Most people look for value and convenience when they go grocery shopping, so how did Whole Foods become so successful? The rise of specialty grocery stores that focused on healthier, organic foods began in the 1970s, but Whole Foods, founded in 1980, has been the real success story of the age. According to the Wall Street Journal, the grocery chain’s profits were up 50 percent in 2012, while more traditional grocery stores have continued to suffer. There are many different reasons for the popularity of Whole Foods, but possibly the biggest one is the magic of brand differentiation. Not only do customers shop at Whole Foods for quality products they can’t find anywhere else, the store also manages to create a unique shopping experience that inspires a certain loyalty in the people who love to buy food there.
1. A Brief History of Whole Foods
In 1978, 25-year-old John Mackey borrowed $45,000 to open a natural food store. Two years later, he merged with another natural food store to create the first Whole Foods in Austin, Texas. In 1984, they began to expand, and in 1989 they opened stores in California. The next two decades were filled with acquisitions of smaller natural food companies and the promotion of several regional managers until Whole Foods became a national chain. There are around 300 stores in America, and they also own a chain called Fresh & Wild which operates in the UK and Scotland. Recently, Forbes reported that the chain set a goal of 1,000 U.S. locations, which means Mackey is far from finished with his expansion.
2. The Appeal of Elite Shopping
Prices at Whole Foods can be nearly triple those of a traditional grocery store, but the business prides itself on not being for everyone. Whole Foods offers itself as an alternative to the Wal-Mart culture, says Mackey, catering to the customer who wants to pay a higher price for better quality instead of the lowest possible price for mediocre food. In Los Angeles, Whole Foods is one of the most common places for paparazzi to snap celebrities. Its appeal to that kind of high-income clientele could be part of the reason that the other grocery chains are suffering. The pleasing store environment, helpful staff, and elegant presentation of the products are all part of an experience that conveys specialness. Not to mention, Whole Foods has been aggressively cornering the market on unique organic food for decades.
3. Can This Success Continue?
Whole Foods’ differentiation seems to be an exacting business model that has worked wonders for them, but does their success have a limit? As other businesses catch on and copycat stores pop up, Whole Foods has to work to maintain its unique culture. Plus, grocery stores like Safeway and Kroger are beginning to stock more and more organic and natural products, and many customers would be just as happy buying them in local supermarkets and avoiding sky-high prices and long lines. One of the core reasons for Whole Foods succeeding when many other natural grocery chains failed is because they’ve been willing to change with the times. In the future, that change could start to take a much different form than Mackey or his CEOs have seen before.
Whole Foods will probably go down in history as being on the forefront of a change in how people shop for groceries. What began as a simple start-up business in the 1970s became a huge international chain through building its own unique brand and the culture to go along with it. The real test will be when that unique culture becomes more mainstream. But John Mackey and his Whole Foods empire have proven that they’re experts when it comes to standing out in a crowd.
Stacy Hilliard writes article reviews on local businesses such as the grocery store she frequents. A management career in the grocery sector can be obtainable with an online MBA offered by many schools.