How Greg Parker reached negative CPG break-even—and what's stopping you.
The best convenience operators need to generate an average of 6 cents per gallon (CPG) for the business to break even. The industry’s least competitive locations need almost 2.5 times that, or 14.4 cents.
Greg Parker pays his bills on a negative CPG break-even—a double-digit negative CPG.
His stores are among the most profitable in the industry, and often, according to at least one established metric, the most profitable.
CSX, a data-analysis firm that NACS acquired in 2008, takes in monthly data from 130 c-store companies and consistently puts Parker and his 21 Savannah, Ga.-area stores at the top of the pack.
In other words, he’s not just top quartile—he’s typically in the top quartile of the top quartile.
What makes his performance even more compelling is what’s missing from the sample, namely the tens of thousands of operators who won’t or can’t provide the convenience-industry association with the necessary numbers on a timely basis, potentially eliminating the channel’s poorest performers.
How does Parker do it?
The easy assumption is foodservice, based on his marquee Parker’s Market a 6,000-square-foot, Mediterraneaninspired jewel featuring imported cheeses, deli goods, jambalaya, sandwich wraps and elegant pastries. In the heart of the city’s sultry historic district of courtyards, monuments and hanging moss, the market does its fair share of flatbread sandwiches, deviled eggs and banana pudding. But as a format, it’s the only one in his chain. Foodservice is not his sole potion. In fact, Parker gets a bit peeved by the industry’s current infatuation with foodservice. “It’s a silver bullet,” he says. “It’s not the silver bullet.”
No, like Savannah itself, the chain’s old-world charm transforms as one drives away from the horse-drawn carriages and cobblestone streets, giving way to the clean, modern look of any contemporary city, suburban straightaway or high-volume c-store.
For Parker, the divining rod of profitability is a drive to increase margin and slash expenses. It’s a byproduct of what this gracious yet self-described “classic overachiever” says is a fear of failure.
“We didn’t have the money for [our first store] to fail,” he says of the retail journey he started in 1976. “I was terrified that it would not succeed.”
On a salary of $75 a week, he worked with no days off for three and a half years. Now almost three and a half decades and a data revolution later, that drive has become an obsession to turn almost every aspect of running a c-store into a number. With the help of technologies both current and pending, Parker boils everything down to its base digits: space to sales, per kilowatt hour usage, employee performance, customer satisfaction, the true profitability of a foodservice program.
In doing so, he shrugs off the lure of supplier slotting fees and other manufacturer product-to-shelf incentives.
“[The company is] not in it for a rebate program,” says Patrick NeSmith, area sales manager for McLane Co., Temple, Texas, and one of the many suppliers enamored with Parker. “They’re in it to grow their business. They know they’re going to make triple the rebate by putting in [what sells].”
During an exclusive interview with Parker, it becomes clear why his chain is elite among the c-store ranks, and why he is considered one of its visionaries.
- Embracing Convenience Retail: Parker understands the value of the cstore concept, especially in recessionary times. So he sells what customers expect but pushes profitability and expense reduction to the extreme.
- Employing Retail Metrics: Parker has figured out what the numbers are telling him and acts to influence them. Space to sales, space to gross-profit dollar, gross profit per labor hour, gross profit per labor dollar, CPG break-even are all urgent, fluid touchstones.
- An Aesthetic Appreciation: He uses store design, appearance, service and product assortment to set a standard of what the c-store experience should be. “Greg Parker is a student of convenience retailing,” says Dae Kim, NACS’ vice president of research. “He’s the guy who wants to get an A in every class. He sits in front, takes copious notes, is always prepared, raises his hand and asks questions. You know how some people sit in class but can’t figure out how it relates to their lives? Greg connects the dots.”
A BITTER PILL
Parker’s formula is a tough pill, plain and simple. For any retailer taking contract money, setting cookie-cutter plano- grams or ignoring advances in technology, doing what Parker does will mean a radical shift in thinking.
Consider the following tenets of Parker’s business:
- Plan-o-gram every store differently.
- Let scan data, not rebate money, guide store sets.
- Pare direct store deliveries (DSDs) to the bare minimum.
- Take scheduling out of the hands of managers.
- Calculate occupancy rental, utilities, maintenance and other hidden expenses into the true cost of a foodservice program
- Give customers wide aisles, clean lines and no clutter.
Appeal first and foremost to working moms. Getting to this point, of course, was a long road. Parker’s decision to forgo a career in law, business sessions taught by his fuel supplier and involvement in study groups composed of noncompeting retailers shaped the company’s vision.
