, as well as online donations made to Double Dollars or Community Shares of Wisconsin, will be exempt from additional margin on online purchases. The higher margin is designed to reflect the true cost of our online pickup and delivery shopping service, and therefore—along with improving the efficiency of our process—it will provide us with the means to add additional labor and grow the capacity for the program (meaning eventually more pickup and delivery spots for you). We will continue to monitor and adjust the margin applied to regularly priced products offered on the website based on labor efficiencies gained as we finesse the program.
SNAP Use and Double Dollars Participation on the Rise, Needs Community Support
Double Dollars is a nutrition incentive program that offers matching vouchers for participants in the Federal Supplemental Nutrition Assistance Program (SNAP, or FoodShare/QUEST as it is known in Wisconsin) who use their SNAP EBT card at the Co-op and participating local farmers’ markets. We have been providing these vouchers in partnership with Dane County, the City of Madison, and Community Action Coalition for South Central Wisconsin. The vouchers support shoppers with low income in making their food budgets stretch further, and the vouchers are eligible for use at the Co-op on any fresh, frozen or canned produce as well as seeds and seedlings for growing edible plants. In the last four years, the Co-op has not seen any major changes to participation in the program, we typically issue and redeem the same number of vouchers year-to-year. This year, with an estimated 10,000 more SNAP benefits participants in Dane County due to the economic fallout of the COVID-19 pandemic, the Co-op is already seeing record-breaking participation in the program, with a projected 26% increase in Double Dollars spending.
Double Dollars is funded by the Co-op in two ways: by accepting cash donations at the registers and on our shop.willystreet.coop online shopping platform; and when customers reuse shopping bags, we give 10¢ to the Double Dollars fund. Typically, about 71% of the funding for Double Dollars was supported by shoppers reusing bags at checkout in normal, non-pandemic years. Reusing shopping bags is not only good for the environment, but also good for your Co-op, because we can use the money we would normally spend on paper bags for the betterment of our community, such as sustaining the Double Dollars program. However, at the beginning of the pandemic and based on the government recommendations and restrictions at the time, the Co-op ceased allowing reusable bags from the end of March through the middle of September. Since then, reuse of shopping bags has been down about 74%, likely due to continued fears of surface transmission (perpetuated by early pandemic warnings causing mixed messaging in the community), and simply loss of habit. While cash support has increased since the start of the pandemic due to the generosity of shoppers, it has not been able to bridge the gap compared to the loss of reusable bag use. As such, for the first time since the program began, we are projecting a potential budget shortfall for the Co-op arm of the Double Dollars program.
You can still support Double Dollars by making donations at the registers, on our online shopping and delivery service, and by reusing bags when you shop the Co-op. Every little bit makes a difference and we still have time to turn things around for this year. A $5 donation is the equivalent of one Double Dollars voucher. It is clear that those in our community who rely on SNAP also depend on Double Dollars at both the Co-op and the local farmers markets to meet their household food budgets. With more people needing SNAP and Double Dollars to make ends meet, please consider participating in the Double Dollars fund today!
Facing Challenges Together
It is hard to make changes and deliver news like this to our cooperative community, and harder still to know that not only our Co-op is facing challenges, but there are also people in the community struggling both with the health and fiscal outcomes of the pandemic in their everyday lives. Working as a community, we can face these challenges together, by supporting our local businesses and giving to charitable causes when we are able to do so, and by continuing to hold each other accountable for our collective safety and wellness. Wishing all of us here at the Co-op and in the community a stronger, safer, and hopefully simpler and brighter 2021. We are eager to see things turn around, and are committed to a greater cooperative future.