Sunday, April 5, 2015

FRIDAY, MARCH 03, 2006

DEMOGRAPHIC ALGORHYTHMS

Though I’ve never run a business, except as second-banana for Bob Scriver, even that small role plus shoptalk about the Browning Mercantile got me interested in the how-to’s. How does one figure out what business will be successful? Where does financing come from? How does one learn how to plug into the distribution chains and so on.

The Blackfeet have owned a grocery store in the past. It was a co-op, which failed because of charges never paid and a psychology of “it’s ours -- we can do what we want.” That, plus a far worse economy than now, doomed the enterprise. The business was bought by Buttreys; then they closed out as well. For decades now, especially since the Browning Mercantile closed down in the late 1980’s, the only grocery store has been Teeple’s IGA. As a monopoly, it is a money-maker for the owner and a payroll for the community. Employees are local. Many of the shoppers don’t have wheels. In fact, when I arrived in 1961 to teach, I was totally broke for the first month (never did have either a car or a telephone) and had to beg for credit from Dolly Teeple. She was a little reluctant but saved me from starvation. It is her son-in-law who has built a chain of successful IGA stores around Montana.

But people grumble about having only one choice and there is a impulse for the tribe to start another grocery store. This time it will be very different. The key is demographic algorhythms. When news of interest reached a Utah-based company, they sat down at the computer and began reviewing public data, applying algorhythms that predict success. The first thing that struck them was that the population on the reservation is growing by leaps and bounds. Just OFF the reservation the population is aging and shrinking for many reasons: drought, CRP, out-of-state college, and so on. What this told them was that basics like food and soap are going to be needed whether or not the economy allows for extras. These are not luxury items but necessities. In fact, by using computer data, the company was able to tell exactly what the people were buying, at what prices and in what amounts.

The second thing that interested them was whether the Tribe, through Siyeh, would accept a package deal in which the company supplied all the know-how in return for being the sole wholesaler. The company would build the store, but would dictate everything right down to where the electrical plugs were. They would teach the staff how to run this business, according to the practices this company has determined will lead to success. NO credit, NO warehouses full of food, strict accounting, and so on. 

In the past the tribe’s pride has been hurt by such offers. “We can do it our ownselves” was the cry through the Sixties, “And we’ll do it our own way.” Or even, "What? You think we're too dumb to sell stuff??" At one point the Blackfeet refused the offer of free buffalo because they came with some strings, like not eating any of them for a given period of time. (Since then, agreement has been reached and the buffs are on the rez.) Now the time of counterdependence has passed, and people are more willing to say, “Okay. Teach us.”

What’s in it for the company? This is like the people who will give you a printer for your computer because they make no money off the machine -- they make all their money selling paper and toner. Judging from the prices of toner, the stuff must have a 200% markup and the cassettes are small enough to avoid high shipping costs. I don't know about you, but I buy them by the boxful. So the company gets the business running smoothly and then they keep the groceries coming, making their own deals with the primary sources. The more stores they supply, the better deals they can make with those sources and the better their profits look. With modern Internet connections, supervision is far closer and more detailed than it was when someone had to drive out in a blizzard to see what was happening.

What‘s in it for the tribe? The most obvious is creating competition which even George Bush would approve. The next most obvious is training people in an accepted mainstream kind of setting that is all over America -- a good grocery store clerk, bookkeeper, or manager can find a job. And surely it can’t be that different from running other businesses.

I tried brainstorming for glitches. Might the Utah-based company stock foods and supplies that the people don’t like? Might they refuse to stock local products? Might they be bad bosses? There are probably answers to all this. This is not inventing the wheel. Probably the biggest obstacle will be opposition from the local stores, including the Cut Bank stores who sell to many rez dwellers. There are lots of legal strategies for them to pursue, but the Blackfeet are a lot more hip about such paper skirmishes now. 

It will be fascinating to watch how this goes, and to look for other consequences of demographic algorhythms.

1 comment:

Anonymous said...
Would the outside company actually own the store, or would it transfer ownership to the tribe once it's completed? I can see a serious risk in the latter arrangement, as the company might overcharge for merchandise and prevent the tribe from trying to get better deals.

Peter
Iron Rails & Iron Weights

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