While only two 365 by
In fact, the amount of goods that customers have been buying at the two locations has forced Whole Foods to redesign their front-ends. The chain had expected smaller market baskets and, therefore, designed what David Lannon, executive vice president operations, called “smaller, teller-style registers.”
One of the surprises around the new concept is that fresh meat sales at 365 are in line with the typical Whole Foods location. What makes this interesting is that the new concept is completely self-serve, while Whole Foods has built its reputation, in part, on the service it offers in its mainline stores.
While Whole Foods has been hurt by the labeling of the chain as “Whole Paycheck,” the new 365 concept may help change that value perception. A report on the Today website claims that a market basket comparison on like items at Trader Joe’s and 365 by Whole Foods showed the new concept was in line or lower priced than its rival.
If this price comparison holds, it could be a game changer. A market basket comparison of
Further emphasizing price, the new 365 stores, according to Mr. Lannon, will also offer Whole Foods’ new “Gimme 10” loyalty card program, which enables customers to receive an additional 10 percent off selected items. So far, over 16,000 individuals have signed up for the program at the two 365 stores.
In an online discussion last week, some of the industry insiders on the RetailWire BrainTrust saw the preliminary success of 365 as the road to solidifying Whole Foods’ embattled position in the market.
“Whole Foods’ core value proposition appears tired at this point as rivals have matched its fresh offerings at lower prices,” said Ross Ely, president and CEO of ProLogic Retail Services. “365 gives Whole Foods an opportunity to reset its operating model and better compete against its arch enemy Trader Joe’s. ... We should watch for indications from Whole Foods about applying the learnings from 365 to its traditional stores.”
But for some, the current state of the main Whole Foods chain didn’t look so bad.
“If you look at the ‘disappointing’ numbers around Whole Foods lately, they’re still profitable, they’re still quite impressive, they’re just not as stellar as they used to be,” said Lee Peterson, EVP brand, strategy and design at WD Partners. “I’ve always believed that you have to look at the concept and the execution, not at what Wall Street thinks their numbers should be. And to me, a Whole Foods store is still leagues above the competition in both those categories. Here’s to 365 and the next piece of the portfolio.”
Peterson noted, along with others, that concepts like 365 could represent the future, not just for Whole Foods, but also for grocery as a whole.
“I predict that we’ll see other grocery chains follow suit until a new, smaller format is established that has more product types than a convenience store but fewer choices in each category than a full supermarket,” said William Hogben, CEO of FutureProof Retail. “This is in keeping with decreasing incomes, continued urbanization and the need for grocery stores to offer high convenience.”
And one BrainTrust member noted that the new concept might already have more competition than one might expect.
“While it’s tempting to compare 365 with Trader Joe’s, I think an equally challenging competitor could be 220-store Sprouts, which has positioned itself as the healthy food supermarket for the masses across the southwest,” said James Tenser, principal at VSN Strategies. “Other regional competitive pressure comes from Natural Grocers (96 stores), the Colorado-based chain, and