For Parker, a critical piece was the study groups. Taking part in these gatherings allowed for comparisons, adding more meaning to his company’s numbers. Information from these groups would also evolve into CSX, which would ultimately bring added weight to NACS’ State of the Industry (SOI) data that Parker says had been “soft” in the past.
Now finishing up a four-year term as vice chairman of the NACS research committee and having been one of the lead presenters at the annual SOI meeting for the past five years, Parker has embraced the formulas and comparisons, allowing his business to evaluate labor expense, utilities and merchandise as they relate to the all-important gross-profit dollar.
“If you talk about people competing in tennis or golf, you have all these different [measures] that portend success,” says Parker, himself an accomplished tennis player. “But in business, it’s the numbers. [That’s] the blueprint for success.”
FIXATING ON GROSS PROFIT
Everything at Parker Cos. revolves around gross profit, both in dollars and margins. For merchandise, he considers space to gross profit. For utilities, it’s percentage of gross profit. For staff, it’s gross profit per labor hour and labor dollar.
“Once we knew what those [industry] benchmarks were, we wanted to beat those numbers,” says Brandon Hofmann, marketing manager for Parker Cos. “It made us better operators. We’re constantly hammering at expenses, growing all gross profit as much as we can and adapting the best ideas … that relate to us.”
NeSmith of McLane has seen the efforts firsthand. Parker, he says, reviews scan data and makes decisions on products based on profit per square foot. The company reviews two or three product categories a month, identifying items that make up the largest part of gross-profit dollars, eliminating slow movers and introducing promising new products.
“A lot of our customers are flat or negative [in category growth],” NeSmith says. “But [Parker] has been operating in the positive year to year.”
About three years ago, Parker introduced a space-management program that, based on movement data, determined how much space an item deserved. “The theory is not every store sells the exact same thing … and to customize stores in each area,” says Charlie Pearson, key account manager for Coca-Cola United, Savannah, who says Parker brought the program to their attention vs. the other way around. “It’s the state of the art of doing business.”
No two Parker locations have the same plan-o-gram, Hofmann says. In fact, two Parker locations across the street from each other have different assortments, with one more residential and the other more urban industrial.
As important as gross profit is, so is avoiding out-of-stocks, Hofmann says. If a product brings in the gross profit but also needs more space to avoid running out, then he allocates the space. For instance, many Parker stores have more facings of Red Bull, a high-margin energy drink, than what a space-tosales analysis calls for. That’s because it’s a high-profit item that can’t be out of stock. Technology allows Parker’s to truly address inventory challenges, says David Cason, sales manager for Southern Eagle Distributors, Savannah. He says Parker takes a “days on hand” approach. For instance, cigarette turnover is analyzed at 26.81 turns per year, which gives a road map for reorders. “Everything is by scan data, so you pull the number and set boxes up for a two-week supply, so there’s no out-ofstock and no overabundance,” Cason says. “In dealing with [Hofmann and Parker], they’re just so much further along with technology and research than any other c-stores [in the area].”
The individualism required for each store does mean more effort, suppliers admit. But, as Pearson says, “There’s no time to take a breather, but it’s a winwin. Parker Cos. is [all about] keeping inventory pretty close to what they’re going to sell.”
Almost in tandem, the flip side of selling is cutting expenses. Product costs, utilities and labor all fall under this frontier of opportunity.
What comes to mind first is the chain’s specialty and top-selling item: 79- cent fountain drinks with chewable ice. The company moves up to 1,200 cups of 32-ounce fountain drinks a day per store. From radio spots to billboards to ads wrapped around buses, the company has invested in this “hero” offer. Of course the margins are lower, says Hofmann, but “we’ve worked with cup prices, syrup contracts, proprietary brands” to create a winning equation.
It’s such a destination item that, “Customers will get very vocal if you run out of chewy ice,” according to Amy Lane, the company’s chief operating officer.
Utilities also have become a focus. Here the lesson was about finding the right question to ask. Parker says the company initially looked at utilities in terms of utility cost per location, but soon switched to looking at kilowatt usage per location. The move leveled out differences in regional pricing. He tested different energy-efficient lighting fixtures, insulation and equipment to measure the influence on gross profit.
Taking similar formulas, Parker addressed labor, using both sales and gross profit per labor hour as well as per labor dollar as measures. One of the company’s more tangible formulas involves transactions per hour. For the company, 55 transactions equal one customer service representative (CSR); 55 to 100 is two; and 100 and above is three.
To help affect employee metrics, he is deploying a point-of-sale (POS) program that prompts cashiers to upsell affinity and marketing-calendar items. The hardware-software system also analyzes sales generated by each individual cashier, measuring them based on sale-closure rates.
