Whole Foods Market
Executives discuss how new 365 format fits in.

NEW YORK – Executives of Whole Foods Market expect its new millennial-focused format to “go places that Whole Foods Market can’t go.” The Austin, Texas-based retailer is slated to open its first three 365 by Whole Foods Market stores next year and up to 10 locations in 2017, with hopes to expand its consumer base and regain business lost to competition in the natural and organic marketplace. 

John Mackey, Whole Foods Market
John Mackey, co-founder, CEO of Whole Foods

“We think we’re taking the best elements of some of our competitors like Trader Joe’s and Sprouts, and we’re taking the very best of Whole Foods, we’re putting it in a very compelling package,” said John Mackey, co-founder and CEO of Whole Foods, during a Nov. 18 presentation at the Morgan Stanley Global Consumer & Retail Conference in New York. “We stated that these stores… we’re going to market them to the millennial generation. That seems to upset boomers and Xers, but they can come into the store, too. We’re not doing a card check for people to see how old they are…

“But we know that we want these stores… to have a techno buzz to them, and they’re going to be fun, and they’re going to be very accessible. And they are going to be less expensive.”

Because the 365 stores are designed to appeal to a different consumer segment, they are not expected to steal business from flagship Whole Foods stores, he said.

“I don’t think 365 is going to disrupt Whole Foods Markets,” Mackey said. “Instead, I think 365 will actually help Whole Foods Market’s key brand to evolve because I think (with) 365 stores, we’re going to introduce some new ideas that…will accelerate Whole Foods Market’s evolution.”

The new model also will stock a smaller selection of items.

“If the average Whole Foods has 34,000 SKUs, 35,000 SKUs, 365 will be much more curated,” said Walter Robb, co-CEO. “And I think sometimes the shopper may want that experience; sometimes they want the other experience.”

Averaging 43,000 sq. ft., the smaller-footprint 365 stores are expected to yield higher returns on invested capital than traditional Whole Foods stores. Executives said there are 114 sites in the pipeline for the new banner. Still, the company plans to slow the pace of overall store development and shift its focus on other strategic priorities in the coming quarters.

“As we look at the world, we see a market that continues to grow profoundly, that the opportunity is large, very large,” Robb said. “And so, we haven’t backed off being a growth company… I think we remain fairly bullish about our opportunities to build, but I think some moderation is called for right now.”