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Profit Case Study: Whole

Foods Market
Business 304, Fall 2013
Eryn Eledge

Whole Foods Market Case Study

Abstract
The purpose of this case study is to analyze Whole Foods Market and the market it is a part of.
This report was compiled with extensive research on the Whole Foods Market company, market,
and competition. First, a history and background of the company will be provided. While
conducting research, a problem with the company arose. In order to solve this problem, three
solutions were drafted and evaluated based on four decision criteria. First, the problem will be
stated along with the possible solutions to the problem. The possible solutions will be
individually ranked based on their impact on the decision criteria. After the evaluation of each
solution is completed, the best solution will be selected. The selection of the best solution will
lead into recommendations on how the company can implement this solution and what pros and
cons will arise in the implementation. Finally, conclusions and recommendations will be
provided for the future actions taken by Whole Foods Market.

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Whole Foods Market Case Study

TableofContents
Abstract..........................................................................................................................................ii
ExecutiveSummary.......................................................................................................................4
Introduction................................................................................................................................4
Problem.......................................................................................................................................4
OptionsandCriteria..................................................................................................................4
Recommendations......................................................................................................................5
Conclusion..................................................................................................................................5
BackgroundandHistory...............................................................................................................7
Founding.....................................................................................................................................7
MissionStatement......................................................................................................................7
Overview.........................................................................................................................................8
Structure.....................................................................................................................................8
ProductsandServices................................................................................................................9
TargetMarket..........................................................................................................................10
Competitors..............................................................................................................................10
PlaceinIndustry......................................................................................................................11
Problem.........................................................................................................................................12
IncreasedCompetitionasaProblem.....................................................................................12
ThoseAffectedbytheIncreaseinCompetition....................................................................13
PastAction................................................................................................................................13
OptionsAnalysis..........................................................................................................................14
AddressingtheProblem..........................................................................................................14
DecisionCriteria......................................................................................................................15
Option1:CreationofaRewardsProgram...........................................................................16
Option2:BroadentheTargetAudience...............................................................................19
Option3:ReducePercentageofPerishableProducts..........................................................22
Solution.........................................................................................................................................24
Pros............................................................................................................................................24
Cons...........................................................................................................................................25
ConclusionsandRecommendations...........................................................................................25
References.....................................................................................................................................27

Whole Foods Market Case Study

Executive Summary
Introduction
Whole Foods Market is a chain of grocers that offer organic and natural products at high quality.
The grocers offer customers a wide variety of products from organic produce to pet supplies, and
ready-made food items to natural hygiene products. From humble beginnings, Whole Foods
Market has seen large success and growth as it is now known as Americas Healthiest Grocery
Store TM. Whole Foods Market is focused on the sustainability of our resources as a society as
well as the education of the public on healthy eating and sustainable practices.

Problem
Although a leader in the natural foods market, Whole Foods Market is now seeing an increase in
competition in the market for organic and natural products that it must respond to. WFM faces
competition both directly and indirectly. Specialty stores such as Trader Joes, Sprouts Farmers
Market, and Wild Oats Market serve as WFMs main competition as they are retailers who sell
natural and organic products at lower prices. Additionally, WFM sees completion arising from
grocery and convenience stores, like Safeway and Walmart, which have begun offering organic
produce recently.

Options and Criteria


In order to solve the problem at hand, Whole Foods Market has the opportunity to adopt one of
three possible solutions:
1. Create a rewards program for customers that will create diversification from competitors
and maintain a loyal customer base.
2. Broaden the narrow target audience by offering lower cost items that will challenge the
Whole Foods, Whole Paycheck reputation that the company has attained.

Whole Foods Market Case Study


3. Reduce the percentage of perishable foods that create significant product inventory losses
for the company.
The selection of one of the solutions above is based off of four criteria. The four criteria are
composed of two qualitative and two quantitative measures: Profit, Return on Investment,
Customer Satisfaction, and Competitive Advantage. Below is a matrix that evaluates each option
on the four criteria.
Solutions
1. Create a Rewards Program

Profit

Return on Competitive Customer


TOTAL
Investment Advantage Satisfaction

XX

XXX

XXX

2. Broaden the Target Audience

XX

XXX

XX

XXX

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3. Reduce Percentage of Perishable


Products

XX

XXX

Recommendations
The three different solutions were ranked based on how they would affect each criteria. Although
they ranked closely together, the highest ranked solution was the solution that suggested the
broadening of the target audience. Adopting this solution can be made possible by offering low
cost items, offering a wider array of coupons on a more consistent basis, or creating a product
home-delivery service. Broadening its target audience would allow Whole Foods Market to
remain a leader in the health food and organic product market even in the presence of increased
competition.

