Whole Foods Case Analysis
Whole Foods Markets’ sales have been in decline since last year due to intrusion from mainstream and specialty grocers. Whole Foods plans to revive its growth by starting a lower-priced chain aimed at millennials in 2016. These stores will be called 365 By Whole Foods Market and will concentrate on the sale of its private label inside a smaller footprint, and provide a technology-infused shopping experience. It is my opinion that the creation of Whole Foods 365 is a strategic blunder because (1) it is not appropriately meeting the needs of millennials and (2) it is losing focus.
When discussing 365, John Mackey Co-CEO of WF referred to it as a “chain for millennials” yet it seems to have miscalculated the needs and wants of this market. Mackay says 365 will be more focused on value, convenience, and technology than traditional Whole Foods markets however upon examination 365 does not deliver. As for value: A price review by the LA Times found that 365 produce is generally …show more content…
cheaper than Whole Foods, however, the prices are only similar to Trader Joe's and still far above those offered at Target and other major big box retailers. According to a study conducted by Entrepreneur magazine researching the shopping preference of millennials, when asked about price sensitivity, 95 percent of respondents said they have more or the same sensitivity to price as last year. Additionally, price was the greatest influence on millennial's purchase decisions above all other factors, including quality, brand, store, and availability. Even if WF 365 is able to deliver and beat the competition in the technology and convenience categories, if it is unable to meet the number one customer requirement, the value offered by other requirements loses significant value.
In addition to miscalculating the requirements of the millennial demographic, WF 365 is also a bad strategic move because it is a diversion from the core concept that made it successful in the first place.
When analyzed, top retailers around the country have grown to massive sizes by focusing on one core concept and doing it very well. Take Starbucks for example; the company is worth over $80 billion and it has grown to its huge size by focusing on premium hot beverages in the high-end market. Prior to Starbucks, there was no demand for a $5 cup of coffee. Starbucks was successful because it created an experience for the consumer and created demand.
It is my opinion that WF 365 will ultimately cannibalize the sales of WF which are already in decline. While 365 was established to combat Trader Joe's, Sprouts and similar vendors, I believe 365 will only add to the pricing pressure for Whole Foods. With the creation of the 365 brand, Whole Foods is acknowledging that the main brand is too
expensive.
Instead of pouring the time and resources into 365, Whole Foods should focus on improving and expanding its main stores. Whole Foods suggests that the premium organic market has the potential for about 1,200 stores nationwide, but currently, it only has slightly over 400. Having only reached one-third of its supposed market potential, Whole Foods should focus on the existing market opportunity that they have already mastered instead of venturing into uncharted territory.
Whole Foods Market has achieved success by leading the market in delivering premium organic foods along with top-notch service. In my opinion, the 365 concept is entering a crowded market already owned by Trader Joe’s and Sprouts and in the process sending a mixed message to consumers as to why they should pay the premium prices at Whole Foods.
When discussing 365, John Mackey Co-CEO of WF referred to it as a “chain for millennials” yet it seems to have miscalculated the needs and wants of this market. Mackay says 365 will be more focused on value, convenience, and technology than traditional Whole Foods markets however upon examination 365 does not deliver. As for value: A price review by the LA Times found that 365 produce is generally …show more content…
cheaper than Whole Foods, however, the prices are only similar to Trader Joe's and still far above those offered at Target and other major big box retailers. According to a study conducted by Entrepreneur magazine researching the shopping preference of millennials, when asked about price sensitivity, 95 percent of respondents said they have more or the same sensitivity to price as last year. Additionally, price was the greatest influence on millennial's purchase decisions above all other factors, including quality, brand, store, and availability. Even if WF 365 is able to deliver and beat the competition in the technology and convenience categories, if it is unable to meet the number one customer requirement, the value offered by other requirements loses significant value.
In addition to miscalculating the requirements of the millennial demographic, WF 365 is also a bad strategic move because it is a diversion from the core concept that made it successful in the first place.
When analyzed, top retailers around the country have grown to massive sizes by focusing on one core concept and doing it very well. Take Starbucks for example; the company is worth over $80 billion and it has grown to its huge size by focusing on premium hot beverages in the high-end market. Prior to Starbucks, there was no demand for a $5 cup of coffee. Starbucks was successful because it created an experience for the consumer and created demand.
It is my opinion that WF 365 will ultimately cannibalize the sales of WF which are already in decline. While 365 was established to combat Trader Joe's, Sprouts and similar vendors, I believe 365 will only add to the pricing pressure for Whole Foods. With the creation of the 365 brand, Whole Foods is acknowledging that the main brand is too
expensive.
Instead of pouring the time and resources into 365, Whole Foods should focus on improving and expanding its main stores. Whole Foods suggests that the premium organic market has the potential for about 1,200 stores nationwide, but currently, it only has slightly over 400. Having only reached one-third of its supposed market potential, Whole Foods should focus on the existing market opportunity that they have already mastered instead of venturing into uncharted territory.
Whole Foods Market has achieved success by leading the market in delivering premium organic foods along with top-notch service. In my opinion, the 365 concept is entering a crowded market already owned by Trader Joe’s and Sprouts and in the process sending a mixed message to consumers as to why they should pay the premium prices at Whole Foods.