In a recent post to TheGuardianNews, Starla Eleson described a meeting in which a Sidney, Neb. community-owned clothing store was discussed. She talked about similar efforts in Torrington and other communities who sought to establish ways to recapture shopping dollars spent elsewhere. They also hoped to create local jobs and further stimulate local downtown areas that had seen a rough time of things in recent years.
According to Brad Sutherland, the idea of a community-owned store was first brought the idea to the Goshen Economic Development Board of Directors, for whom he was the sole employee. Torrington is a relatively low wage community and he thought that it would boost the economic impact of the community if more dollars could be spent locally as opposed to heading out of town to Scottsbluff or Cheyenne, Wyo.
Although Sutherland was unable to convince the board that the project was viable during his first attempt, he believed he had a winning idea. What he needed was more information.
"I had to cool my jets," he said. "You really can't go against your board."
After a period of time elapsed and armed with additional study, Sutherland returned to his board of directors with the additional information and a modified plan. This time, his efforts paid off and he was able to get a green light to start working on the project in earnest.
Sutherland stressed the need to do a tremendous amount of work up front. He credits the success of the store, which is still in operation today to the diligence the organizing group and subsequent Board of Directors provided in key areas.
First and foremost beyond the idea of the store, was figuring out whether enough money could be captured from local citizens to ensure the profitability of the enterprise. Sutherland said that the University of Wyoming's marketing study group provided much of the number crunching assistance. The group conducted a retail leakage study and the results from that were used to help develop the break even points for commercial viability. The goal of the study was to figure out how much money spent by local residents was finding its way into businesses outside of Torrington.
The break even analysis was a critical component to the venture's business plan. It was found that by capturing as little as 25% of the retail leakage dollars, the store would generate enough sales to be profitable. The store would be really profitable if as much as 50% of those migratory dollars could be induced to stay at home.
The next thing the project needed to do was evaluate similar enterprises. "We went up on a bus ride with a bunch of residents," said Sutherland. The people who performed the evaluation were from across a range of socio-economic backgrounds.
"If you just get one group who all hang out together, that doesn't cut it. It might be wealthier than average or not as wealthy," he said. "You've got to get a good, diverse group to go and take a look at it (Powell, Wyo.) and evaluate the products and prices."
Each participant who went on the tour was armed with a survey, They rated the Powell community store on a range of criteria, including pricing, quality and product choice. When asked why he chose the Powell location, Sutherland said that their situation was very similar and that the Powell location and several others were using a common buyer and that would factor into unit cost for items they might carry in the proposed Torrington location.
In speaking about the need to have this information up front, Sutherland said, "Before you go out and sell the stock, you have to have all these things lined up so that you can put it in your prospectus and be accurate."
With the survey completed and the board firmly behind the project's initiation, the business plan was refined and brought forward in consideration of a stock offering for Wyoming residents. A decision was made to only sell stock to Wyoming residents, and by doing so allowed the initiative to avoid more challenging rules required by the Securities and Exchange Commission.
Shareholder power was also a concern. The idea behind the community store was to have a wide base of shareholders with a volunteer Board of Directors. It would fall to the board to make the decisions on employees and general operations, while the shareholders would be generally silent with respect to day-to- day operations. The Board would oversee the decisions of the company. Sutherland said it was important to dilute the effects of individual shareholders as much as possible and a rule limiting ownership by legal individuals or couples to a maximum of twenty shares was put into the bylaws for that purpose.
Theoretically, each member of the household could own this many shares, (spouses, individually and jointly, plus twenty shares for each child), but the intent was to have many shareholders, who could be unable to individually affect decisions by the Board. The provision was placed specifically to enhance the meaning of the word community for the project.
The offering that was made sought to achieve at least $425,000 in its stock offer. Shares were to be sold by officers of the company as well as directors at $500.00. There was a provision to allow the board to extend the amount of time necessary to get the minimum level sought if a certain amount of progress had been achieved. The group did not pay a broker to sell shares on their behalf so, it really came down to having members of the Board who were effective salesmen.