Conclusion
Whole Foods Markets past success was made possible through its creative business strategy and
leadership in a niche market. As competition in the market increases, WFM must find a way to
remain a leader. In order to stay above its competition, it is recommended that Whole Foods
Market implements a solution that will broaden its target audience and negate its Whole Foods,

Whole Foods Market Case Study


Whole Paycheck reputation while still maintaining its reputation of offering the highest quality
products and shopping experience.

Whole Foods Market Case Study

Background and History


Founding
Whole Foods Market (WFM) is a chain of natural foods grocery stores that provide organic
products to consumers in the United States, Canada, and the United Kingdom. The chain was
founded in Austin, Texas, when four local businesspeople decided the natural foods industry was
ready for a supermarket format (Whole Foods Market IP. L.P, 2013). With previous experience
in the grocery store industry, John Mackey, Renee Lawson Hardy, Craig Weller, and Mark Skiles
saw great success with the natural food and organic product concept that was implemented into
the new store concept. The initial success of the company can also be attributed to the fact that
there were less than half a dozen natural food supermarkets in the United States at the time
(Whole Foods Market IP. L.P, 2013). Since the founding of the company more than 30 years ago,
Whole Foods Market has expanded all over the United States and even the globe.

Mission Statement
Unlike other companies, Whole Foods Market does not operate on a standard single sentence
mission statement. Instead, the company bases its daily operations on eight fundamental core
values:

We sell the highest quality natural and organic products available.


We satisfy, delight, and nourish our customers.
We support team member excellence and happiness.
We create wealth through profits and growth.
We serve and support our local and global communities.
We practice and advance environmental stewardship.
We create ongoing win-win partnerships with our suppliers.
We promote the health of our stakeholders through healthy eating education.
(Whole Foods Market IP. L.P, 2013)

Whole Foods Market Case Study


The core values that the corporation is shaped by ensure the sustainability of the company while
still continuing to provide the best products and goods to its consumers. WFM is focus on being
successful in an ethical manner.

Overview
Structure
Similar to all other aspects of the company, Whole Foods Markets organizational structure is
nonconventional. The company is often run as a democracy and although the co-founder, John
Mackey, is still considered the Chief Executive Officer (CEO), he runs the company in a
collective manner with the rest of the Executive Team members:

Co-Chief Executive Officers: John Mackey and Walter Robb


President and Chief Operating Officer: A.C. Gallo
Executive Vice President and Chief Financial Officer: Glenda Flanagan
Executive Vice President, Growth and Business Development: Jim Sud

The behavior of the executive team creates the entire structure that WFM is substantiated by.
John Mackey describes his relationship withothermembersoftheExecutiveTeam[as]oneof
mutualrespect,trust,andequality[...asthe]WholeFoodsExecutiveTeammakes[its]most
importantdecisionsthroughconsensus(Mackey,2010).Withthecommitmenttoincorporating
theideasandopinionsofhisfellowteammembers,JohnMackeycreatesacohesivecorporation
thatservesitscustomerstothebestofitsability.

SincetheirhumblebeginninginAustin,thecompanyhasgrownexponentiallyandcurrentlyhas
362storesglobally.BelowisatableofthecurrentWholeFoodsMarketlocationsfromtheir
2013annualreport:

Whole Foods Market Case Study

Source:(WholeFoodsMarketInc.,2013)

Products and Services


As a company that maintains an image of being natural and places a large emphasis the
importance of organic products, Whole Foods Market must think carefully about the products
that it offers and how those products are produced. WFM caters to health enthusiasts, individuals
with dietary restrictions, as well as individuals who appreciate natural products. The market
consists of products from many different suppliers that are hand selected for based on quality
standards established by the company. The quality of the products is definedbyevaluatingthe
ingredients,freshness,safety,taste,nutritivevalueandappearanceofalloftheproducts[it
carries](Whole Foods Market IP. L.P, 2013). With high standards of quality, WFM has
cultivated a wide array of products ranging from organic produce to pet supplies, and organic
hygiene products to ready-made food.

