When an old friend asks how you’re doing, they’re probably not looking for chest x-rays or the latest on your gall bladder. So when customers ask how the business is doing, we often just say “pretty good” and leave it at that.

But since a lot of folks have been probing for more details lately, I thought I would give an honest and thorough answer, as best as I am able anyway.

The short answer is that small businesses are unbelievably complicated, but from the information I have, I think the business is doing ok. Our growth slowed through the first half of December, which looked about like October, and I’m guessing the second half of December will look a bit worse than September. We’re hoping that growth will pick up again after the holidays.

Here are some charts showing daily gross sales relative to our current financial goal since August, and also all the data I have about how many conventional bananas we’ve sold per day over the last year. (You can click the pictures for bigger versions.)

To explain these charts, unfortunately, I will need to bore you with another long post which is after this link.

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Open Produce has been really rigorous about keeping good point-of-sale data over the past 4 months, so looking back we can now tease out some interesting patterns in buying habits.

Certain things that “go together” frequently get bought on the same ticket. If you look back over tickets and count up how many times each pair of items is bought together, you can get a sense of how related any two items we sell are. Mathematically you can look at this as a weighted graph. For example, here is a picture of one such graph (circles correspond to items, and the closer two circles are, the more frequently those items are bought together.)

(Click image for larger size; other formats: [svg] [graphviz])

Corn tortillas are a daily staple for many Mexicans and Latin Americans. We sell the best fresh corn tortillas in Chicago, El Milagro brand, for a good price in packs of 12. They’re good, so many people buy a single pack now and again, even if they’re not staple eaters. However, we also have a discount for people who buy 3 packs at a time, and many staple eaters purchase as many as 9 or 12 packs per day.

This graph shows some interesting patterns. Both 1-pack and 3-pack buyers also frequently buy produce that makes sense with tortillas, such as tomatoes, avocados, jalapeños, and limes—guacamole fixings—and 3-pack buyers occasionally go for bargain produce. However, 3-pack buyers also frequently buy well-known Mexican products such as the medio litro size of Mexican coke and de la Rosa peanut candy, while 1-pack buyers do so less. Also, 1-pack buyers buy slightly more canned beans than 3-pack buyers. In particular 1-pack buyers purchase canned refried beans while 3-pack buyers rarely do. Finally note that 1-pack buyers sometimes purchase prepared foods such as mtr meals and clif bars, while 3-pack buyers generally don’t.

My reading of this is that staple tortilla eaters mostly buy fresh produce and a couple Mexican products, while non-staple eaters buy slightly more prepared food, less produce, and fewer Mexican products. If you’re a Mexican immigrant who eats refried beans every day, maybe you feel weirder about seeing them in a can and make them better, for cheaper, at home; if you’re a grad student on taco night, maybe you grab the can. Or maybe we just don’t carry the right kind of refried beans—La Preferida makes about a dozen kinds, and we carry only one size of the vegetarian kind. Staple tortilla eaters almost certainly have more specific bean preferences!

What’s clear is that there are two distinct categories of customers here who interact with one item we sell in very different ways. Tortillas are a crucial crossover point for staple eaters and exotic eaters to try new things. How can we get 1-pack buyers to buy avocados as frequently as 3-pack buyers? It’s a shocking thought, but do 1-pack buyers perhaps not know how awesome avocados are? And what other products do 3-pack buyers want—better beans, or something else like the de la Rosa candy?

Hello again! Hope you had a nice Thanksgiving and are enjoying your weekend. Things were a little slow at Open Produce on Black Friday, as you might expect, but people seem to be hungry again today. We have lots of new stuff in the store, including Odwalla juice and Vegemite; drop in and see us sometime!

Here’s another long post about the business. Today I thought I would write a bit about inventory, a subject which is so fascinating to me that I could rant about it for pages. Instead I will put a little link here, so you only have to read this if football and leftovers aren’t enough to put you to sleep.

Read the rest of this entry »

Okay, let’s talk turkey. Actually, to give you a flavor of the kind of logistical challenges that come up every day for Open Produce, let’s talk about turkeys.

