It shouldn’t come as a huge surprise that Whole Foods is struggling these days. Their first quarter results show a continuing trend of dropping sales and reduced profitability which has been going on for a while now.
Like every other grocery retailer, they face increased competition from online sources (Amazon) and the major markets like Kroger who are now carrying larger selections of organic foods and specialty products at more traditional prices. Whole Foods has survived by being unique and carrying items not found anywhere else but were also able to charge high prices and thus make higher margins but they can no longer get away with that.
Of course the first thing they changed is cutting labor hours, which has resulted in customer complaints from customers who are not used to anything but immaculate stores and exclusive service. Now, as this article from Inc.com, says, they are lowering prices in an effort to compete with the grocery stores. The problem with that? In order to compete they have to centralize more which will eliminate a lot of the locally bought items that are one of the biggest reasons customers shop there. In other words, they’ll become more like everyone else.
This is similar to what happened to Longs Drugs, who thrived because of local autonomy and the managers ability to buy items from local vendors which enabled them to customize the store for their community. So in retirement communities they’d have more items for senior citizens, in recreational areas larger fishing sections, and so on. But as times got tough the company centralized and made it harder for the stores to buy locally and soon they became just another drug store to be acquired by CVS.
So if you’ve been shopping at Wild Oats because one of their crazy specialty items caught your eye, you might walk in one day and not find it any more. Hopefully they won’t get gobbled up by CVS or Walmart though…
There was some surprise recently when it emerged that Whole Foods was having problems.
An analyst at Barclays claimed the organic supermarket might have lost as many as 14 million customers over the past six quarters.
A big reason? Kroger.
This seemingly middle-of-the-road chain had suddenly pushed the sport button on the dashboard of its Honda Accord and realized that it, too, could stock organic food.
Why, then, would customers need to go to Kroger and Whole Foods?
The result? Kroger now enjoys more revenue from organic food than Whole Foods.
So what’s the Austin-based brand of the bearded save-the-worlders supposed to do? Become Walmart? Perhaps.
As the Wall Street Journal reports, Whole Foods is reducing its prices.
I hear you cheer. I ask you to pause.
You surely know, because you’ve lived a little, that the price reduction might have a downside.
Indeed, it seems Wall Street types have been pressuring the organic kingdom to operate more like the grub(by) proletariat.
So Whole Foods hired an executive from Target to centralize things. Target is the just-about-acceptable cousin of the Walmart clan.
I feel you shuddering. Your frissons may be justified.
One effect of this more politburo approach — Whole Foods is currently divided into 11 regions — may be that your local Whole Foods stocks fewer items. Fewer of those cuddly, local, quirky items you adore, that is.
Whole Foods’ CEO John Mackey says of the new strategy that it “strikes a balance” between the more locally sourced items and the big national brands.
One man’s balance is another man’s toppling down the mountainside.
Even more tremor-inducing is Mackey’s promise that customers will see “tremendous savings.”
It’s so hard to keep your cachet when you suddenly admit you’ve been charging too much.
You know how this may end. Whole Foods becomes more like Kroger, which has become more like Whole Foods, which means they all become the same.
Of course, it could be that once Whole Foods begins to shake the notion of it being Whole Paycheck, people will view it in a different light. In which case, annoying things like location and human touches like design and service might play a very big role.
But if the company really is losing business as Barclays’ analyst says, what incentive is there for customers to come back?
Is it just the prices? Or has Whole Foods begun to look a little ordinary?
If there will be fewer items, if (what customers used to see as) originality is lost in favor of, um, balance, where’s the attraction?
Perhaps the company will offer a new marketing campaign.
Whole Foods. We’re Like Kroger, But More Wholey.