How Weavers Way Co-op thrives in this Amazon age for grocery stores

Weavers Way is one of the longest-running of Philadelphia-area food co-ops, launched in 1973 when neighbors in West Mount Airy formed a produce-buying club in a church basement. Soon after, they opened a store at Carpenter and Greene Streets and expanded to Chestnut Hill in 2010. In October, Weavers Way opened its third store, in Ambler, Montgomery County, and now counts nearly 7,000 families as members.

The Ambler deal fell into place through fortuitous timing. A Bottom Dollar store in the borough's downtown had closed. "As a start-up, we didn't have resources or credibility to put a bid on the building," said Kathleen Casey, who headed a neighborhood group wishing to open a co-op store. "We wanted to prevent another grocer from coming in."

Casey and her fellow members approached Weavers Way, and about two years later, the neighbors got their wish. The store, at 217 E. Butler Ave., is larger than the Mount Airy and Chestnut Hill stores combined. It includes a large prepared-foods section and butcher and fish counters. Prices are about the same as the chains, but much more of the fresh inventory is local.

Last week, general manager Jon Roesser and I sat down to chat about the business.

Why Ambler?

We made a business decision a few years ago that we felt it was in the co-op's best long-term interest for us to grow. We're also a pretty mission-driven organization. We wanted to grow the cooperative economy in Philadelphia. For us, it made sense to expand to a community where it was within close proximity to our existing membership. I'm sure a place like Haddonfield or Lansdowne would make an excellent co-op community; but it's not close to where we're at. Ambler is really just the next trade area over from where we historically have been. For us, it worked out well, because the market data showed that Ambler was a good place to expand. We already had this core group of members that we knew was going to support the store.

Why not just pop up co-ops everywhere?

When we expanded to Chestnut Hill in 2010, it was five-plus years before we could contemplate expanding again. I would assume it would probably be a similar time frame … this go-round, too. It's not like we have venture capitalists backing us up with millions and millions of dollars to expand our business. Our expansion is grass roots. It comes from members saying, 'Hey, I want something like this in my community.' With the Ambler store, our [total] anticipated [annual] sales are about $30 million. We own a few buildings. We own some trucks. We own our inventory. We've got an awful lot of equipment, which is expensive. If we were to expand, one of our primary sources of funding expansion is the members themselves, through member loans. For this store, we raised $1.5 million from members. That's mostly small loans under $10,000. We have traditional financing, too. We have a bank loan for the equipment and all that.

Do you run the same kind of razor-thin margin that big supermarkets do?

We don't operate the co-op for profit. If we have profit, I wouldn't know what to do with it. Profit goes back to the members in the form of a patronage rebate. We're not going to have a profit this year. You don't open up a big store like this and turn a profit. When we budget, we budget for around 1 percent return on sales. If we get that, that goes back to the members. In the theoretical sense, what should happen is we should charge our customers the exact amount of money we need to generate the revenue we need to cover our costs. The end of a theoretical year, the balance is zero. We spent exactly as much money as we took in. Now, that would be irresponsible to budget for that sort of thing. So we budget to have a surplus. In most years, we do. Not in an expansion year like this.

Tell me about the challenges of Weavers Way. Is it competition, is it public awareness?

For starters, we have the same challenges as any other grocery store. The grocery industry is ferociously competitive. There's lots of places people can spend their money on food. In that respect, we're no different than anybody else. We have to exist in the free market, like all the other folks out there selling you groceries. The grocery industry is now also dealing with the evolution of online grocery retailing, what Amazon is doing, in terms of offering grocery to its customers through their online platform. That's disrupting the industry. But that's not unique to us; we're all dealing with that. We face a few challenges because of our model. If you're not familiar with it, it throws people off. People don't know that they're allowed to shop at Weavers Way. We get this all the time, at all three of our stores. People come in and the first thing, they look around and say, 'Am I allowed to shop here?' And it drives me crazy. A lot of people aren't familiar with co-ops, and they think about membership the way you think of membership at a Costco. I have to be a member to shop at Costco. Membership just means that you are part-owner of the organization. It doesn't mean that you can't shop if you're not a member. I tell some folks, if you're only going to shop here from time to time, for convenience purposes, then shop as a nonmember.

Why do you think people shop here?

Very broadly speaking, customers fall into three buckets. The first is our true believers. The true believers are the folks that really embraced the cooperative model and a democratically controlled organization. They're interested in supporting local, in a hyper type of way. They are very deliberate in terms of where they spend their money. They tend to be supportive of local mom-and-pops. They tend to be supportive of co-ops. They tend to have their money with a credit union, all that stuff. True believers, they spend most of their food dollars at the co-op.

At the other extreme are convenience shoppers. They're really spending the preponderance of their food dollars someplace else. They really only come to the co-op when they need a quart of milk or a loaf of bread or some eggs or whatever.

In the middle is what we would call the mid-level shoppers. They're splitting their tickets. They shop at the Terminal. They shop at farmers' markets. They go to Acme. They're really doing shopping all over the place. They go to Costco. They probably go to Whole Foods. Mid-level shoppers are the lion's share of all grocery shoppers. They're all important to us.