Whole Foods Reducing Margins in Some Stores

Looking to shed its "Whole Paycheck" reputation, the grocer will reduce its margins in some urban markets.

March 07, 2013

NEW YORK - Whole Foods Market??s co-chief executive officer announced earlier this week that the grocer plans to lower margins in some urban markets, Supermarket News reports. The plan does not reflect a chain-wide strategy but a pilot program to gauge consumer response.

"If we start getting into places where we're just about price, we'd be getting away from our mission as a company and what we know how to do really well," Robb said. "However, we have modeled some stores that are lower margin to put in certain urban markets, and I think there is some potential there, and you will see us do some experiments around that, just to see what that looks like."

According to Robb, Whole Foods has done a better job ensuring that it remains competitive in the marketplace, leveraging data insights from its customers.

"One of the things we realized during the downturn in 2007 was that we didn't have the analytics to really understand our business beyond the intuitive. We now have a database on every competitor and more analytics on our customers," he said.

According to Robb, Whole Foods tracks nearly 800 items from between 60 and 70 competitors across 13 marketplaces every month, "Not on what they say but what they actually do on the shelf, including perishables and non-perishables," an approach that will expand to 1,000 items this year.

Robb also said Whole Foods has historically run promotions in the 12% range, "but you can see us moving toward 14% and 15%, and we are going to use those more aggressively, whether it's a one-day sale or a three-day sale. Early-bird specials turn out to be a great thing, so it's a combination of price points and promotions [that work well]."

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