In addition to products made available to customers, Whole Foods Market offers high quality
service through consumer education and intelligent staff employed in store. As stated in its core
values listed above, WFM provides their customers with health eating education on the products
that are sold in their stores and how those products will affect the consumers lives. The company

Whole Foods Market Case Study


has implemented their Health Starts Here program to ensure that its customers are educated on
the products it offers. Additionally, WFM are well staffed with highly knowledgeable employees
who are dedicated to health and spreading the awareness of the benefits of organic products.
Because the stores are focused on health, they offer products that may be foreign to average
shoppers, like chia seeds or Genetically Modified Organism (GMO) free products, WFM must
educate the employees on the products in the stores so they can educate consumers.

Target Market
The quality of the products available and the standards that are evaluated in the search for these
products results in high prices. The high prices of the products and the emphasis on organics
limits the target audience that Whole Foods Market can cater to. Not only is the target audience
limited to the affluent consumers that can afford the high priced items offered, it is also often
limited to the consumers who implement a healthy lifestyle into their lives. In their industry,
Whole Foods Market is known as an upscale competitor that has gained a reputation of
Whole Foods, Whole Paycheck due to its high prices (Armstrong, G., Kotler, P., 2012).

Competitors
Contrary to when the company was founded, Whole Foods Market is facing increased
competition as their market is transforming from a niche market to a more highly populated
market. The increased competition that WFM is facing can be attributed to the healthy lifestyle
trend that is present in our society today. WFMs main competition come from other markets that
specialize in natural and organic products, such as Sprouts Farmers Market, Wild Oats
Marketplace, and Trader Joes. As opposed to WFM, competing stores do not have the same
whole paycheck reputation, and instead operate with a strong emphasis on creating value for
their customers. The increased emphasis on value and low prices of the competitors acts as a
threat to WFM.
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Whole Foods Market Case Study

In addition to direct competition, Whole Foods Market faces indirect competition from wellknown grocery and convenience stores that are integrating natural and organic products into their
repertoire. Organic products can now be found on the aisle of grocery stores like Ralphs and
Safeway, as well as in Walmart stores across the country. A competitor with a large customer
reach, Walmart released a press release in 2008 that explained that The company sells 18
percent of all the groceries bought in the United States, which creates a major threat to WFMs
hold on the market (Philpott, 2012). WFM is facing increased competition from every angle.

Place in Industry
Although Whole Foods Market initially placed itself into a limited niche market industry, the
increased competition thatitisfacingischallengingitsplaceastheindustryleader.Currently,
WFMremainsaleaderbutthecompanyscompetitorshavebeensteadilycreepinginand
stealingmarketinterest.[Forexample],Krogerisaggressivelyexpandingintoorganicand
naturalfoodselectionwhilealsoattemptingtocompeteonprice.(QuandaryFX,2012).

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Whole Foods Market Case Study

Problem
With a strong beginning and a possibly brought future, Whole Foods Market must address a
problem that it is currently facing. Once a leader in a niche market, Whole Foods Market must
now find a way to maintain its leader position in a challenging market that is being penetrated by
strong competitors. Belowisachartshowingthemarketshareheldbyspecialtystores,like
WholeFoodsMarket,comparedtothatofitscompetitors(USDA,2013):

Increased Competition as a Problem


Whole Foods Market is a company that can be attributed to the rise in concern that consumers
now have about the food products they are purchasing. As a company that depends on their
customers for its success, increased competition in their market questions the future of the
company. WFMs competitors are forcing the company to reevaluate their business decisions on
a daily basis. Although increased competition can prove to be beneficial for the consumer due to

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Whole Foods Market Case Study


the increase in natural and organic products that are available, WFM may suffer if it does not
react.

Those Affected by the Increase in Competition


With an increase in competition, the consumers who are shopping for natural and organic
products are seeing a benefit. Consumers are seeing cheaper prices and quality products offered
by the competition in the fight to overcome the strong influence of WFM. On the other hand, the
Whole Foods Market Company and their shareholders are not being affected in the same manner.
The company suffers from the presence of new competitors as WFM experienced a significant
decline from around $64.50 per share to only $57.30 per share after it reported a not-soimpressive operating performance in the fourth quarter of the 2013 fiscal year (Hoang, 2013).
Shareholders of the company seeing a negative growth in their investments as the company faces
competition and falls behind in its industry.

