Today, let's talk about another quirky supermarket that the industry calls "the last model of retail innovation." While other supermarkets are promoting sales and engaging in price wars, it does the opposite: its most ordinary food prices are 10%-20% higher than Walmart's, and most products are 40%-175% more expensive than ordinary supermarkets. Despite the high prices, people still flock to it. It is the largest natural and organic food retailer in the United States—Whole Foods Market.
Whole Foods Market was founded in Texas in 1978. In 1980, the first Whole Foods organic supermarket opened, with food prices 40%-175% higher than ordinary supermarkets, yet consumers still flocked. In the first year, the small store's sales exceeded $4 million.
In 2004, it opened a flagship store in Manhattan's famous Time Warner Center, covering over 5,000 square meters, making it the largest supermarket in New York. That same year, it crossed the ocean and acquired six branches of the natural food supermarket "Fresh & Wild" in London, which the UK's Financial Times praised as "the fastest-growing large retailer in the United States."
By 2013, Whole Foods' sales reached $12.9 billion, with continuous growth for over 30 years, averaging a 13% annual increase in earnings. It ranked 232nd in the Fortune 500, with 375 stores and over 60,000 employees.
Why is Whole Foods so popular despite its high prices?
1. A "healthy" brand image deeply rooted in people's minds
In the 1980s, with the accelerated industrialization of food, consumers became increasingly concerned about food safety. People craved healthier food, but most supermarkets did not transform due to profit needs. Founder John Mackey identified this pain point.
In 1980, when John Mackey opened the first Whole Foods supermarket, he positioned it as a "health nutritionist" for customers, helping them select foods free of pesticides, growth hormones, and antibiotics, allowing customers to buy with greater safety and confidence. Sales broke $4 million in the first year.
So why do customers trust that Whole Foods products are "healthy"?
1. Increasing customer's right to know about products
All products at Whole Foods have labels, maximizing the customer's right to know, and then letting customers choose for themselves.
▼For example, this meat cut's label says: NO CAGES, NO CROWDING, Non-GMO fed, and the number "1" is Whole Foods' rating for this product. This means the pig was raised in an environment without cages or crowding, and is non-GMO, with a rating of "1".
▼This drink's green label says "organic," meaning it's an organic product.
▼These apricots and pears are unrated; the circular label on the blackboard says "conventional" and "unrated," meaning they are ordinary apricots and pears.
Most Whole Foods products are organic and natural, but that doesn't mean Whole Foods has no GMO products, because over 70% of American foods contain GMOs, and the U.S. government does not mandate GMO labeling, so Whole Foods finds it hard to avoid. Therefore, Whole Foods was the first supermarket to require the U.S. government to mandate GMO labeling, and also the first to promise transparency in GMO products by 2018.
Whole Foods believes that consumers should have the right to know about the products they buy. Therefore, all suppliers must fill out a nearly 40-page supplier application form before entering, detailing the land conditions, planting conditions, animal feeding, and growth environment.
2. Establishing an extremely strict evaluation system to increase customer trust
Whole Foods has established extremely strict evaluation standards for all products (including non-food items). Each direct-operated store has its own quality management committee responsible for safety supervision and evaluation of all in-store products.
For example, meat products have six evaluation levels, with level 1 being the most basic. The "1" standard includes no antibiotics, no growth hormones, and must be raised in an environment without cages or crowding, with daily air quality checks and feed conditions. So when a supplier reaches level 5 or 5+, the product quality and health level are very high.▼
▲Six levels of meat product evaluation
▲These chicken labels say "3," meaning a rating of "3," and next to the number it says "enhanced outdoor space," so consumers can understand at a glance. (Besides the "enhanced outdoor space" label, rating "3" has many other requirements that can't all be listed on the label, so it's simplified for customer understanding.)
If you look closely, you'll notice that many "big brand" snacks are not available at Whole Foods because all foods containing additives are prohibited. Even for non-food items, Whole Foods' evaluation standards are equally strict.
For example, in the selection of personal care products, 50 ingredients are banned, including triclosan, plastic microbeads (common in ordinary scrubs), phthalates, etc. See the table below for details:▼
▼The circle to the right of the dish soap price label is the rating for this household detergent, rated orange.
▼Even the clothes and scarves are organic.
Whole Foods' strict standards for product health not only increase customer trust in the brand but also lower the psychological threshold for spending, increasing product profit margins.
3. Building local supply chains to ensure freshness
Since food is a very fast-moving consumer good, especially fresh produce, vegetables, fruits, and dairy, the supply time requirements are very high. To ensure freshness, Whole Foods gives each store significant autonomy in purchasing, establishing a supply chain within a certain radius centered on the store to meet single-store demand. This not only ensures freshness but also reduces transportation costs and is quick.
Therefore, at least 10%-15% of products in each Whole Foods store are local, and during peak harvest months (May and June), up to 70% of products can be local.
▲Products with "LOCAL" written next to them are locally sourced.
4. For specific products, establish production bases locally
For certain products, Whole Foods also establishes production bases locally, with each base supplying only one specific type of product, ensuring local characteristics and product quality. For example, the China base supplies tea, and the Mexico base supplies coffee.
