{"id":3027,"date":"2015-12-09T15:31:39","date_gmt":"2015-12-09T20:31:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/whole-foods-market-adapting-to-a-competitive-natural-foods-grocery-store-environment\/"},"modified":"2015-12-09T15:31:39","modified_gmt":"2015-12-09T20:31:39","slug":"whole-foods-market-adapting-to-a-competitive-natural-foods-grocery-store-environment","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/whole-foods-market-adapting-to-a-competitive-natural-foods-grocery-store-environment\/","title":{"rendered":"Whole Foods Market: Adapting to a competitive natural foods grocery store environment"},"content":{"rendered":"

Whole Foods Market (WFM) is a premier natural foods grocery company, also known as \u201cAmerica\u2019s Healthiest Grocery Store\u201d. In addition, Whole Foods has been touted as one of the \u201c100 Best Companies to Work For\u201d by Fortune Magazine and consistently been a leader in corporate social responsibility. \u00a0(Source: Wikipedia)<\/p>\n

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Despite Whole Foods Markets historical success and continual expansion, in recent years WFM has faced margin pressures and\u00a0come up against a slew of competition both from traditional grocery and big-box retail stores like Walmart and Kroger as well as smaller organic food chains like Sprouts of Trader Joe\u2019s.\u00a0 Competition is often providing similar natural and organic items at lower prices, especially larger retail stores that have better pricing leverage. In the past year, Whole Foods stock price has plummeted significantly. \u00a0WFM is currently trading at ~$30\/share, more than 50% lower than it\u2019s high in 2013 of ~$65\/share.<\/p>\n

\"Screen<\/a><\/p>\n

(Source: Yahoo Finance)<\/p>\n

\u00a0<\/strong><\/p>\n

As the grocery environment changes, Whole Foods is at risk of not effectively realigning and adapting their operating model to support a changing grocer retail business model of more low-price for value items for customers. Wall Street has similar sentiments that Whole Foods has not properly positioned itself among new competitors such as Costco or Walmart that are now offering cheaper organic and natural food options in their stores.\u00a0 Nicknamed \u201cWhole Paycheck\u201d many on Wall Street have sourced on Whole Foods potential to realize operational efficiencies in order to provide lower price points compared to competitors eating away market share. (Source: NY Times: \u201cWall Street sources on Whole Foods Market,\u201d Nov 2, 2015)<\/p>\n

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Whole Foods\u2019s business model focuses on providing quality, natural foods for it\u2019s customers including organic foods, albeit at a much higher mark-up compared to normal grocery stores. One of the main benefits of Whole Foods was the ability to provide to its customers shopper items you couldn\u2019t get anywhere else. This was supported by the company\u2019s operating model, a highly decentralized structure that enabled store and regional managers to utilize \u201cforagers\u201d and employees to source local and regional products in the area.\u00a0 However, the growth of small organic food businesses like Sprouts, have provided alternative shopping items for customers at lower price alternatives than Whole Foods. As Whole Foods Market expands its stores into environments that aren\u2019t as amenable to the \u201cwhole paycheck\u201d price tag for organic, healthy food, Whole Foods Market needs to reconsider how to align it\u2019s core business and portfolio of providing\u00a0 natural \/ organic products to it\u2019s customers. As Whole Foods Market\u2019s facing margin pressures, it will need to think about was to improve its cost restructure but ultimately will need to find growth opportunities as well.<\/p>\n

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One avenue Whole Foods Market has leveraged to better align models is the \u00a0launch of the \u201c365″ store, essentially a lower cost alternative to its flagship Whole Foods Market store which more readily aligns to the more competitive low-price environment of natural, healthy grocer options and also supports Whole Foods Markets expansion into lower income markets where a lower price point store is likely to be more competitive than the original Whole Foods Market concept. While the current Whole Foods Market store does not give the company the competitive advantage against existing and new entrants, I support the Whole Foods Market vision of the \u201c365 store\u201d to provide a new concept of a new store with an operating model that supports a lower cost business model for its customers.<\/p>\n

https:\/\/www.youtube.com\/watch?time_continue=4&v=4CFJ87PeGsk<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Whole Foods Market (WFM) is a premier natural foods grocery company, also known as \u201cAmerica\u2019s Healthiest Grocery Store\u201d. 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