Whole Foods: A Whole-Istic Strategy
1) Define Whole Foods’ “product”. How does it deliver value to customers? Rather than pursuing mass-market sales volume and razor thin margins, Whole Food targets a selected group of upscale customer and offer them “organic, natural, and gourmet food Synopsis
The best way to compete against a mega-retailer is to not compete against it. This case provides an excellent illustration of how a relatively small retail chain can thrive in the face of a dominant market leader. They key to this is positioning away from the strengths of the competition.
Whole Foods has clearly been successful in doing just this. It has identified a substantial segment of customers that do not want to what the mass discount retailers serve up. It has identified what they do want. And it is providing that value to the customer in spades.
Whole Foods focuses on a niche of educated, liberal, and socially conscious consumers through three pillars: whole foods (organics, gourmet, and natural products), whole people (the company treats its employees exceptionally well), and whole planet (producing food and groceries but treading lightly on the earth). The result is a whole lot of customers.
The teaching objectives for this case are to:
1. Define a retailer in terms of “product.”
2. Analyze competitive threats for a niche marketer.
3. Understand the importance of targeting and positioning for retail organizations. 4. Apply widely recognized retail trends to the future of a retail chain.
Questions for Discussion
1. Define Whole Foods’ “product.” How does it deliver value to customers?
To do this adequately, one has to return to chapter 7. “Product” can be defined a number of different ways. But defining the “three levels of product” as noted in Figure 7.1 is one good way to analyze just what it is that Whole Foods is selling.
• Core benefit –food and grocery items.
• Actual product – 1) brand – Whole Foods has the image of being an earth-friendly purveyor of gourmet and organic foods; 2) quality level - higher than average; 3) design – store environment is inviting, fun, unique, informal, comfortable, attractive, nurturing, and educational; 4) features – not only high-end versions of standard products, but a deli, dessert bar, wine section, and other special touches that add to the image of the brand; 5) packaging – as a retailer, this idea is most likely captured by the concept of design. • Augmented product – two things likely stand out here. 1) Service – as the case points out, the employees of Whole Foods take ownership in the company. They are highly educated as to the products carried by the store. They believe in the values of Whole Foods, those values shared by customers. And they provide an exceptional level of attention to individual customers. 2) Experience – this idea may just capture all the elements of Whole Foods. But beyond the individual parts, the sum of such combine to provide a unique experience for what is widely considered a traditional good.
2. Organics are becoming quite popular. Many chains, including Wal-Mart, have begun offering and expanding their selection of organics. Do you think this poses a competitive threat that should worry Whole Foods?
As the case points out, the big chains likely present no threat to Whole Foods because it has positioned itself as the alternative to such. It has focused on the type of customer that disdains the large corporate chains and the products that they sell. Ironically, chains like Whole Foods and Wild Oats have popularized organics, thus paving the way for the Wal-Marts of the world to capitalize on the trend. But the large competitors can only offer so much. They can never offer the depth of product line that Whole Foods does. And regardless of what the big chains carry, Whole Foods’ core customer will likely...