Whole Foods grocery store is in a bind. The chain built a loyal customer base by offering organic foods, ethically-sourced products and a singular shopping experience. Whole Foods became the standard-bearer for conscientious — some may say precious — food-shoppers. Then Walmart entered the picture.
Selling organic foods at relatively low prices, the Bentonville, Arkansas retail giant came calling for a slice of Whole Foods's market share. Evidently, Walmart customers responded positively. Now, organic products are de rigueur from big chain supermarkets down to small-scale operations.
Amid the din of grocery-store competition, Whole Foods is looking to reassert itself. The company commissioned a new ad campaign, "Values Matter," articulating why no other store can touch the Whole Foods experience.
Harvard Business School historian Nancy Koehn said that, despite the competition, Whole Foods retains a loyal, global-minded customer base. "There's no question that people are increasingly moving to use their dollars for political, social, ethical, [and] humanitarian" purposes, Koehn said on Boston Public Radio. "We will use our wallets in a way that we know commands attention."
But clearly, the chain known for devising its own meat-rating system is worried about losing customers. The New York Times said Whole Foods spent an estimated $15 to $20 million on its advertising campaign. The ads go to great lengths to crown the company "America's healthiest grocery store," in hopes of retaining — and ideally, expanding — its customer base.
Whole Foods Markets, Inc. is a multi-billion-dollar company headquartered in Austin, Texas. Company CEO John Mackey opened the first store in 1978, and since its inception interest in Whole Foods has never been limited to navel-gazing, health-obsessed customers.
"[The stereotypical customers are] suburban folks with yuppie proclivities, in blue states, but that's way too simplistic," Koehn said. Customers are often middle- or working-class, "folks who hold two jobs and don't necessarily have a grad[uate] degree."
Koehn said the rise of Whole Foods should have been a lesson to all retailers. "Corporations that think this isn't [important] haven't woken up and smelled the coffee, because they're going to pay for it," Koehn said.
Walmart — the world's largest private employer — studied the ascendance of Whole Foods carefully. "Walmart is a company that for years and years and years activists [and] consumer watchdog groups took on," Koehn said. Now, "the game is changing."
Walmart burnished its reputation carrying ethically- and locally-sourced organic groceries. The company has been criticized for buying too many goods abroad, and investigated by the US government for its labor practices. Organic groceries give the chain a chance to woo back values-conscious consumers.
Koehn said no brand should expect a lifetime of loyalty from each of its customers, which is why Walmart stands to gain so much. "Consumers are very, very smart — and very adaptive," Koehn said.
Koehn said the likes of Walmart and Whole Foods force global customers to confront two unresolved issues. "One is factory farming" with its attendant environmental and ethical considerations. The second? "How are we going to feed everyone? Can we really feed everyone by organic farming?" Koehn asked. "We have [many more families] coming online with disposable incomes," in emerging markets.
The more immediate question — whether Whole Foods can beat back a market intrusion by Walmart — will be decided at the cash register, week by week, sale by sale. "Can [Whole Foods] reclaim their path-breaking, market-leading position? I wouldn't bet against [CEO] John Mackey and [co-CEO] Walter Robb," Koehn said. The same could certainly be said about Walmart's leadership.
>> To hear the entire conversation with Nancy Koehn on Boston Public Radio, click the audio at the top of the page.