Karen McGuire regards Doug Van Zee, a retail consultant for CHS Inc.,as a key person in her life. As general manager of two Cenex branded locationsin Mitchell, SD, McGuire doesn’t have time to chase down the best deals forher stores. But since she joined her company’s buying club, C-Buying for Cenex,she’s had someonenamely Van Zeeto do the legwork for her.
“[Van Zee] is constantly coming to us with deals to take advantage of,” she says. “I was trying to get maps in my stores for the summer tourists and he was able to get them for me with a 40% savings. The other day he stopped by to let me know about a deal he found on these Breathalyzer key chains. They’re a great little product that I wouldn’t have been able to find before.”
Even more than new and cheaper product for her stores, McGuire was impressed with the lengths the buying group went to meet her needs. When two of her part-time employeesone diabetic, one anemicwere having trouble getting the necessary medical coverage for their medication, the buying group stepped in.
“I had explored every option I could think of,” she says. “They were on a Cobraplan, but that wasn’t really conducive to what they needed. I called the buyinggroup and by the next day we had an insurance card that covered all their needs.”
McGuire’s stores and some other Cenex independent operators were investigating their own buying clubs before CHS Inc. started offering C-Buying for Cenex, but the initial clubs dictated a lot to the retailers in terms of what programs they had to participate in and from whom they would purchase their merchandise. C-Buying for Cenex offered her the flexibility for her stores and her purchasing that she so desperately needed.
When CHS (Inver Grove Heights, MN) saw some of its Cenex-branded marketers forming buying groups in 2001, it saw their initiative and took it a step further. With more than 800 Cenex branded retail locations in 22 states, the company thought there had to be a way that the retailers could maintain their independent nature but come together to buy more efficiently as a larger group. So CHS began investigating national buying groups already on the scene. It finally chose to develop an agreement with Consolidated Buying Co. (CBC) to launch C-Buying for Cenex, a buying program that would not only serve its convenience retailers, but could also assist its more than 1,600 cooperative businesses.
“CHS doesn’t have a marketing department that makes decisions for our branded retailers,” says Gary Braaten, retail consultant supervisor for CHS. “Each retailer makes his/her own decision that will work best for their business. We wanted to create a program for our people that would give them access to national-level buying programs, wholesale agreements, accrual programs and other programs, whether it were for cleaning supplies, office supplies or even insurance. We’re a cooperative system, but it’s our retailers’ independent nature that allow them to succeed in their individual markets. C-Buying for Cenex is a way for them to pick and choose the programs that would work for them from a smorgasbord of options that would strengthen their buying efficiencies. We [CHS] have a vested interest in the success of our branded retailers. If they’re buying smarter, they’re making more, and that’s always good for the Cenex brand.”
C-Buying for Cenex enables Cenex marketers to tap into more than 300 nationalproduct agreements CBC has established, including cigarette and tobacco, beverage,confectionery, grocery and snack programs, as well as other more diverse programssuch as bay services, carwash, insurance, transportation, equipment purchasesand business services. All Cenex branded marketers are encouraged to evaluatethe program and take advantage of a wide assortment of product discounts andrebates.
C-Buying for Cenex, like most buying clubs, comes at no initial cost to the retailer. Fees are only deducted when rebates are collected for a member and the membership fees collected will not exceed the member’s portion of the net quarterly rebate check. If rebates are not earned in any particular quarter, membership fees do not apply. Each location’s rebates are tracked separately and there are no enrollment criteria regarding the size or number of stores owned by the retailer. Also included with a membership in C-Buying for Cenex is a no-cost subscription to Category Solutions magazine, CBC’s monthly publication designed specifically for retail members.
Braaten says representatives from CBC contact Cenex marketers to review the program, answer any questions and assist with the registration process. While the program is still in its infancyit’s only been in place for three monthsit took only 90 days to get the program up and running. Today, 200 of the more than 800 Cenex branded marketers are already taking part. CHS hopes to finish the year with 400 members.
“Every store is different,” says McGuire. “Even between my two stores the salesare very different. C-Buying has been a dream because it gives us the optionto participate. Just before I joined C-Buying I had made some shipper purchasesfor the summer, so there are a number of deals I wasn’t participating in atthe beginning. I never felt pressured to take part in the programs when I didn’tneed to, and the information about the programs is still at my disposalbutit’s up to me what we get in for our stores, and that’s a great freedom.
“We do exceptional volume in one of my stores because this is an agriculturalcommunity and our diesel sales are very good,” she continues. “But even withgreat volume, I still don’t get the deals that I could be and neither do neighboringstores. The buying club gives us so many options that can make us more profitable.Whether it’s a rebate program for a Frito-Lay shipper or having Pepsi or Cokebuy a door that they would already be getting space in, it lets us buy smarterand grow our business.”
