Whole Foods has tried to stay ahead of the bricks-and-mortar curve.
It was one of the first major retailers to publicly praise Apple Pay’s role in igniting mobile payments in a physical retail setting, noting that its customers appreciate stores that embrace technology (and it presented the stats to back it up). Whole Foods claims to be the leading Apple Pay retailer with 3.3 million transactions from the mobile payments app – a significant increase from Whole Foods’ 150,000 Apple Pay transactions it had processed by last year’s third-quarter earnings report.
Whole Foods has also shown its prowess in getting into the omnichannel groove when it blended the lines between brick-and-mortar and eCommerce when they paired up with Instacart for online delivery. Whole Foods said that it saw, on average, weekly Instacart sales increase to $1.5 million a week — and many of those sales reflected a higher basket size from consumers who loaded up their virtual carts with more stuff than they did their physical carts when shopping in store.
And now Whole Foods has a whole new strategy to keep it top of mind and win over a key audience: Millennials.
In an effort to counter its reputation as “Whole Paycheck,” the purveyor of organic everything is upping its focus on this young, tech-savvy segment by establishing a whole new category of shops. Just what will these new, so-called one of a kind “uniquely-branded” stores look like?
Basically, a smaller version of Whole Foods without the “whole paycheck” pricing. And perhaps they will be a little more edgy and have more of a focus on digital.
“Modern, streamlined design, innovative technology and a curated selection,” Co-CEO John Mackey said in a call with analysts last week. “It will offer convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high quality, fresh food at great prices.”
Mackey also gave an explanation of why the younger generation is a perfect audience to target, specifically because of their interest in “mission-driven” values that make them attracted to buying the types of products Whole Foods offers. He indicated the company has 420 stores planned and another 114 in development. And Whole Foods says it already has plans in place to produce a rapid expansion plan once the stores actually begin to open.
“We think a streamlined hip, cool technology-oriented store unlike any store anybody has ever seen before that has lower capital, lower cost, perhaps little labor cost and lower prices is going to be very, very attractive to that particular generation,” Mackey told analysts, giving them an insight without offering the whole story. “So you can’t envision it yet because it hasn’t been created yet. We’re creating it. It will be new. It will be different. It will be unlike any of the other stores you’ve seen out there. And hey, sometimes you have to wait to see it, but it will be worth waiting for.”
While other retailers are shrinking their storefront presence, Whole Foods has zeroed in on a niche that it hopes will allow it to keep growing, and even tripling its storefronts, Mackey said.
“Over the past several years, we have explored the idea of new formats several times but never felt the time was right, particularly given our accelerated growth plans,” Mackey said. “That issue is now behind us, as we have successfully increased our new store openings for six years. In addition, we now have a successful track record of opening some smaller format stores with a lower cost structure.”
He was also quick to point out that Whole Foods is looking at this new model as an “and” addition to Whole Foods’ model, and not an “or” scenario where Whole Foods will have to sacrifice its traditional model for its new, younger-focused stores. Instead, Mackey believes the two concepts will complement each other.
“In the best of all worlds for Whole Foods, people will shop both stores,” Mackey added. “They’ll come in and enjoy the big, exciting Whole Foods market and they will do fill-in shops at the new concept and the stores will intermix with each other in a very unique way.”
While Whole Foods has already attempted to make their stores more than a retailer of organic food products, and more of an experience destination with its taproom and wine bars at select markets, its new millennial model is expected to be more than just a retailer with a bar. Instead, Mackey said he envisions that the new models will be destinations consumers will want to visit.
“We want these stores to be incredibly exciting. So the trend line for Whole Foods’ market will probably be towards larger stores that are very experientially oriented with a very differentiated product mix for the customer base and then we will have our new format that will be, the stores will be more streamlined and won’t be as large,” Mackey said.
So what are some of the secret weapons that Whole Foods will use to attract this younger audience?
Whole Foods leaders kept a tight lid on specifics, but Mackey did allude that technology will play a big role in how the stores are developed, noting that “tech-savvy stores” will be “value focused,” with a “tailored product mix.”
He indicated Whole Foods would be rolling out a full reveal later this summer about what exactly the retailer has in store for its new millennial markets. While he didn’t share quite as much as some would hope about what’s next for these stores, other comments about Whole Foods’ digital and mobile payment focus indicates that Whole Foods is learning from its digitally-savvy customers just what their new storefronts should incorporate.
“We are, through the use of technology, building out and extending ourselves where our customers are whether it’s through Instacart for home delivery, which we’re doing more than any other grocery store in America now,” Co-CEO Walter Robb said during the company’s earnings call. “And we’re really just getting started whether it’s through affinity, which builds a personal connection to customers who will allow to customize their relationship with us [or] whether it’s through the ease of Apple Pay.”
Between its online delivery options, Apple Pay integration and the addition of its mobile app last year, Robb said the investments in technology have shown how fusing digital technologies into the customer experience can truly pay off for a retailer. While its digital footprint may not be as big as the CEO would like at its current state, he’s hopeful Whole Foods can stay ahead of the curve as the rest of retail continues to manage the massive disruption that’s coming from digital innovations.
“All those things are in the works, and I wish that we were doing them faster, but we’re doing them as fast as we can do as we replace our foundational systems and technology. To get there, ultimately where we’re going is to create this fuller, richer experience,” Robb said. “And digitally for our customers…we’re taking these steps and we’re doing it at a time when the marketplace is going through a huge transition.”