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Whole Foods Teases Rewards Program, Meal Kits

Plus, 365 stores are a hit with consumers

Whole Foods sold $3.7 billion worth of groceries in the last fiscal quarter, according to a report the organic grocery chain released yesterday. In a conference call with investors, co-CEO Walter Robb called the sales “a record,” marked in part by the launch of the chain’s new, lower-priced 365 stores.

Below, three things we learned from the company’s third quarter earnings call.

1. People are buying so much at 365 stores the chain had to re-design its registers

Noting that customers have accepted the stores as a “new brand,” Whole Foods executives said both 365 stores — one is in California, another is in Oregon— have been successful, but in a different way than they initially thought.

Robb said the company is conducting “several experiments” in both stores, but that it was too early to share data on what they’ve found. He did, however, say that the stores seem to be “creating a new customer” — in other words, it’s not just Whole Foods customers who are shopping at 365. “We’re reaching customers that we historically have not reached,” he said.

In fact, both stores have been so popular that the chain has already run into issues regarding their design. Apparently customers are buying more than executives thought they would. Meat and seafood sales, for instance, mirror those at the traditional Whole Foods store — which is surprising, considering the meat and seafood counters at 365 are self-serve.

“[The 365 stores] require lower capital and operating costs than our full-line stores,” said Robb. “But we’re seeing a larger basket size [at 365] versus our metro store averages. That’s led us to a re-design of the front-end of stores already.”

The “basket size” — industry parlance for amount of groceries purchased on one trip — has been so large that the “smaller, teller-size registers” the 365 stores were using proved to be ineffective, said David Lannon, executive vice president of operations. The company is now “adjusting” the cash registers at both its open stores and redesigning the ones that will be featured in stores in the future.

The company is also testing what it called “engaging technology” at the 365 stores (executives specifically cited a partnership with Sage, a nutritional transparency app). If those digital initiatives prove successful, they could eventually make their way to full-line Whole Foods stores.

The third 365 store is slated to open in Seattle in September. Twenty 365 stores are now in development.

2. Look for a national rewards program to roll out next year

As expected, the organic grocery chain is testing a new rewards program (it launched in Dallas on Wednesday). That launch will serve as a test for a larger national program which, according to Robb, will be rolled out nationally “sometime next year.”

According to Robb, the program will allow customers to register and save on certain products. Additionally, they will earn rewards over time and receive “surprises” occasionally. “With each scan,” said Robb, “customers can increase their savings and earn rewards.”

The company also launched digital coupons recently, which have already become the most-used feature within the Whole Foods app. The chain will soon reach a million digital coupon redemptions.

3. There might be a Whole Foods-branded meal kit in the works

The company has a “huge interest” in getting into the meal kit space. Robb said Whole Foods was in the process of developing something (which sounds an awful lot like a meal kit) as part of the company’s “meal solutions spectrum.”

“We’re not going to announce anything today, but we will say we are committed to this category,” he said. “We’ve been testing a lot of food and there are a lot of people in the ‘Willy Wonka lab.’ It’ll be revealed. We’re going to have a lot to say about this soon.”