Most important for McGuire is that she can maintain relationships with wholesalers and vendors she’s been dealing with for years.
“Some buying clubs try to dictate to you what you should buy and whom you should buy it from,” she says. “I have a supplier out of Iowa that is fantastic about getting us what we need. I didn’t want to have to give them up and in this buying club I didn’t have to. My ordering process hasn’t changed in the slightest except that I’m getting deals that I never could have imagined before.”
STARZ in their eyes
When Shell Oil Products US began to change its networkstrategy to step away from company-run retail operations, it still wanted tobe involved. It realized customers didn’t see Shell sites strictly as gas sitesit’severything on the site, including carwash and c-store merchandiseso bystrengthening its retail network, it could help produce top-tier marketers thatwould, in turn, sell more fuel.
To that end, Shell created the Shell Trading and Retail Zone (STARZ) to identifyopportunities to help its retailers become better merchants. Not only did Shellcome up with a proprietary Web portal available to all Shell retailers and wholesalersat no charge, but also it formed a buying club with Royal Buying Group thatenables its retailers to take advantage of national programs.
“Expenses are increasing, revenue opportunities are decreasing and operators are time-starved,” says Dick Francis, manager of the STARZ program. “Our retailers want to get the best deals for themselves, but they don’t have the time to investigate their opportunities. We formed the STARZ Web portal as a way of single-sourcing information for our people.
“A password gives our retailers, wholesalers and retailers’ wholesalers access to the site,” he continues, “and it gives them access to industry data, news and best practices, She
ll news and information as well as a vendor directory of Shell proprietary programs.”
Shell began investigating national buying club organizations that could help create a program for Shell and decided to go with Royal Buying Group (RBG) because, according to Francis, RBG understood the Shell organization since some of its management were or currently are Shell dealers. RGB already had the infrastructure in place to establish a national buying club, thereby providing a smooth transition to let Shell introduce its own version to retailers.
STARZ Buying Club is intended to increase non-fuel revenues while reducing administrative costs. While retailers maintain focus on their operations and store-level execution, RBG confirms about 200 national programs each year for its members and handles vendor negotiations and contracts. One of the greatest deals RBG hopes members will take part in is its national tobacco program. Participation in the program allows retailers to provide space for all major manufacturers in a uniform offer that meets contract requirements and adheres to image standards; it also helps them achieve the minimum amount of facings with maximum profit.
“RBG handles the buying club, rebate program administration, category managementopportunities, promotion and promotion management,” says Francis. “It trackstheir purchases, compares them to payments provided by tobacco companies andidentifies locations that might not have received complete creditensuringour retailers are getting their due monies. It brings opportunities to membersof the club and keeps communication open between retailers and their sales supportvia phone, internet and mail. It’s overwhelming how much they can offer ourretailers and the lengths they go to keep members informed.”
RBG communicates to retailers promotion schedules, an annual marketing manual and a monthly magazine for seasonal opportunities. These publications focus on the top seven categories in convenience stores. Retailers are assigned their own account representative to answer any questions they might have, take orders or get feedback. All of this is followed up by an online newsletter that focuses on the benefits of programs and how retailers can participate. The newsletter lets retailers bounce into the Web site for planograms and other information about their business they can use every day.
While participation in the STARZ program is free, retailers pay a yearly membership fee along with a 10% administrative fee for anyone that wants to take part in the STARZ Buying Club. Both fees are taken from the first rebate monies that are earned from retailers participating in programs, not from any tobacco monies. Once the fees are deducted, the remaining funds go to the retailer’s bottom line.
STARZ Buying Club went live in December 2003, and the STARZ Web portal launched in February 2004. Before the end of its first year of existence, 1,000 members had already joined the buying club. To date, more than 1,900 members participate.
Learning the ropes
While the benefits of membership are considerablein the STARZ Buying Club, some operators are still trying to get their headsaround the concept. Vern Kelly, president of wholesaler Kelly Oil (Shokapee,MN), provides branded Shell fuels to 19 independent stores. He is still tryingto convey to his retailers all that the buying club has to offer. In the meantime,they are taking advantage of the STARZ Web portal.
“The STARZ program is very good for the retailers,” says Kelly. “So far there are up to 100 vendors that have discounts just for Shell retailers and it’s free just for being a Shell retailer. By leveraging the stores they have, Shell can negotiate deals with vendors that might not have been available to single-store operators.”
But Kelly has had a tough time conveying the benefits of the STARZ Buying Club. But he just received a packet from RBG that should help explain it more effectively.
“It’s easy to show people free deals they can get, but when there are membershipfees and administrative fees, it’s harder to convince the little guys to geton board,” says Kelly. “But one way to combat low margins on gas is to comeup with the best scenario inside the store. The bottom line is Shell has putan effort to come up with a program to ease the expenses retailers are facing.”