The Rapid Rise of Southern Express

Express to Success

The Rapid Rise of Southern Express

Southern Express’ vision of the convenience store of the future is
creating lots of profit in the present

By Jane S. Gerring

To any objective analyst, the thirteen U-Tote’m convenience stores which Owais Dagra brought in 1991 would not have been considered a good investment. But Dagra not only made his acquisition a success, he also now operates one of the fastest growing “C-store”chains in the Richmond area.

With total sales of $4 million, the U tote’m chain had been losing money for four years. The company’s one profitable store, which had barely managed to keep the small chain out of bankruptcy, was not part of the deal.

The stores had been on the market for a number of years –with no takers. Meanwhile they hadn’t been upgraded, and their age was showing. Most had been built in the fifties and sixties.

“They were very outdated, dark, dingy,” admits Owais Dagra. “Frankly, nobody else was interested in touching them.”Many of the stores locations were losing their appeal also, as neighborhoods and traffic patterns changed.

In addition, Owais Dagra’s credentials as a turnaround artist were yet to be established. He was only twenty-six, with limited personal resources, and he’d spent last few years as the owner/operator of a single West End convenience store he’d purchased in 1989 from another local chain. But Owais Dagra had turned that store from a loser into a winner, and he knew the business as only an operator can.

In the four years since he bought U-tote’m, Owais Dagra has achieved a remarkable turnaround. In six months, his company, Southern Retailers, Inc., was profitable. By the end of 1994, he owned twenty stores, operating at sales rate of $25 million per year, and profits are still growing. Sales projections for 1995 exceed $30 million.

How did Dagra do it?

FINANCING THE DEAL

For Starters, he had to raise the money to buy the U-tote’m stores. He sold his own store for a modest profit and then turned to the banks for additional financing.

Not surprisingly, he was turned down by every bank – except one.
Owais Dagra found a believer in V. W. Henley, chairman of the board and president of Consolidated Bank and the Trust Company.

“He convinced me that he had sufficient knowledge to be successful in running the stores,” says Henley.” “His ideas made sense and the young man seemed to understand the business he wanted to go into”.

Owais Dagra did indeed have ideas about the convenience stores industry, and he immediately began to put them into action.

His ideas were combined into a strategy that guided the early improvements in the U-Tote’m stores and continues to guide the expansion of the company today.

His strategy was simple:

• Redesign the stores to make them more open, inviting and safe to attract more customers, particularly women.
• Change the product to reduce the labor costs while enhancing the sales of high margin impulse items.
• Develop a personnel structure and policies that attracted and retained quality personnel.

REDESIGNING THE STORES

Underlying Southern Express’ strategy was a clear vision as to what the convenience store of the future should look like.

To start with, Owais Dagra was convinced the stores had to be clean, and cleaning up became his first priority. They also had to be bright, comfortable and safe. Women are a big part of C-store market, and they are reluctant to come into a store that isn’t open and well-lit.

The stores’ designs had to be revamped. Instead of the no-frills approach normally associated with convenience stores, Owais Dagra planned a much more open layout that would attract more customers and keep them coming back. Southern Express stores now feature large windows, bright lights, and uncluttered aisles displaying a wide variety of snacks and necessities. Despite the availability of “free money” from vendors, no advertising signs block the view in or out of the store.

Owais Dagra also designed all the fixtures for the stores. The fixtures are easy for store personnel to reach and service, and all are permanently attached, to ease the job of caring for them and to insure consistency for customers.

 

CHANGING THE PRODUCT MIX

Owais Dagra was also convinced that U-Tote’m’s inventory had been wrong for the market. While conventional C-store wisdom is to offer more and more specialty items, particularly in the food service area. Owais Dagra took the opposite approach. He designed the product mix to minimize labor. That meant concentrating on packaged foods that do not have to be prepared by store personnel.

Owais Dagra also has added wider selection of candies, snacks and other items to the store’s product mix. If you want hard candy, you can find it at several different price points. If you want beer, you will find chips right beside it – not just on the gondola of chips. Southern Express’ product mix is broader than most C-stores, with lots of high margin novelty items.

CONSOLIDATION AND REFINEMENT

In his first eighteen months, Owais Dagra sold five stores, retrofitted two in his newly designed “Southern Express” format and acquired new stores. These ten major transactions set precedent that would beign to shape Southern Express for the future.

During 1993, the second full year of operations, Southern Express consolidated its operations and continued to refine its store mix through store acquisitions and divestitures. “Retrofits” were completed in three more U-tote’ms. The company also acquired six stores, including two that it had sold the previous year. To round out a year that included ten transactions, one unprofitable store was sold.

In 1994, the company again completed ten transactions, but this year the emphasis was on growth. Eight new stores were opened or acquired while one was closed and one remodeled to fit the Southern Express format.

Owais Dagra also used the year to refine the Southern Express concept. He hired several C-store “pros,” including Larry Landis, an experienced operations manager, to serve as Vice President of Operations. It would be Landis’ job to manage the stores and see the company’s vision was implemented. He also added Bob Cash, a marketing manager from a Des Moines, Iowa chain who shared vision for comfortable, safe and low labor stores and Michael Kappler, a human resources manager from Circle K in Florida.

By the end of 1994, chain was prepared to grow.

THE FUTURE

With four stores opened in the first three months of 1995, Owais Dagra plans to build the convenience store chain of the future. “We feel when a customer comes into our stores, we are giving them an experience of what the convenience store is going to be in 21st century,” he said.

For the most immediate future, Owais Dagra plans continued expansion in the region. Southern Express already has twenty stores in the metro area and plans aggressive growth in the near future. These stores will be designed and engineered to last long into the future. His commitment to the long term is evidenced by his willingness to invest in higher upfront costs in each store to reduce labor and maintenance costs, and improve the image of the store.

Southern Express does not have any immediate plans to expand outside the area. “My philosophy has always been to go in, define a market area and try to dominate it,” Owais Dagra said. “I’d rather have a dominating presence in a small market than a small presence in a large market.”