"We had to get one extension to get the minimum and then we closed the offering and started operations, " said Sutherland. In total, approximately half a million dollars was raised. Although Southerland started the project, he was a limited owner, purchasing a total between 6 and 8 shares for himself and members of his family.
As for others potentially concentrating shareholder power, Sutherland said that there was no attempt to consolidate large number of shares. The stockholder group remains pretty diluted even today.
A question has come up as to whether or not Our Clothing Store has been sold. Sutherland, who still maintains his original shares, said that he had not received anything with respect to an ownership change and was unaware of one being contemplated.
Of the current ownership situation, Sutherland said, "Bill Pickerel was an instrumental guy on the board, but any of the banks in town would know where it stands right now. It was kind of a big deal for the town."
Funding the project came from multiple sources. A small amount of money was given to the initial efforts, with local citizens making donations. The lion share of the funding came from a grant from the Community Development Block Grant fund and the stock offering. According to Sutherland, the federally funded CDBG grant was in the amount of approximately $300,000. and the stock offering garnered about $500,000. The grant required a matching funds component, which was met by the group's stock offering. The grant was used to fund the purchase of the building by the economic development corporation, which in turn, offered the property to the store ownership at an attractive lease rate.
The survey filled out by the residents who wen to the Powell location was instrumental in understanding the variety of products that could potentially be offered for sale. It was decided that cheaper costs would be recognized by using the same buyer employed by other stores in the region. By leveraging the buying power of multiple locations, lower prices and better variety would be realized both for the benefit of shareholders and patrons. Capturing the best cost was important, but Sutherland saw the potential for disaster in having only one supplier.
"To me, you always got to have Plan A, Plan B, " he said. "It's great to have the buyer you're excited about, but you better find out about a second buyer," in case a backup is needed, or additional circumstances warrant. The relationship with the store's initial buyer was severed in 2008, according to the store's current manager Denise Hill.
"He wasn't meeting our needs as far as, what our customers were looking for, " she said. "When we passed along the information, we were not seeing that in return (from the buyer)." Hill says that she now does the majority of buying and often goes to market shows such as the one in Las Vegas, NV and that the change is working out. She credits her ability to choose the products the store carries to her predecessor, who mentored her through the process.
Although Hill is the primary buyer, she still runs certain purchase decisions by the board for approval. One example of this involved extending a particular line of shoes.
"I had people coming in, looking for the Sketcher Shapes ups. We already sell Sketchers, but in order to pull in the Shape ups, I had to purchase 72 pair," she said. "I wanted to run that one through the board."
She stresses the need to constantly evaluate the products offered by vendors and the needs of the store's customers. "It's kind of a catch 22," she says, of vendors. "One season they do phenomenal for your, but the next season its like, 'what happened?'" She added that the quality may be the same, but it might be color or some other choice related issue that causes her to look to other vendors to fill in market gaps.
In order to drive local dollars into the store, it was necessary to effectively motivate the shareholders to shop locally as well. The bylaws for the company provide that all profits above $100,000 per year would be returned to the shareholders in the form of dividends.
What would the impact of a new clothing store have on other, similar businesses?
"None of them closed up, in fact one more opened up," he said. "Once people feel like they have variety and competition, they are much more likely to stay in town and shop," he said of the effect of the new store's opening.
Sutherland spoke highly of the project, but more so of its participants. "People began to get excited once the project got started, he said. "Board members were buying into it, volunteering to help renovate a building. It had become a true community project," The Board of Directors became fully engaged with the project and as Sutherland noted, some guys, "spent a lot of time renovating the building."
The lessons learned in the early stages allowed a small town the ability to engage its residents for a common purpose. They created jobs, tax revenue and have been successful at maintaining the operation for nearly five years. Circumstances have changed somewhat over the years, but the dream of holding on to local sales dollars, by first understanding a need, and then constantly evaluating that need over time has allowed 'Our Clothing Store' to remain fresh and viable.
The most critical parts of the project's success came months before a single share was offered. The due diligence of knowing what money was leaving town and more importantly, where it was being spent, allowed a thought to become a reality and the people of Torrington are enjoying the fruits of that labor of community love.
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