The Secret to Whole Foods Market’s Success

Written By:
Jay Jacobowitz
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Every calendar quarter, public companies provide guidance to Wall Street to explain recent performance and project future results. In these quarterly telephone conference calls, investment analysts responsible for recommending stocks to their clients get to ask management questions to shed light on company strategy. While the “scripted” portions of these calls are interesting—where corporate executives read prepared remarks—the Q & A sessions that follow can reveal the most meaningful information. This was the case in the November 2012, fourth-quarter conference call hosted by Austin, TX-based Whole Foods Market.

An analyst on the call noted that, with a 7.3% sales increase, Whole Foods’ older stores have been “comping” very well. “Comping” is retail industry-speak for “comparable store sales,” which means comparing year-ago sales results of stores that existed largely in the same form last year as in the current year. This is a way to discern a retailer’s organic growth rate because it excludes new or expanded stores from the results, which can skew the numbers.

The analyst expressed surprise that these older stores—which he described as “significantly full”—could still increase in productivity given the “friction” of squeezing more customers into, and larger average transactions out of, a smaller, older space. Whole Foods’ co-CEO, Walter Robb, answered the question saying, “We are in a constant process of renovating, updating, with all our town stores.” By “town stores,” Robb means stores located in markets outside of the largest U.S. metropolitan areas historically favored by the company.

Robb went on, “We assume our small, mature stores are going to ‘cap’ out, but they don’t. The basket size continues to increase, our teams continue to increase. I think if you compare one of our 10-year-old stores to a conventional [grocery] 10-year-old store, you can see that our store is in a constant state of improvement,” Robb explained, adding, “I think that’s the secret” [my emphasis].

“We continue to upgrade and improve our stores so they don’t stand still. And if you keep making them fresh and you can even put new innovations in them, you can continue to be successful at them. The truth is we have some smaller, older stores that you would think had kind of reached their capacity; that you couldn’t get any more volume out of them, but they still manage to do it. And our sales per square foot are sort of phenomenal. Theoretically there have to be some limits, only we have never really seen that,” Robb concluded.

So, the secret to Whole Foods’ success in its oldest stores is really no secret at all. Whole Foods deliberately manufactures its success with a disciplined, methodical and continuous re-investment in its fixtures, equipment and use-of-space, that reinvigorates its presentations, its teams and its customers, all of which adds up to “sort of phenomenal” sales per square foot. What’s keeping you from improving your results? WF

Jay Jacobowitz is president and founder of Retail Insights®, a professional consulting service for natural products retailers established in 1998, and creator of Natural Insights for Well Being®, a comprehensive marketing service designed especially for independent natural products retailers. With 36 years of wholesale and retail industry experience, Jay has assisted in developing over 1,000 successful natural products retail stores in the U.S. and abroad. Jay is a popular author, educator, and speaker, and is the merchandising editor of WholeFoods Magazine, for which he writes Merchandising Insights and Tip of the Month. Jay also serves the Natural Products Association in several capacities. He can be reached at (800)328-0855 or via e-mail at jay@retailinsights.com.

Published in WholeFoods Magazine, February 2013