Past Action
As a precaution to the threat of increased competition, Whole Foods Market attempted to widen
their target audience. By offering its 365 Everyday Value brand products, WFM attempted to
change the way [consumers] shop at Whole Foods Market by offering products [that] can fill
[a] pantry without emptying [a] pocketbook (Whole Foods Market, 2013). Although a worthy
attempt at catering to a different market, WFMs 365 Everyday Value brand is still unable to
compete with the low priced items at the competitors like Trader Joes, that offers almost
identical products at noticeably lower prices. The table below lists prices on common 365
Everyday Value product prices versus the prices of the same standardly priced items at Trader
Joes:

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Whole Foods Market Case Study

Whole milk
Eggs (12
Sugar (5 lb. bag)
Canned
(gallon)
count carton)
soup
365 Everyday Value (WFM)
$3.49
$2.99
$5.99
$2.99
Trader Joes
$2.99
$1.69
$3.49
$1.99
Source of information: (Craddick, 2013)
It is visibly apparent that Whole Foods Market is seeing a strong competitor in Trader Joes as its
normally priced items easily underbid the value brand that WFM offers to its customers.
Although WFM acknowledged its whole paycheck reputation and tried to find a solution, the
companys competitors still remain the leaders in value-based items.

Options Analysis
As previously stated, Whole Foods Markets leader position is being challenged by the increase
in competitors in the natural and organic food industry. WFM is being pushed into differentiating
themselves from their competition in order to remain the world's largest retailer of natural and
organic foods (Whole Foods Market, 2013).

Addressing the Problem


Three solutions are applicable to address the problem and have the ability to decrease or entirely
eliminate the impact of the increased competition that Whole Foods Market is facing:
1. Create a rewards program for customers that will create diversification from competitors
and maintain a loyal customer base.
2. Broaden the narrow target audience by offering lower cost items that will challenge the
Whole Foods, Whole Paycheck reputation that the company has attained.
3. Reduce the percentage of perishable foods that create significant product inventory losses
for the company.

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Whole Foods Market Case Study

Decision Criteria
The previous solutions will be evaluated on four different decision criteria: Profit, Return on
Investment, Competitive Advantage, and Customer Satisfaction. The four criteria will be defined
in terms of how they apply to Whole Foods Market and the solutions that they are being applied
to. Below is a matrix that ranks the solutions to the problem using the criteria:

Solutions
1. Create a Rewards Program
2. Broaden the Target Audience

Profit

Return on Competitive Customer


TOTAL
Investment Advantage Satisfaction

XX

XXX

XXX

XX

XXX

XX

XXX

10

3. Reduce Percentage of Perishable


XX
XXX
Products
X- Adequate
XX- Satisfactory

XXX- Exemplary

Profit
Profit is the monetary benefit that Whole Foods Market will gain with the implementation of the
solution being evaluated. The profit criterion depends upon the expense that is required to
implement the solutions. Profit was chosen due to its determination of a companys position in an
industry and possibility of a future.
Return on Investment
Return on investment is defined as the reward that Whole Foods will acquire from investing
money into implementing the solutions. This criterion acts as a justification for Whole Foods
Market to adopt a solution, as the money used will be gained back in the future.
Competitive Advantage
With a problem that focuses largely on WFMs competition, using competitive advantage as a
criterion was necessary. Competitive advantage is defined as the positive impact the solutions
will have on WFM in terms of its competitors success. This criterion measures how each

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solution will clarify the degree of separation that will be placed between WFM and its
competitors after adopting a solution.
Customer Satisfaction
Customer satisfaction is a criterion that measures how a solution will affect the WFM customers.
As the main determinants in the success of the company, customers attitude toward the
implementation of a solution needs to be identified. This criterion allows WFM to measure the
benefits of a solution in an intangible manner.

Option 1: Creation of a Rewards Program


The adoption of loyalty and rewards programs for large food retailers has seen exceeding success
for many reasons. The implementation of a customer loyalty program has the following benefits
for the company that implements the program (VitalCashFlow, 2012):

Attracts new customers


Generates repeat traffic
Generates higher tickets
Increases frequency of visits
Creates ease in tracking customer behavior
Acts as advertising avenue
Differentiates from competition
Creates branding opportunity
Ease of implementation
Increases customer loyalty

Whole Foods Market has a diverse level of competition from specialty natural food stores to
grocery stores and convenience stores that offer natural and organic products. Its direct
competition, Sprouts Farmers Market, Wild Oats, and Trader Joes have not implemented
customer reward or loyalty programs and do not have the intention to do so in the near future. In
contrast, the indirect competition, the grocery stores like Safeway, that offer a selection of
organic and natural products, were some of the leaders in the implementation of loyalty cards.

