The Three Retail Advancements Whole Foods Market is Making

While Whole Foods Market (WFM) once cornered the niche organic market, competitive alternatives are now causing the retailer strife. The grocer reported its sixth consecutive quarter of falling same-store sales and plans to close of nine stores its second quarter.

People aren't driving long distances to WFM on the weekends to do big shops as much as they used to, explained CEO John P. Mackey in one example. To combat this, the company is resetting and refining its growth strategy, including focusing on its niche of core customers.

"Through our affinity work, we know that our core customers represent our largest customer segment and account for a majority of our sales," said Mackey. "While they are already highly engaged with our brand, there is still significant opportunity for growth."

Part of WFM's refined growth strategy includes three solutions to curb operating expenses and improve the shopping experience for customers.

1. Data driven category management

WFM is focusing on managing the company "a lot more with data and marketing information," said Mackey. To this end it has teamed up with customer science company dunnhumby to evolve its category management and merchandising fueled by customer data and insights. This may enable WFM to create experiences where shoppers can find the products and services they are looking for faster and easier.

"Evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities are critical steps – steps that are integral to our go-forward merchandising, pricing, marketing, and affinity strategies, particularly with regard to supplier support," explained Mackey.
WFM wants to accelerate category management to accelerate its price investments, according to Mackey, but in a more strategic and efficient way than the company has done so far.

"Dunnhumby has a proven track record of using data-driven, customer-led insights to create relevant shopping experiences for customers on a market-to-market basis, and this strategic partnership will help us go faster, do more, and do it better," said Mackey.

2. Kiosks

The retailer’s Bryant Park, New York City location opened January 28, catering to the neighborhood’s Midtown crowd by placing emphasis on prepared culinary offerings. To meet the needs of these time-pressed shoppers WFM included quick service kiosks, where food orders can be placed through a digital ordering solution.  

In its first week, on the average hour, the company was achieving four times the amount of orders on the kiosk than any other store it's ever had, said David Lannon, Executive Vice-President of Operations.

Some of the labor cost reductions WFM is making involve determining where its customers want the company to provide service, and where do they not. Mackey said, for example, when the company switches pizza from a service department to self service, in many cases sales go up 100%.

Examples of food that can be ordered from the new kiosks include: Italian Sandwiches, Nosh (featuring Jewish-style sandwiches), Hot Chicken (offering Nashville-style spicy fried chicken), and Indian-inspired Indie Bowls, created in partnership with Chef Hari Nayak.

3. Automatic Replenishment

WFM's "order-to-shelf" project, where some products are moved directly from the loading dock to store shelves, is reducing back room inventories, and the amount of time that's spent moving inventory.

"We're basically examining every aspect of our retail operations and asking what are we doing here that's not creating value, that's just adding unnecessary cost," said Mackey. "We'll see increased efficiencies gained as we go to automatic replenishment, which we're pioneering at some of our stores right now."

The order-to-shelf project is led by Global V.P., Distribution, Bart Beilman and has reportedly has transformed inventory levels in the back room, essentially clearing them out of inventory that's not necessary. It's "really improving and helping our out of stocks, as well, dramatically," said Executive V.P., Operations, Ken Meyer.

According to Lannon, in the stores with order-to-shelf, WFM is looking at some very empty back room spaces, and is therefore contemplating store designs involving less room in the back of the house than traditionally.