R&FF Retailer: 9 things Whole Foods Does Well… And 9 Ways Whole Foods Could Improve
Through a special arrangement, what follows are excerpts of a current article from Refrigerated & Frozen
Foods Retailer magazine, presented here for discussion.
While Whole Foods clearly does plenty right, like any retailer, there are a few areas it might improve. That’s especially true if it plans (as it says) to grow its sales by 56 percent over the next three years in the face of growing competition. We asked a cross section of industry observers – including frozen and refrigerated food vendors, consultants, brokers and competitors – for their thoughts on what Whole Foods could do better. (Our complete
story also focuses on what Whole Foods does especially well.)
1. The price image needs work.
Observers say the perception of high prices, justified or not, hurts Whole Foods, and it needs to take active steps to change this. They note that other supermarkets send out fliers to steer shoppers to their stores, while Whole Foods relies on word-of-mouth. It needs to do more to recruit mainstream shoppers who are not going to its stores, these people say.
2. Some buyers need to chill.
Says one vendor, “Whole Foods needs to educate its team more about category management and pricing strategies. Because they have a chip on their shoulder about their price image, the buyers are tough on suppliers and often themselves, depressing margins within a core commodity which hurts everyone from the farmer to the manufacturer to the retailer themselves.”
3. It could speed up a little.
Says a manufacturer trying to gain distribution: “I
have found the process of getting our items to the right place and point of
approval to be very slow. The information seems to flow very, very slowly and,
in my retail experience, that appears to be a sign of overwhelmed buyers…My
guess is that once you are in, it is a different story.” Yet other vendors
also selling the chain say decision-making can be very slow.
4. It relies too much on distributors.
Complains one vendor. “If you are a
local niche producer with high costs, further marked up by the distributor
and yet again by WFM, often your products end up with wildly high retail prices
and aren’t successful in the store.”
5. It must focus on hiring quality people.
Okay, so this isn’t really seen as
a problem now, but potentially a serious one as the chain expands.
6. More structure, but not too much!
They need structure, and maybe a hint
of standardization, but not at the expense of becoming homogenous. They need
to maintain their commitment to being a ‘neighborhood’ market. This flies in
the face of buying power but serves to keep them special and sensitive to each
store’s community. Says one observer: “The largest area I believe they could
improve upon is their distribution network. Once this is secure I believe they
can further that by implementing some national programs while not pulling too
much decision-making away from the store personnel.”
7. It needs to pre-order more product for promos.
“If WFM chooses to support
your items, they do sell lots of product and their stores do support the national
display programs. However, about half of the stores do not pre-order enough
product to manage their needs.” Another vendor says Whole Foods needs to reduce
its margins on promoted items, and to work with manufacturers better to help
them hit target feature price points.
8. Private label is gaining too much at the expense of branded items.
For the record, Whole Foods’ private label SKU count rose 13 percent over the past year, and it makes up 19 percent of grocery and whole body sales.
It must maintain differentiation.
According to one vendor, “Other retailers are quickly catching up in terms of adequate assortment that also delivers healthy, all-natural or organic alternatives. Whole Foods needs to make sure that shoppers do not become ‘equally pleased’ with the alternative.”
Discussion Question: Which of the recommendations for Whole Foods makes the most sense? Which makes the least sense?