When the topic of a big player putting mom and pop stores out of business comes up, the discussion usually comes around to the mention of chains such as Wal-Mart or Home Depot. In Hawaii, however, the entry of another big chain has little guys apprehensive about the future. The "big bad" in this case is Whole Foods, which plans to open four stores in the state over the next three years.
Dean Nelson told the Honolulu Advertiser what it was like when Whole Foods opened a store near his business, Dean's Natural Food Market, in Ocean, New Jersey.
"You see your life and your family's well-being flash before your eyes," he said. "You get hit with one punch, recuperate, then get hit with another punch."
According to Mr. Nelson, Whole Foods hit hard with sales down as much as 40 percent on some days. Still, his business survived while three other small competitors in the area were forced to close.
Now, independent natural food stores in Hawaii are interested in the experience of Mr. Nelson and others that have managed to survive the Whole Food juggernaut.
Daryl Yamaguchi, president and co-owner of 'Umeke Market Natural Foods & Deli in Kahala, compared Whole Foods entry into the Hawaiian market to a retailing "tidal wave." He doesn't, however, see the chain's entry as necessarily all doom and gloom.
"They are going to grow the market," he said. "Anyone related to the industry is going to benefit."
Damian Paul, owner of The Source Natural Foods in Kailua, is another who believes there will be some benefits to having Whole Foods in the market.
"Whole Foods will introduce natural and organic foods to a whole crop of people who wouldn't shop in my store," said Mr. Paul, whose business is a block from one of the locations where Whole Foods is expected to open. "I think it's really going to affect Safeway, Foodland and Times more than it will us."
Messrs. Yamaguchi and Paul along with others including Ed Thielk, president of Mana Foods in Pa'ia, Maui, are looking to prepare before Whole Foods opens by making adjustments in product selection, merchandising, customer service and other areas.
Mr. Thielk told the Advertiser, "We expect them to come in and start a price war immediately. We feel we can go blow for blow, but they have deeper pockets and it doesn't hurt them as much."
Mark Fergusson is CEO of Hawaii's largest natural foods retailer Down To Earth Natural Foods and Lifestyle. The company operates five stores averaging 5,000 square feet. He doesn't see Whole Foods entering the Hawaiian market as a friendly competitor.
"Whole Foods is a $5 billion company that built its success by eliminating the competition with their high-profile and aggressive CEO publicly stating that as his goal," he said.
Merchants who spoke with the Advertiser said they expect to have to lower prices to remain competitive when Whole Foods opens for business. They also see the need to more aggressively manage inventory to offer products the bigger chain may not carry.
"While there may be some demand in Hawaii for the high-priced gourmet products and glitzy shopping experience that Whole Foods has to offer, this is not our market," Mr. Fergusson told the Advertiser.
Turning back to Dean Nelson and his experience in New Jersey, he said he was able to survive the hits from Whole Foods (and Wegmans too) because he focused on areas where he could be stronger than the chains.
He also came to the understanding, he told the Advertiser, that "Your best customers are going to shop at both locations whether you like it or not. That's just the way it is. There's almost nothing you can do. You don't beat these guys, you coexist with them."
Today, he said, sales are back to within five percent of where they were before Whole Foods opened. "I feel we're on pretty firm ground," he said.
Discussion Questions: What should independent natural food stores do to prepare for a Whole Foods opening down the block or in a nearby town? Do traditional supermarkets have more to fear from Whole Foods than small natural food stores, as suggested in the Honolulu Advertiser article?