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Whole Foods Market Case Study


Many of the indirect competitors use their loyalty cards to establish loyal customers that will
chose their establishments over the new and trendy specialty stores like WFM. The
implementation of a rewards program would act as a viable solution in WFM maintaining its
leader position in an increasingly competitive market.
Profit
The implementation of a rewards program does not present Whole Foods Market with an
immediate increase in profit. The rewards program acts as a direct benefit to the customers,
rather than the company initially. A rewards program, like the one that WFM would implement,
is not intended to boost the profit that the company sees because it will not generate money
directly from those who are members of the program. Instead, the positive effects of the rewards
program will potentially create an increase in profits for the company. If the rewards program is
effective in the way that most programs are for companies, WFM will see an increase in profits
due to the increased customer base, and the increase in frequency of return customers.
Return on Investment
The investment required to implement a rewards program is minimal in terms of the size and
success of Whole Foods Market. An investment of minimal time and money is needed to
encourage customers to become a part of the program, sign up for the program, and remain an
active member of the program. Team members would be required to invest time into daily
transactions in WFM locations to inform customers of the rewards program and its benefits.
Additionally, monetary investment is required to print and distribute the applications as well as
hire personnel to be in charge of the program. As a company that prides itself on being ecofriendly, WFM can get rid of the usual rewards program cards and allow customers to show their
affiliation through giving their phone number or email to the cashiers at checkout; also reducing
the expense that needs to be invested. The little investment that is needed to make this program
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Whole Foods Market Case Study


possible reaps large benefits for the long term, which creates a large return on investment for the
company.
Competitive Advantage
As the highest-ranking criterion for this option, the competitive advantage that WFM will see
from the implementation of a rewards program is pertinent. Keeping in mind WFMs wide array
of competition, creating a rewards program will create a high competitive advantage from the
direct completion that is composed of the other natural and organic markets. Trader Joes,
Sprouts, and Wild Oats do not have rewards programs. The implementation of a loyalty program
by WFM would establish its separation from its direct competition and attract more customers
who value rewards programs as well as natural and organic food. On the other hand, WFM faces
secondary competition from grocery stores and convenience stores that are now starting to offer
organic produce. Most of the grocery stores and convenience stores already have loyalty
programs, which give them the competitive advantage against WFM for some consumers.
Adopting a loyalty program will minimize the competitive advantage that the secondary
competitors have over WFM, while simultaneously increasing its competitive advantage over its
direct competition.
Customer Satisfaction
Also ranking exemplary, customer satisfaction would increase immensely from the
implementation of a rewards program. A rewards program is entirely beneficial to customer
satisfaction because it shows the customers that the company cares about them. Also, the
implementation of a rewards program makes customers feel as though they are getting more for
the money they are spending. As a company that is known for having highly priced items,
WFMs customers would feel as if their high priced trips to the stores are more justified with the
ability to collect rewards for every purchase they make. Referring back to the core values, WFM
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Whole Foods Market Case Study


rely heavily on the customers to ensure future success. Maintaining a high level of satisfaction
from the customers would be simple with the rewards program as heightens the possibility of
return customers.

Option 2: Broaden the Target Audience


As a company that focuses on the quality of their products, Whole Foods Market is not highly
concerned with the prices of its products. It is well known by consumers that organic and natural
foods are standardly priced much higher than non-organic products because of the extensive
precautions that must be taken into account in the cultivation of these products. WFM operates
on the mantra that its products are of high quality and therefor suitable of the high prices, which
limits the audience it can attack. According to Tim Forrest, who is a marketing consultant for the
grocery industry, the Whole Foods Market shopper is usually one of the following:

Gravitate to lifestyle brands


Form a loyal customer base
Are better educated and wealthier
Are willing to pay higher prices for higher quality food in a pleasant shopping

environment
Are largely Baby Boomers the largest consumer group in America is getting older and
they are seeking healthy, preservative- and pesticide-free foods to ensure a long and
healthy life (wHealthySolutions, 2012)

With such a narrow target audience, WFM limits its future success and ability to adapt to the
changing economic environment. Its highly priced selection and limited target audience has
given WFM the reputation of being a Whole Foods, Whole Paycheck retailer. Adopting
systems that will create a wider customer base include offering a larger selection of coupons,
providing lower cost items, and implementing a delivery service for grocery items. All three of
the possible implementation tactics will draw in new consumers who desire to eat healthy but

