In this [image-nocss] pay-before-you-pump era, Stewart's Shops Corp. refuses to force customers to pay before theyfuel up. To abandon that practice would be adversarial and counter to Stewart's culture. "You do not want to be at war with your customers," Stewart's Shops president Gary Dake told the newspaper. "You want them to come in the store and shop."
Once customers are in the store, the company knows that even in tough economic times, people will buy milk and bread. "We have never gone to any one excess," Dake said. "We are not super high-priced. We are not super low-priced. We've stuck with offering a good value."
At a time when businesses are trimming expenses to contend with credit issues and decreasing sales because of consumer spending cuts, 88-year-old Stewart's Shops is planning to remodel a half-dozen stores. It will rebuild two or three stores. The company also is negotiating potential store acquisitions, the report said.
Executives said they have avoided traditional business philosophies of leasing stores, compiling debt to leverage operations and pursuing the goal of becoming publicly traded. Remaining debt-free for nearly 50 years and acquiring most of the real estate associated with its 326 stores has put Stewart's on solid ground.
"We don't have to deal with landlords. We don't have to deal with investors. And we don't have to deal with banks," Dake said. "That gives us a lot of flexibility."
Still, the company is cautious about acquiring new properties. About three years ago, Stewart's began buying less land for new stores, fearing property was overvalued. Now, prices are starting to come down and the company is considering buying land and possibly investing in other non-convenience-store-related real estate investments.
"We operate in a want-to mode when it comes to buying new property, not a have-to," Dake said.
When you have to act, you don't always make the best business decision, he said.
The company-which is one-third employee-owned-promises new hires that the value of their profit-sharing account will be three times their annual salary after seven years. That can be a good recruiting tool after a year in which many workers in a wide range of industries across the country have seen 401(k) values cut in half, said the report.
"Probably our biggest advantage is that we are vertically integrated," William Dake, Stewart's chairman, told the paper.
Stewart's controls the majority of merchandise sold in its stores, the report added. That control begins with the production of its own ice cream and the bottling of its own milk at the Stewart's plant in Greenfield, N.Y., just west of Saratoga Springs. The company also warehouses most of the products that appear on store shelves and controls distribution with its fleet of 55 trucks and 100-plus drivers.
Stewart's also has found a cost-effective way to keep its northern New York stores stocked. The company uses trucks that can carry frozen, chilled and dry goods at the same time. That has given them an advantage over other Adirondacks-area retailers who have a hard time scheduling timely and affordable deliveries, William Dake said.
More c-store chains around the country are working harder to become vertically integrated, Jim Fisher, CEO of Houston-based IMST Corp., a retail forecasting company, told the paper. "It's not just the large chains. Medium-sized chains are bringing warehouse and distribution in-house to become vertical where they can," he said.
Nearly everyone in the c-store industry has begun to realize that growth and success is linked to in-store sales, not gasoline sales, Fisher added. Vertical integration is the best way to trim the bottom line and increase in-store profits.
Another piece of Stewart's strategy is the practice of developing weekly profit-and-loss statements for each of its 326 stores. Many businesses rely on quarterly or monthly statements. Producing weekly statements allows Stewart's to focus on inventory problems, product loss and sales activities in specific areas such as food-to-go or dip ice cream-two high-margin categories.
"Knowing on Tuesday what happened on the week that ended Sunday, you might be able to do something about it," Gary Dake said. "We are getting annoyed with someone over not solving a problem before most companies even know about it."
Stewart's also has an elaborate auditing system, the report said, auditing all 326 stores every two weeks. That serves multiple purposes. Company auditors, who are Stewart's employees, do a lot more than double-check sales, profit and loss in each store. They identify marketing and operational problems and train or retrain employees to do everything from managing inventory and waiting on customers to handling cash.
One of Stewart's biggest motivating tools is its employee profit-sharing program. About 2,000 of the company's 4,000 employees are enrolled. Giving employees an ownership stake has been a big part of the company's success, Gary Dake said.
Other incentive tools include paying delivery drivers on commission based on productivity. Store clerks, who earn $8 to $12 a hour, have an opportunity to receive a bonus based on their productivity and the total gross profit of the store where they work. And store managers-the average manager was paid $45,000 last year-also are paid based on the success of their store. Managers receive a salary and a share of store profits.
All those factors added up to a successful year in 2008. "We are a lot more than a convenience store that sells cigarettes, beer and gasoline," Gary Dake told the Business Review. It's a good thing. Those products have seen a decline in sales.
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