Will 365 concept prove to be the future of Whole Foods?

Will 365 concept prove to be the future of Whole Foods?

While only two 365 by Whole Foods Market stores have opened so far, “the customer response has been overwhelmingly positive,” co-CEO Walter Robb told analysts earlier this week on the company’s earnings call.

In fact, the amount of goods that customers have been buying at the two locations has forced Whole Foods to redesign their front-ends. The chain had expected smaller market baskets and, therefore, designed what David Lannon, executive vice president operations, called “smaller, teller-style registers.”

One of the surprises around the new concept is that fresh meat sales at 365 are in line with the typical Whole Foods location. What makes this interesting is that the new concept is completely self-serve, while Whole Foods has built its reputation, in part, on the service it offers in its mainline stores.

While Whole Foods has been hurt by the labeling of the chain as “Whole Paycheck,” lower overhead costs at its 365 stores is quickly producing a value perception of the new concept. A report on the Today website claims that a market basket comparison on like items at Trader Joe’s and 365 by Whole Foods showed the new concept was in line or lower priced than its rival.

If this price comparison holds, it could be a game changer. A market basket comparison of 77 similar items by Deutsche Bank published earlier this year found Trader Joe’s was 21 percent lower than Whole Foods mainline stores.

Further emphasizing price, the new 365 stores, according to Mr. Lannon, will also offer Whole Foods’ new “Gimme 10” loyalty card program, which enables customers to receive an additional 10 percent off selected items. So far, over 16,000 individuals have signed up for the program at the two 365 stores.

“Our 365 stores are firsts for us in so many ways, from a streamlined operating model, to centralized buying, to auto-replenishment of inventory,” Mr. Robb told analysts. “With 20 stores in development, we’re very excited about the learning potential, and we are already using these to shape and evolve not just future 365 stores, but Whole Foods Market stores as well.”

Whole Foods announced on Wednesday that it has signed a lease to open a new 365 concept store in the Buckhead area of Atlanta. Earlier this year, Whole Foods announced it would open one of the new stores in Decatur, GA.