May 7, 2015
Whole Foods Market must reach four populations to have its new smaller, lower-priced, limited-selection stores succeed. Each one requires a different persuasion to be brought on board. There is no guarantee that any or all will get behind this new chain.
The first group is Whole Foods’ investors. The importance of this group is underscored by the fact that the announcement about the new venture was made on an earnings call with investors—and that it was made well in advance of the opening of the first store. If the investor community sees this move as adding profits to the chain and value to the stock, they are going to be happy with it.
The next group is the supernatural’s suppliers. They may be a bit more challenging. Many of these folks have been tapped, tapped and tapped again for price concessions by Whole Foods. While they all want more sales and growth opportunities—and Whole Foods does have a track record of delivering results— there is only so much money that can be shaved off the cost of a product. If the margins get too thin (or nonexistent), some brands will walk away.
Employees are next. Obviously, a key to the execution of a Whole Foods store is its staff. They are the ones, somewhat akin to the staff at Disney, who bring the magic to life. In the Whole Foods chain, with the emphasis on local products and unique offerings, the local staff and management get a chance to really shine. The announcement about the new brand gave me the picture of a chain of stores with Whole Foods’ ingredient standards, but with a limited selection and less service housed in a smaller footprint store. There won’t be the room or the opportunity for local expression. There also will not be the labor budget for it. My expectation is that Whole Foods will maintain its corporate values of taking good care of its staff, so the pay, benefits and working conditions will all be good, but the opportunities to grow, thrive and create will be limited. They may have a challenge replicating their staff performance in this kind of environment.
Lastly in our discussion, and ultimately the most important, are the shoppers. Will they buy into a “Whole Foods Light” concept? The strong success of concepts such as Sprouts and Fresh Thyme farmers markets hint that there will be a good marketplace acceptance. Both Sprouts and Fresh Thyme execute well—but neither have the name Whole Foods or the expectation to be part grocery store and part theatre with shoppers. My opinion is that for this brand to succeed with shoppers, it should not have the Whole Foods name anywhere near it. That will set a standard of performance that Whole Foods is not planning to deliver with this brand. If the difference is too stark, the new chain will be doomed before it starts.
The best bet—with the support of investors, suppliers and staff—is to open these stores as a new concept with a new name and for them to earn their place in each local market, one shopper at a time.
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