Jack Trout, the father of positioning in the U.S., said: In a competitive environment, a company must differentiate itself in some way. "You must tell the customer why they should buy your product instead of someone else's." Whole Foods' "product differentiation" establishes its unique competitive advantage, effectively avoiding homogeneous competition with rivals, achieving customer value, and laying a solid foundation in the "health and safety" area of supermarkets.
2. Close to customers, open stores nearby
Whole Foods currently has over 300 stores globally. Some locations seem to lack commercial atmosphere, but Whole Foods still opens stores there and does very well. They all share a common feature: they are almost all in affluent areas.
Why open stores in affluent areas? There are two reasons:
1. Even in the U.S., those who can afford to buy organic food consistently are high-income people. Whole Foods' products are 40%-175% more expensive than ordinary supermarkets, so the wealthy are more likely to consume them.
2. The wealthy are often more sensitive to food safety issues than ordinary people and are more willing to pay for health.
So how does Whole Foods find suitable locations?
1. Preliminary screening on high-end real estate websites. Store sizes typically range from 15,000 square feet (about 1,400 square meters) to 75,000 square feet (about 7,000 square meters).
2. Use an internal development model to score multiple dimensions such as local education level, population density, income level, and driving time.
3. Once the location is determined, conduct a more comprehensive evaluation, including sales forecasts, and collaborate with regional teams to estimate construction and operating costs, ensuring each project meets the minimum expected return on investment.
3. Every product has its own story
Compared to other retail companies, Whole Foods spends very little on advertising and marketing. In 2013, Whole Foods' marketing expenses accounted for only 0.4% of total annual revenue. Why so little?
Whole Foods believes that good word-of-mouth from customers is far more influential than traditional advertising.
So Whole Foods places great importance on customer shopping experience and feelings. For example, there are stories that have been passed down by word of mouth:
**"Rosie is a chicken that lived on an organic farm, living a happy life until she was sent to the slaughterhouse, went through processes, and became a beautifully packaged bag of chicken on the ice bed at Whole Foods in Glendale, California. Rosie's life was spent in a custom-built chicken coop in California's wine country. Her coop was well-ventilated, with good lighting, and the tiled floor was covered with clean husks. She spent her days either leisurely pecking at golden corn or walking in the yard outside the coop. Unlike poultry sold in most food stores, Rosie never used antibiotics or growth hormones."
"Montebelo" brand Italian pasta is not just a simple mixture of flour and water, but the masterpiece of the famous Italian gourmet Gino Girolomoni. In 1973, Girolomoni bought a 195-hectare field on a hill near the Adriatic Sea to grow organic hard wheat as raw material for pasta.
Such stories were once made into brochures and placed next to the products. When customers accidentally read the little stories in the brochure, they were easily stimulated to buy, unconsciously agreeing with Whole Foods' health philosophy, enhancing the customer experience.
▲Other common foods, like tomatoes, are also carefully arranged with special lighting to increase customer desire to buy.
With this unique marketing strategy, Whole Foods has also achieved considerable profits, standing out in the highly competitive food industry.
4. Building a strong execution team
At Whole Foods, the most basic organizational unit is not the store but the team. Each store is composed of about eight teams, which are given a high degree of autonomy to manage all aspects of the store, including core business decisions, product pricing, product procurement, product display, personnel recruitment, and marketing strategies.
Every four weeks, Whole Foods calculates the profit created per unit of labor time for each team in each store. Teams that exceed a certain performance threshold receive bonuses. Each team has the right to know all performance data, so no team wants to be a laggard, forming a virtuous cycle of internal competition.
Additionally, Whole Foods practices "profit sharing," where every employee is eligible for bonuses and stock options. Only 7% of stock options are allocated to the top 16 senior managers, while the remaining 93% are fairly distributed to all non-management employees.
Whole Foods believes: If managers take care of employees, employees will take care of customers, and happy customers will bring benefits to shareholders. This is a virtuous cycle. "The best way to maximize shareholder value is not to directly pursue profits. If you start by seeking happiness, you may end up unhappy."
Summary
The success of Whole Foods is not just in marketing but in the success of the entire system. Just the selection of suppliers, with its processes and controls, shows how complex it is. The flexibility in employee management also reveals Whole Foods' different thinking. There is much to study and ponder.
At the request of many distributor friends, our platform's third B-end e-commerce inspection class will visit Wanshang Yizhan, Yunbao Shangmeng, and Weicheng Distribution from July 9-12. Distributors interested in transformation can join us for on-site inspections:
Organization format
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Participating distributors only need to pay a registration fee of 200 yuan. Time: July 9-12, 2016. Location: Changsha, Xiamen.
Interested distributors can register by scanning the QR code below.
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Previous inspection enterprise cases:
Yishang Logistics Model Inspection (Second B-end e-commerce inspection group Yishang Logistics)
Caiba Model Inspection
Jinhuobao Model Inspection
Beiquan Model On-site Inspection
Piduoduo Model On-site Inspection
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