Thanksgiving is coming around again, and many Hyde Parkers will want turkey. We can get some ethically grown turkeys from a nearby farm, but our distributor has to drop them off one week before Thanksgiving. So, should we sell turkeys? Ethical questions aside, where would we put them?

We simply don’t have the cooler space to stock turkeys as a normal item. But if customers pre-ordered, we could ask them to pick up on the same day we received delivery. The trouble is we can’t expect people to pick up instantly. Realistically, we’d probably need to hold turkeys up to 48 hours.

Frozen turkeys need to be kept below 40°F, and they thaw at about 5 lbs/day at that temperature. So if the weather’s cold enough, we could theoretically hold a frozen 15 lb bird for 2 days in our unrefrigerated back room. But typical Chicago temperatures for the season are 35-45°F, and this year is expected to be a little warmer based on our warm October, so we probably can’t rely on getting our back room to a safe temperature.

That means we need refrigeration. We have one display freezer which is stuffed to the gills. If we emptied its $1000 of inventory, some of which takes 2-3 weeks to sell, it’d fit maybe 10 turkeys. Realistically, it can probably fit 4 turkeys in place of $400 of back stock. We could buy a storage freezer for $500, or a new display freezer for $2500-$3500. We could buy sketchy used freezers for as little as $200 (storage) or $1000 (display) but would risk a costly blowout and jeopardize customers’ Thanksgiving meals. We could try to fit 2 or 3 turkeys each in mini-fridges or as many as 20 shoved into every free space in our four doors of display fridges, if we were completely crazy.

To me, the most reasonable solution would be a chest freezer. This farm’s turkeys make an average of $10 at the usual markup. At that rate, we’d need to sell 50 to break even on a 16 ft^3 freezer that could hold maybe 20. Even if each turkey sale also meant $5 of additional profit (about $15 of sales) as customers bought more Thanksgiving meal items than otherwise, we’d need to sell 34 to break even. We just can’t hold that many.

Now, selling turkeys would probably help to bring in some new customers, which would be invaluable. And more freezer space would certainly pay for itself over time, even if not right away.

But as we approach December when Hyde Park empties out and food sales hit a seasonal low, we’re very worried about our cash. We think the business can’t afford many improvements right now. That means we probably need to wait to buy more refrigeration and can’t do turkeys this year. Instead we’ll put our inventory dollars towards other great November fixings and make do with the fixtures we have, while carefully limiting costs for December.

Reports of our death have been greatly exaggerated. We apologize for neglecting our blog and you, dear readers, for so long. In consolation, here is a long entry.

In upcoming posts, I’d like to talk through some numbers and logistics, which are what I (Jered) know best. But right now I want to relate some personal experience of “Open” Produce and address what the “open” part means to me. First the news.

The store has come a long way since March. Foremost, it’s stayed open. But it’s also grown up a lot. Through spring and early summer, we expanded our hours, increased our dry goods selection and continued to refine our eclectic merchandise mix. Through the summer into fall, we tore out the stage at the front and moved the till there, added and re-planned a lot of shelves, completely changed the layout to open up the center of the store, and built our own point-of-sale system with a barcode scanner so we can gather accurate sales data. Recently, a local carpenter rebuilt our stock room shelving to accommodate our expanding inventory. We’ve gotten much better at ordering, and have begun to connect with other local businesses, small distributors and farms. We’re also working on case ordering and gift basket programs which we’re hoping will take off.

Now back to my story.
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Open Produce has joined the Web 3.0 revolution, by broadcasting a Twitter feed! Expect mention of new products, eye-popping sales, and random store anecdotes. If you use Twitter yourself, you can just follow @openproduce. If you don’t use Twitter, you can visit the feed directly or just check the right-hand side of our blog page, where you can see recent posts. Feel free to message us (@openproduce) with requests, suggestions, and questions.

