Whole Foods in a Whole Lot of Trouble
November 13, 2008
Statement: "Whole Foods spending dropped 19% from January to October 2008."
Did the total revenue of Whole Foods really fall that much? No, basket size fell.
The article also indicated that Whole Foods has a small basket size in relation to other grocery chains. Why might that be? Whole Foods shoppers may have smaller basket sizes [average transaction] because people buy fresh products more frequently. The more times a customer is in your store the more opportunities you have to gain incremental [unplanned] sales.
The real question is... What is happening to shopper frequency? The article did not address this metric. This is a critical measure in food retail. If visits increased, it is possible for basket size to shrink but for total sales to increase.
The typical shopper at Safeway and Kroger is a once a week shopper who is hurried for time and shops there to get it all done at once. This means the visits are stable and basket sizes are typically larger. If a customer decreases frequency at these chains there is the possibility that sales will be pinched.
Increasing & Maintaining Store Visits
Typically you can only sell to customers that are actually in your store. The Internet is changing this to some degree, this is minuscule at present [for supermarkets, grocery]. Many food retailers have created email newsletters to spur visits thereby getting a customer into a store where they will make actual purchases.