Whole Foods Case Study

Introduction

In 1978, twenty-five year old college dropout John Mackey and twenty-one year old Rene Lawson Hardy, borrowed $45,000 from family and friends to open the doors of a small natural foods store called SaferWay in Austin, Texas (the name being a spoof of Safeway, which operated stores under their own name in Austin at that time). When the couple got booted out of their apartment for storing food products there, they decided to simply live at the store. Since it was zoned commercial, there was no shower stall. Instead, they bathed in the Hobart dishwasher, which had an attached water hose. Two years later, John and Rene partnered with Craig Weller and Mark Skiles to merge SaferWay with their Clarksville Natural Grocery, resulting in the opening of the original Whole Foods Market on September 20, 1980. At 10,500 square feet and a staff of 19, this store was quite large in comparison to the standard health food store of the time. Less than a year later, on Memorial Day in 1981, the worst flood in 70 years devastated the city of Austin. Caught in the flood waters, the store's inventory was wiped out and most of the equipment was damaged. The losses were approximately $400,000 and Whole Foods Market had no insurance. Customers and neighbors voluntarily joined the staff to repair and clean up the damage. Creditors, vendors and investors all provided breathing room for the store to get back on its feet and it re-opened only 28 days after the flood. By 2006, Whole Foods Market had evolved into the "world's largest retail chain of natural and organic foods supermarkets." Their rapid growth and success is primarily due to being highly selective about what they sell, as well as being dedicated quality standards and core values. (wholefoodsmarket.com) Whole Foods Market has a strong grasp of the natural and organic products industry, which has recently hit $81 billion in sales. In a mature market place, which the natural products industry is becoming, price and convenience are the leading issues. The minimum standards for both will be set by the consumers, who will have many choices of channels offering natural products. The profile of the average natural foods shopper will largely be a shopper in a supermarket or mass merchandiser such as Wal-Mart or Costco.

Situation Analysis

Whole Food's strategy since 2002 has been to open its own large stores, 50,000 square feet and larger, rather than acquiring small chain stores ranging from 5,000- 20,000 square feet. The concept behind their merchandising strategy was to create and "inviting and interactive store atmosphere that turned shopping for food into a fun, pleasurable experience." Whole Food's wanted customers to think of the store as a "third place" outside of home and work, where they could relax as well as interact with others in a colorful environment. Whole Foods