“Greg is an industry advocate,” says Doug Kruep, CEO and founder of LIFT Retail Marketing Technology Inc., Atlanta, which supplies the new upsell POS technology. “So he put us through a rigorous [pilot] with control and test stores to show proof. And he saw a sales increase in his stores, which were already very [profitable].”
Parker is working with software makers such as PeopleMatter, Charleston, S.C., to install an interactive evaluation system involving iPads, so customers can rate their experience while paying for items. He’s also working with them to develop what could be a national data- base of c-store workers, aiding in background checks and hiring challenges.
As part of the company’s immersion in technology, Lane says, managers are not allowed to schedule staff. That’s because the best cashiers would inevitably end up on that manager’s shift. The goal is to have the best people on during the right shifts, she says: “It’s our people in the stores who keep [customers] coming.”
TARGET: WORKING MOMS
For Parker, the best way to affect the numbers he watches so dutifully is to understand both sides of the counter— not only his employees, but customers as well.
For that reason, the typical Parker’s location is known for bright lighting, clean lines, open spaces and attention to landscaping. This, Parker says, is critical for the target demographic: working moms.
In his mind, working moms present a catch-all consumer group. “They’re time-starved; they have kids in the car; they want safety, cleanliness, ease of access and egress,” he says. “But men are also time-starved. They want a clean place [to shop], too.”
While Parker tweaks merchandise sets to accommodate what he describes as urban (upscale), suburban (grab and go) and rural demographics (sit and eat, socialize, having multiple needs), critically important is the proper use of space, even if it’s to simply be space. That’s why there’s no clutter. Aisles are 54 to 60 inches apart. Shelf heights don’t exceed 54 inches, and lines with signage and fixtures are level. “We’re trying to maximize square footage,” Hofmann says. “But you still have to have the passageways and be able to see the merchandise. The reality is we do try to keep it simple.” Landscaping, lighting and architecture that fits in with the community— which at one site meant altering design plans to save a 300-year-old tree—all prove to be integral parts of Parker’s equation for profitability.
WHAT THE NUMBERS MEAN
Yet beyond all the formulas, analysis and technology, Parker’s underlying goal is truth. His delight in numbers stems from discovering the real nature of his business.
His larger company is diversified to include real estate, storage facilities, car washes, laundromats, and office and retail centers, but the numbers say he is very good at c-stores—to the point where he may abandon portfolio diversity to focus on convenience.
With the idea that smart people look for the best return on capital invested, Parker says the industry is at a turning point. Citing NACS statistics, he says that for the longest time, poorly operated c-stores hung on for years. “The worst c-stores in America are now actually going away,” he says. Therein lies the opportunity: to usher in the next generation of c-stores.
NACS numbers now document the falling store count and a growing disparity between top and bottom quartiles. Critical mass is building. The better-run stores are beginning to divert the limited, though consistent, stream of gross-profit dollars that the public allows the convenience channel.
It’s why CPG is also a telling metric. “We had a program we called ‘Operation QuikTrip: Total Focus,’ where we asked, ‘If QuikTrip came to Savannah, how would we have to position ourselves to compete with the best of the industry?’ ” he says, understanding that gasoline margins are addictive but vulnerable to price wars. “That led us to some real introspection.”
The company never rests, says Terri Heidmann, Parker’s chief financial officer. Besides continually reviewing areas of labor, merchandise and utilities, the chain will renew its attention to areas such as customer loyalty, she says.
In the end, Parker’s profitability, along with a recession-inspired decision to create liquidity in his books, has allowed him to build new locations. Three are set to open over the next few months, and he’s looking to increase his chain’s size by 50% by the end of 2011.
“In all my years as an entrepreneur, I’ve finally learned to focus on what produces the greatest return on capital employed,” he says. “For me, it’s convenience stores.”
What Working Moms Want
Time-starved working moms provide Parker Cos. with a “brand filter,” allowing the company to focus on issues of safety, ease of shopping and a product assortment geared to their lifestyles. The strategy draws in common denominators that appeal to a wider demographic, including the industry’s traditional base of blue-collar males.
A Quick List:
- Appealing, clean architecture and landscaping
- Wide aisles, clean lines for ease of shopping and accessibility Employees suggesting relevant promotions tied to products the customers want
- The items they want when they walk into the store
Parker on Failing Fast
- Not one to linger on failure, Greg Parker hops on new opportunity with zeal but quickly realizes when it’s time to get out. Here’s a quick list of failures:
- Take-home prepared meals
- Coffee baristas
- High-end ice cream with homemade cones