Innovative Retailer – Wholefoods Market

The Name: Wholefoods Market

The Place: America (all over the place) and the UK (a lot fewer but spreading fast-ish).

The Story: Innovation is in the DNA of the Wholefoods business – these after all are the people who pretty much invented the category of organic, health and ethics-filled shopping. Give me a product…

Lentils: The people who brought lentils out of their hippy, lefty, longhaired, veggie commune isolation and allowed you, mainstream person, to eat them too.

Right: CEO John Mackay’s first venture sounds like it was a very strict affair indeed.

Food police central: Absolutely. Expect to have been stared at for asking for anything with a face, or a bit lardy for you, or too sugary blah blah.

I get it. Not joyful: So in 1980 when that first venture was over and he set up Wholefoods he reassessed the proposition to roughly this: “People of America I just know that more than my core handful of hippies are going to love mung beans so let’s make this whole wholefood thing more fun and less about brown packets of mulch.”

Well, I’m in: Hey, then everyone was in, partner. You couldn’t move for people suddenly buying flax seeds to the tune of current sales revenue of around $13 billion.

Are you sure “everyone was in” though? Because if I may say with the prices they charge that $13 billion could be just a few people buying the olive oil: And can I just say that I’m really glad that you have brought up the issue of pricing so early in the discussion.

No, you’re not. I hear in the US the stores nickname is Whole Paycheck: Well, I never heard that. But I shall now lay this to rest once and for all. Yes, you can pay a lot for aged balsamic vinegar at Wholefoods but in the same aisle you will find vinegars for a fraction of that price probably in its 365 own-brand range, which just gets larger and more successful every day. It now accounts for 12% of overall sales.

Meh. Still a shop for the affluent only: This is exactly what annoys the management so much. If their first innovation was to bring whole foods to a mass market, the second will be to democratise that market.

Careful, you’re beginning to sound a little evangelical. Anyways, how are they going to do that: By opening shiny new stores in very poor, derelict neighbourhoods, which are exactly the same as the ones in wealthy, health–conscious suburbs.

Point of order, I think I may have spotted a teensy flaw here: Enough, I remind you at this point that Wholefoods is a business not a charity. It’s a business with certain ethical standards admittedly – don’t ask for anything with high fructose corn syrup in it – it’s on their list of banned ingredients and you will be judged – but once they have vetted the goods then we’re into the hard-nosed business of shifting it off the shelves. Trust me, its third great innovation is not trying to lose as much money as possible.

So, back to the flaw: Suspend your disbelief for a moment – they have thought this one through. The first such venture in a less affluent area is in Detroit – a bankrupt city where only the poor remain. Yes, it really is that bad. The major mind change they are working on is that it is possible for people on very low incomes to want to eat healthier than the very limited food buying options often available to them. And that these households can do their weekly shops in Wholefoods rather than just using it for a luxury dried fruit snack purchase. In other words, they are not hoping for a miracle gentrification as soon as they arrive – they are looking to sell to the inhabitants there now.

Expand: Most of the shops in these areas have gone – only a few corner shops remain and what they sell is expensive, single items of low health value. If you want jumbo packs of crisps, biscuits or pot noodles you are in luck. If you want a bag of fresh apples you are not. There may be a single apple on a good day but it will cost you as much as a bag of them in Wholefoods. It is a stern fact of life that the poor probably spend more on food because they have to take the low grade choice presented in small shops where everything is over-priced to make the shelves pay.

Can’t they just drive to a normal supermarket? Far less likely to have a car – it’s the same here you know. If you are stuck on an estate somewhere with an irregular bus service you will do more shopping than is good for your pocket in your one-and-only precinct shop and they don’t focus on health I can tell you.

It’s a toughie: It truly is – but crucially Wholefoods has canvassed opinion on what the local residents want (overcoming lots of “this is a shop for white rich people” on the way) and what the locals said was in essence, don’t give us the poor version of Wholefoods – we want the version that everyone else has. Not with bullet proof glass, and the obligatory bag check as you leave and the stuff you can’t sell to the richer customers on the outskirts, but exactly the same. We want to see the $50 olive oil even if we never buy it.

Slightly strange but OK: Oh, and they also wanted a smoothie bar. Wholefoods stores are famous for all the added extras so they were asked about that too.

Indeed: Best seller according to Fortune magazine is kale kickstart.

Poor people like vegetables. Who knew? Wholefoods knew. The next surprising location is going to be in a part of Chicago – tougher again than Detroit’s opener, which had university buildings nearby. The truth is that Wholefoods plan to open 1,200 stores in America is completely impossible if they are only going to look at sites in the high-income areas they are already in. They have to reach out to a whole new set of people and they are making the biggest innovation of their business lives that – with the help of the 365 range – they can attract a whole new section of society into their shops.

Necessity is the mother of invention: Correct. No one can tell if these will work – consultants don’t do prediction reports on where the poor will spend their money because it’s not worth it. But the Detroit store has reached its predicted 10-year sales mark within only 14 months. Wherever Wholefoods opens it creates demand that isn’t supposed to be there, which is why the firm has designed its own software for calculating good locations and scrapped conventional systems.

Yessir, I am feeling the Wholefood love now. Salford – here we come! Easy tiger. Let’s not run before we can walk. Not sure Salford is ready for kale kick start just yet.

PCMS Group is a leading independent supplier of software and services to the retail industry; PCMS Store and Multi-channel solutions have been chosen by over 98 retailers including Arcadia, John Lewis and M&S.