Whole Foods Market, Inc. (NASDAQ:WFM) is preparing to launch a sister chain of small-scale stores that sell natural and organic foods at lower rates compared to its namesake outlets. It is an aggressive and bold plan to increase overall growth. The consumers can chose to buy from any outlet of their choice. The new stores are expected to be launched this summer. They will reflect a new high-tech, cool and hip version of stores that are smaller and affordable to operate than traditional stores which are spread on almost 38,000 square feet.
The significance of stores
If the company succeeds, it would be able to get new set of younger and cost-conscious customers. The new chain is still unnamed and aims to target younger customers. However, Whole Foods Market need to carefully plan its strategy so that in process it doesn’t hurts sales of its over 400 namesake stores. Meredith Adler, an analyst at Barclays, said that they have never witnessed a food retailer company operate a completely new format successfully, particularly one that is so different from prime operations.
Whole Foods Market have come up with a new plan after it had spent multiple years combating stiff competition, from many big chains like Kroger Co (NYSE:KR) and Wal-Mart Stores, Inc. (NYSE:WMT) and also from smaller firms. The company posted sales of $14.19 billion in FY2014, up 9.8% from fiscal 2013 revenue.
While Whole Foods exert influence among foodies with money and time for grocery shopping, there are many shoppers particularly slightly less wealthy and young consumers who term company’s brand as, “Whole Paycheck.” The efforts to eliminate the unofficial name through increased private label products and price reductions have not yielded positive results to attract these customers. The company belies that they will never be able to provide the kind of value this second segment of customer yearns for.