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Yes! Organic Market

Date: 09/01/10 | Source: Specialty Food Magazine | Author: Meghann Foye
Categories: Industry Operations; Retailers
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Yes! Organic Market

This chain of seven natural food stores in the Washington, D.C. area has thrived by serving both established and under-served neighborhoods alike.

by Meghann Foye

As a first-generation Korean-American entrepreneur in the restaurant industry during the late 1970s, Gary Cha realized that, instead of spending time with his family, he was working night and day at his own Chinese-style cafeteria on K Street for the equivalent of minimum wage. Looking to establish a more profitable endeavor, Cha knew he’d found his next venture when a salesperson told him about an ailing organic grocery store on Connecticut Avenue called Yes! Organic Market. “Profit margins were much better [in organic grocery] than with conventional grocery stores. We saw double-digit growth in a national study of retail sales volume in the industry. With some changes, I knew I could revive the business,” says the Washington state native who received a degree in hotel and restaurant administration from Washington State University.

Since that time, Cha has opened six more Yes! Organic retail operations, many in underserved, up-and-coming D.C. area neighborhoods. He recently launched his seventh store, in the Anacostia neighborhood, while his eighth store, in Hyattsville, Md.’s burgeoning Art District, will open next spring.

History…


“When [the store] came up for sale, it wasn’t making any profits, but the owner had such a good name and reputation that, with the proper management, we thought we could invigorate it—and we did,” Cha explains. He immediately replaced worn wooden shelves with more professional-looking metal versions, lit signs to improve visibility and reconfigured the space to increase its total retail area. Cha gleaned knowledge of the food industry by going to trade shows and seminars and purchasing tapes and books. “We kept applying what we thought would be more modern. Without knowing a lot, looking back, we did a lot of things that were correct,” he notes.

Then, in the early 1980s, two larger natural foods markets—Whole Foods and Bread & Circus—came to town, decimating some of the smaller stores. “They siphoned all the customers away. Sales dropped by 60 percent,” explains Cha. “But another thing they did was increase the [overall] customer base with people who normally would not shop at an organic or natural foods store. That number increased phenomenally.”

Instead of closing up shop like many of the other organic food retailers in D.C., Cha realized that he couldn’t compete with the big stores on a product level. He eliminated many SKUs from grocery and increased the supplement section, which generally has a larger profit margin. The tactic worked. “As predicted, sales volume dropped, but our net profit wasn’t nearly hit as hard,” he says. Cha continued to upgrade the store with better computers, inventory and sales tracking.

Throughout the ‘80s, his tactics helped increase growth each year. As he reached the limits of volume in his store, he began listening to customers from across town who would ask for a store in their own neighborhood. By the end of the decade, he started to expand with what would become six more stores, each time seeking underserved neighborhoods with lower overhead costs. “It was interesting. Customers would come in the first week and thank me for opening,” he says. Cha opened a second store in 1989, then another in 1990, number four in 1998, five and six in 2000 and, now, the next two this year and in 2011.

Customer Base…


Cha’s primary demographic is women ages 30 to 50 who are interested in good health. “In store number seven’s neighborhood, the average income is $30,000 a year versus the D.C. average of $100,000, but we think there are enough people who are concerned about eating healthy,” he says. Cha doesn’t worry that lower income will dampen sales because he’s seen growth at his Georgia Avenue and 12th Street stores, both areas that didn’t have retail offerings to meet current trends until Yes! Organic arrived.

Pricing…


“Because of our size, we can buy palette loads. For things we buy a lot of, we’ll also try to source directly from the manufacturer or vendor. For example, we buy Malis wood briquettes (a cleaner alternative to charcoal briquettes) by the truckload in the summertime. Overall, we try to keep prices as low as we can, but we’re not trying to be the lowest priced guy in town,” says Cha.

Sales Distribution…


In the Cleveland Park store, “grocery is 25 percent; produce, 14 percent; refrigerated, 20 percent; frozen, 10 percent; supplements, 10 percent; health and beauty, 4 percent; non- foods, 3 percent; perishable/deli, 4 percent; and beer/wine, 10 percent,” Cha says.

Highest Selling Department…


Grocery. Kashi Heart to Heart Cereal ($4.99), Vita-Coco Coconut Water ($2.59), Robert’s Pirate’s Booty Veggie Rice and Corn Puffs ($2.99) and Peanut Butter Clif Bars ($1.69) are top sellers.

Other Sales Drivers…


“Good produce. We deal with four vendors regularly, but in season we purchase locally from orchards or farms. The season is short and when the supply runs out, that’s it,” Cha notes. In the summer, organic avocadoes for $0.99 do well and in the winter, organic Pink Lady and Gala apples, both selling for $2.49/pound, are big sellers.

Best Sellers…


Fresh meat, poultry in particular, such as Bell & Evans hormone-free, antibody-free chicken. Fresh-baked local breads are also popular, as well as Mary’s Gone Crackers for $4.99, which are gluten- and wheat-free.

Surprising Sellers…


Blue Diamond Almond Milk ($2 a quart). “For a long time consumers drank soy milk and rice milk, but a lot of people have allergic reactions to soy, and rice is a little bland. They are finding the almond beverage has more flavor,” says Cha.

Product Sourcing…


Throughout the chain, “international is less than 5 percent, but what we do buy, we buy in large volumes,” says Cha. “Domestic products are 75 percent and local, such as perishable breads, fish and meats from local vendors, makes up the remaining 20 percent, but we are always hoping to expand our local offerings. I’m always searching.”

The Design…


Cha has found an economical shortcut to store design. “As a service to their customers, one of our biggest suppliers, Natural Foods Inc., subsidizes design services. They pay 40 percent and we pay 60 percent for a team of six or seven past grocery store owners, merchandisers and architects to help design the new stores. You give them a wish-list and dimensions and they’ll work with you on a design until you’re happy,” he says.

Number of Employees (Full and Part Time)…


At the Cleveland Park store, there are 20 full-time and ten part-time employees; in the entire chain there are 100 full-time and 30 part-time staff members.

Square Footage of Store and Selling Space…


The stores range from 3,000 square feet to 11,000 square feet total. Cleveland Park is the biggest at 11,000 square feet with 8,500 square feet of selling space.

Future Plans…


“Next up is the opening of several stores but, ultimately, when we retire we’d like to give the managers that have been running the stores ownership to reward them for all the time they’ve invested,” says Cha. |SFM|


Meghann Foye is a NewYork-based freelance writer specializing in food and travel.

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Yes! Organic Market


This chain of seven natural food stores in the Washington, D.C. area has thrived by serving both established and under-served neighborhoods alike.


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