I read this article in the New York times a few weeks ago, entitled “How Green Is My Orange?”:

http://www.nytimes.com/2009/01/22/business/22pepsi.htm

It outlines some of the difficulties associated with trying to determine the carbon footprint (or, in fact, any other environmental footprint) of consumer products. One problem is that a lot of that data is hidden or not easily accessible (how many pounds did the truck haul, how many gallons of gas did it use, how many miles out of its way did it go to deliver to your store, etc.). Another problem is to know where to stop: Do we count fuel used by farmers to power their tractors? How about the fuel used to operate tanker trucks to deliver the fuel to the farmers? What about the fuel used to fly an oil company executive to the Middle East to secure a contract for more oil, which was then used to make the gasoline? In what could be described as the reverse corollary to the Butterfly Effect, an unimaginable tree of events transpired to bring any product to any particular storefront. Even the environmental cost of preparing such a report should theoretically be considered in the report itself.

The market is supposed to collapse all of this complexity and history into a single number: the price. But the problem is that, with conflicting moral views and priorities, some consumers inevitably won’t agree with the way in which the complexities were collapsed (e.g. Should pollution be taxed? Should the government subsidize oil drilling?), and will demand more information about the history of their product. But exactly how much information the bulk of consumers want — and are willing to pay for — has not exactly been settled. I fear that catch-all, broad labels such as “organic” and “local” will suffer the same fate as price — just as suppliers often sacrifice the environment or human welfare to drive down price, they could just as easily (and often do) sacrifice the environment or human welfare to satisfy requirements for labeling their products “local” or “organic”. At the same time, metrics complex enough to provide the information necessary to make informed decisions remain elusive. It’s a difficult problem, and one I don’t think is going to be solved quickly or easily.

Every crisis is an opportunity, and we took the crisis of our truck breaking down (with an estimated $1,400 repair bill) as an opportunity to try to get as much delivered as possible. The hardest part, we thought, would be finding affordable and good-quality produce. However, that problem solved itself when we worked out a wholesale agreement with Hyde Park Produce up on 53rd street. We would run into Larry or his father, Yo-Yo, at the produce market in the morning anyway, and now for a small mark-up they are delivering boxes of produce (and smaller amounts of loose greens, which were not able to carry before) to us four times a week.

After two weeks, this seems to be working out well. We’ve been able to maintain our breadth of inventory (even expanded it), and we are committed to using the money saved from truck expenses to cover the small mark-up (about $1/box) rather than raising prices. Plus now we have an eye with 20-years experience in the retail produce business picking our produce, which will probably result in higher quality.

We plan on going to the market at least once a month in a rented vehicle, to maintain our relationships with the wholesalers and keep our ear to the ground regarding the produce world.

On the shelf: fractal broccoli (Romanesco) — check out the Wikipedia page. Also pomegranates, pears (ya, green d’anjou, red d’anjou) for $1/lb., blood oranges $2/lb., organic braeburn apples and jonagold apples (plus conventional honeycrisp, cripps pink, and granny smith apples), Looza juices, tubs of nuts and dried fruit.

Lots of snow outside; here’s what’s inside Open Produce this weekend:

On the shelf: Okra (much-requested), leeks, brussels sprouts, meyer lemons (a cross between a lemon and a mandarin orange), cantaloupe ($2.25 each), Napa cabbage ($2 each), and some Chilean cherries. I am usually disappointed by South American fruit (because it is picked unripe and shipped), but these cherries are truly delightful, and at $6.50 for a two-pound box, how can you say no? Also, for the weekend, blueberries (South America) and strawberries (Florida) are $2 a box!

I had an excellent salad the other day. You should try it out:

- chopped fuyu persimmon
- chopped fragrant pear
- arugula

We have plenty of all three ingredients here at Open Produce. You can add the following if they suit your taste:

- chopped walnuts
- crumbled goat cheese

If you end up trying this out, let me know how you like it. Also, feel free to post a comment with salad suggestions you would like to share with the other readers.

On the shelf (besides the above): Cripps Pink apples, cherries, pineapple, 10 types of tomato sauce, reed’s ginger beer, san pellegrino sodas (orange, lemon, chinotto), organic butter, organic yogurt, basil.