They say imitation is the sincerest form of flattery. And Whole Foods is so flattered by its imitators, that it’s imitating them right back. But who will win in the end – the original, the imitators, or the original that’s imitating the imitators?
If this all sounds a little confusing, Whole Foods Market says it’s simple, really. Natural and organic have now gone mainstream. Once you’re able to get locally-sourced watercress at Walmart and fair-trade kale at Kroger, there’s little incentive to go to Whole Foods and pay a premium for the very same products.
So Whole Foods is planning the next best thing to lowering its prices to match its competitors – it’s launching an entirely new grocery chain with lower prices. The idea is to cater to people who want Whole Foods quality, without spending their Whole Paycheck.
“We are excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace,” Whole Foods co-CEO Walter Robb announced late Wednesday. The new format, he promised, will “deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.”
The as-yet-unnamed chain (Update: it’s now been named “365 by Whole Foods Market”) will coexist with its bigger sibling, and could quickly grow to be as large as the 417-location Whole Foods itself. The new concept will be smaller, streamlined, with a “curated selection”, allowing the company to keep costs down and pass the savings on to more value-conscious customers.
The ultimate aim, co-CEO John Mackey explained, is to “broaden the accessibility of fresh healthy foods.” But lest you think Whole Foods is opening its own version of a Walmart Neighborhood Market – or ALDI – Mackey promised the new banner will consist of “hip, cool, technology-oriented” stores. The target customer will be anyone who isn’t up for the full-price Whole Foods experience, especially younger shoppers who appreciate Whole Foods’ quality and corporate values but are too price-conscious to shop there. The new store could attract a new generation of shoppers, who may someday trade up to shopping at the mother ship.
But the big question among retail watchers, is whether Whole Foods is showing amazing foresight – or admitting defeat? As the competition heats up, Whole Foods’ financial performance has been cooling off. The company has responded by trying to lower prices and offer more sales. Turning toward an entirely separate lower-priced model may be something of an admission that the flagship Whole Foods chain will never be able to get its prices low enough for some shoppers.
At the same time, directing its price-reduction efforts to an entirely separate chain, could help Whole Foods silence its critics, by giving it the freedom to keep prices in its flagship store right where they are. Don’t like the prices here? Well, maybe you’d be happier shopping at our lower-priced sister store instead.
“We’re not looking to race to the bottom,” Robb insisted. “We’re looking to be relevant on price.” And two different stores with two different price points just might be the way to stay relevant, with so many lower-priced competitors now encroaching on what was once Whole Foods’ own natural-and-organic territory.
Whole Foods plans to announce more details about the new chain – including a name – by Labor Day, with the first stores opening next year.
Oh, and Whole Foods still expects to continue expanding its original chain at breakneck speed. “We believe we can still triple the number of Whole Foods Market stores in the United States,” Mackey said. And if stores in the new chain open at the same pace, we could be looking at a world in which Whole Foods eventually has some 2,400 stores. That would transform Whole Foods into one of the largest and most ubiquitous grocery stores in the country.
So, hope you like artisanal arugula! And if Whole Foods has its way, pretty soon you’ll even be able to afford it, without spending your whole – well, you know.
