A Model Location
He expects the new store not only to serve the area but also be a destination shop, even for folks who might normally shop at another of his Fargo stores. “Our parking lot here is immense and very easy to get in and out of,” he says. “We’re noticing that our customer averages at the new store are very robust and the number of premium items we sell are as well. That’s what we were hoping for and it’s turning into a reality.”
Happy Harry’s stores are also known for wide aisles, low shelving and wide open spaces – a suitable design touch for the northern plains.
“We have every aisle at least five feet wide so there’s no butt-brushing,” he says. “We keep the shelving profile low because I believe as people get older (and we have an older demographic here), they start to lose their peripheral vision and people don’t like to feel like they are in canyons and confined to small spaces. That’s true of all shoppers, really.”
It also helps both older customers and those either short or not especially nimble, to be able to reach any item without assistance.
“A trend in our industry has been to put as many things in the store as possible and go really tall with shelving,” Mitzel says. “As long as we can, we’re going to keep our profile low so that people can see the whole store and feel connected to all that’s in it. We find that feel lends to a more relaxed shopping experience for our customers and they linger longer.”
The new store shares employees to some extent with the closest Fargo store, but there are at any one time 30 or so maintaining the 7500 beverage alcohol SKUs and another 1500 or so bar supplies, food and tobacco. Happy Harry’s employs about 110 among all stores.
Family and Service
Gershman, a former Grand Forks City Council president from 2000 to 2014, took over Happy Harry’s in 1976 from his father, Harry, who started the company in 1944. In 1990, Gershman opened a second store, this one in Fargo. In 1993, he opened a second Grand Forks location.
The new unit incorporates all the touches that have made Happy Harry’s so successful for so long: for example, carry out service in all stores. Whether a single bottle or cases, a staff member carries all purchases to the customer’s car, something especially helpful in the frigid ND winter months when juggling gloves and keys and bottles can be awkward. “Why would you put your customers through that?” Gershman asks.
A new tweak seen in all the stores are beer growler stations, with rotating tap handles that differ from store to store. “This has been really fun for us and we’re able now to feature some of our local North Dakota breweries as well. Beers that typically were only offered on-premise and now we have a vehicle to sell our customers these limited release beers, with a technology that keeps them fresh for 30 to 45 days,” Mitzel says.
With beer making up about 45 percent of Happy Harry’s chain-wide sales, upgrading beer was a big boost (spirits account for about 28 percent, wine 24 percent and other items about three percent).
“The steady business growth of the growlers is very encouraging,” Gershman says. “Lots of pubs and restaurants have them, but our system [the patented Pegas counter pressure filling technology] works better than most systems.” In addition, the growlers stations offer tastings three times a week for five to six hours
“Our market always has been a very strong beer market,” Mitzel says, “Fifty-five to sixty percent of it is driven by the big national brands, but as we grow, beer sales may tick up because of growlers and craft beer.”
Changes in wine trends have been slower. “Our market has always been driven by western wines – California, Washington and Oregon,” Mitzel says. “We share similar trends to the country, but sometimes it takes a while for them to get here. We’re in the sweet belt so we may sell a higher percentage of Moscato and Reisling and other sweet things, because our customers have always called for them.”
With spirits, the larger store size has increased small distiller product introductions, Mitzel says. “The market has been really receptive to small distillers within the region, and some of them put together nice products with great packaging. Some are as good as any national brand, and we’re seeing a groundswell of support for many of them.”
Simultaneously with the building of the store, Gershman was working on yet another project – turning Happy Harry’s into an employee-owned business through a complicated employee stock ownership plan (ESOP), a common tool used to pass ownership of a business to its employees. In it, employees buy or earn stock in the company while they are employed and are paid out for their stake in the business when they leave the company or retire.
“As of Jan. 1, the company is 100 percent employee owned, and I’m very proud of that. I have no successor in the business and if you sell a business like ours outright, the first place anyone will look to save money is the key people and I couldn’t do that – they’ve been so loyal to us,” Gershman says. He’s still in charge for now, and he’s optimistic no serious changes will occur anytime soon.
“The thing is this – change is going to visit you, whether you like it or not. The key was, this is a way for me to manage change rather than wait for something drastic to happen. I was able to put my hands on the steering wheel and manage the change that I wanted.”
The same smooth transition to a new store filled Gershman with confidence that he had the key people in place that would justify an ESOP. “The key is to have qualified people to turn the business over to. More than one key person; you need a depth of qualified talented key people. We have such a strong bench. When we opened the new store, we had the management team to move in and didn’t miss a beat. If you came in the first day, you would have thought based on the talent we had there that we’d been open for years.”
Jack Robertiello is the former editor of Cheers magazine and writes about beer, wine, spirits and all things liquid for numerous publications. More of his work can be found at www.jackrobertiello.com.