When you look at only a few metrics and make analysis from that, you have a higher risk of being wrong. It may well turn out that Whole Foods is really struggling, unfortunately the analysis in the article is incomplete.
Whole Foods in a Whole Lot of Trouble
November 13, 2008Whole Foods (NASDAW: WFMI) is the worst performing supermarket chain in 2008, according to Geezeo’s Main Street Spending Index.
Whole Foods has had a cult like following amongst upscale urban professionals. Aspirational shoppers even mocked their own spending by nicknaming Whole Foods: “Whole Paycheck”. Given the economic instability though, customers are staying away from Whole Foods in droves.
The table below compares the drop in average consumer spending per visit at major retail grocery chains year-to-date. Whole Foods spending dropped 19% from January to October 2008. The winner was value-branded Stop & Shop (AHONY.PK) . Stop & Shop had a slim 1.54% decrease in customer spending. Not bad for an economically volatile year.
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.
Traditional GroceryThe 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.
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