Retail Rap: Half Foods?

When Whole Foods Market announced in May that it planned to open a new chain of stores offering a lower price point and specifically targeting millennials, it’s safe to say that the reaction from industry analysts and observers was underwhelming. Responses have ranged from confusion to outright skepticism, and there is a general sense of uncertainty surrounding the whole enterprise.



My own reaction falls somewhere on the spectrum — somewhere between “dubious” and “confused.” I have many questions, not least of which is why, if the new chain will continue to remain focused on offering healthy and all natural foods, Whole Foods would go to such lengths to create a brand that has the potential to cannibalize their own business.



While the announcement promises a “new” and “different” concept, I’m not clear about how "It will be unlike any of the other stores you’re seeing out there.” The stores will reportedly be “technology-oriented,” with a streamlined design and a “curated” product selection. All of which is fine, I suppose, although (again) it doesn’t tell us much in the way of specifics.



There has been lots of discussion about the wisdom of expressly targeting millennials, but the big question to me is why you would go all-in on such a strategy when it seems like Whole Foods is already getting a strong share of millennial business. It depends on which Whole Foods location you go to, of course, but in my experiences millennials seem to be a well-represented demographic.



Some of the media/analyst pushback against the idea of Whole Foods going after millennials stems from the fact that the link was so clearly made between millennial business and cheaper products. Setting aside the accuracy of whether or not going for lower prices is the right way to capture more of the millennial market, there are definitely some questions about how that approach (and even perhaps that statement) will be received by millennials.



I can’t help but think that there are more subtle ways to do that without the extreme expense and complication of rolling out an entirely new concept. Why not take the existing Whole Foods concept and engage in more sophisticated micro-merchandising efforts? That’s something Whole Foods is already doing today. The company also deserves credit for their flexibility, and for recognizing that they need different store sizes and layouts to reach different markets and locations. Compared to retailers like Wal-Mart, which has a small handful of store size and layout specifications, Whole Foods has quite a large amount of variability.



Competition is clearly something that will loom large in this new chain’s success or failure. The problem, as I see it, is that with Trader Joe’s and Sprouts both already flourishing in the same general space that this new brand will occupy (higher quality, perishable focused, affordable price point), will there be room for the new stores to breathe? Trader Joe’s and Sprouts also appeal to a similar demographic segment as Whole Foods —although leaning toward the more price-sensitive customers.



So the dilemma is this: if the new chain is too close to Whole Foods (either in name or concept/execution), you run into the brand confusion issues, and you might be siphoning off some of your existing business. On the flip side, even if the new chain is not too closely connected to Whole Foods and establishes its own clear identity, it’s still going to be awfully difficult to get meaningful traction in an environment where names like Trader Joe’s and Sprouts are performing well and expanding significantly.



The good news is that, while lots of questions remain about the new concept, according to the retailer’s announcement we won’t have to wait too long to get those questions answered: Whole Foods plans to release more details this summer, and the first new stores are set to open as early as next year!



I don’t know about you, but I’m extremely curious to hear more and to try and get a better sense of just how Whole Foods plans to make this new concept successful. Could you see this type of brand flourishing in the current marketplace? Are there more pieces to the millennial puzzle that we’ve yet to put together? Add a comment below, or email [email protected] to keep the conversation going.