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feel as though they cannot afford it or do not have access to the availability of the natural and
organic products that WFM has to offer.
Profit
Broadening the target audience will have both a negative and positive impact on the profit that
Whole Foods Market collects. Offering low cost items, implementing a delivery service, or
offering more coupons will all decrease the immediate profit that the company sees as it must
incur costs in order to implement any of the programs. In contrast, all three systems will create a
profit for the company, as it will broaden the audience of people who feel they can afford to shop
at WFM. Broadening its audience will attract more customers who will therefor create more
profit for the company because the company will appear more consumer-friendly. Increasing the
number of customers who will shop at its locations will increase the profits that the WFM
Company brings in making the implementation of the programs easier.
Return on Investment
Although broadening the target audience comes with a high allotment of costs, WFM will see a
high return on investment, which will justify the option. The investment that is incurred by WFM
is the price that is needed to implement any of the programs. Providing any of the three possible
programs for consumers will increase the reach that WFM has on the grocery market, which will
create bring in higher revenues than the company has seen in the past, justifying the programs.
Increasing its scope and market share by broadening its audience is an option that will bring in
large figures of revenue for those consumers who wish to adopt a healthy lifestyle but believe
they cannot do so with the current available options of natural and organic products.
Competitive Advantage
Currently, Whole Foods Market maintains a reputation of heaving high prices for high quality of
natural and organic products. Although this is sometimes detrimental, the company has a

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competitive advantage against its competition for the loyal customers who value the high quality
and reputation that WFM currently has. Adopting a program that broadens the target audience of
WFM has the possibility of reducing the competitive advantage it holds as being a high-class
specialty store. Broadening the target audience for WFM shoppers will place the company on the
same level as its competition and, which will demand that the company create another avenue to
diversify itself in the market. On the other hand, broadening the target audience makes WFM a
competitor in many more markets.
Customer Satisfaction
Broadening the target audience is a solution that I devoted to the customers opinions of WFM.
Implementing a program to broaden the target audience that WFM can reach will highly increase
customer satisfaction as the company is becoming more focused on the needs and wants of
consumers in a struggling economy. Offering low cost items, starting a delivery service, and
offering more coupons are all programs that would increase the WFMs customer satisfaction as
the natural and organic products are being made more accessible to the everyday shopper who
desires a healthier lifestyle, while on a budget. Although broadening the target audience may
clash with the high-end feeling that most WFMs have, all consumers are satisfied when they feel
as though they are getting a deal. This level of satisfaction can be achieved and instilled in more
customers by broadening the target audience that WFM caters to.

Option 3: Reduce Percentage of Perishable Products


With a devotion to providing the freshest and most natural organic products available, Whole
Foods Market has a high percentage of perishable products in its stores on a daily basis.
Perishable products are products that cannot sit on the stores shelves for long periods of time.
Due to their short shelf life, perishable products create a large margin of inventory loss for the

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stores. Below is a table from WFMs annual 10k report listing the percentages of perishable
products in the stores from 2011 to 2013:

Source: (Whole Foods Market Inc., 2013)


With more than 50 percent of its inventory categorized as perishable, WFM has a daily inventory
loss that creates a deficit for the company. In order to stay a leader in their industry, WFM needs
to retain the highest amount of profit possible, which is difficult with a daily deficit. Because
WFM is dedicated to providing a diverse inventory or fresh produce, it is necessary that the
company does not simply cut back on the percentage of perishable products, but decreases the
percentage based on the daily sales of those products. As seen in the data above, the prepared
foods offered in the stores also account for a noticeable percentage of the companys perishable
goods. Changing the manner in which those prepared foods are made to reduce the percentage of
goods disposed of at the end of the day would also increase the profits the company gains.
Profit
As a solution that requires little, reducing the percentage of perishable goods in the WFM stores
ranks satisfactorily. The expenses incurred in the implementation of this solution are minimal
and basing the reduction on daily averages of the sales of products creates a sizable profit.
Basing the reduction on average sales means that the company does not have to lose money, but
instead reduces their loss on inventory, increasing the profits. The adoption of this solution
would require little expense, as the company would simply have to find the average sales of
perishable products in each store location and alter their daily inventory based on those numbers.

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The daily sales in each category are a number that is already measured in each store and therefor
the expenses are minimal, gaining a large profit for the company.
Return on Investment
As previously stated, the investment required to implement this solution is minimal but the
profits that will be incurred are high in both the immediate and long-term periods. Therefor, the
return on investment needed to reduce the percentage of perishable goods is exemplary. Creating
a noticeably high return on investment makes this solution justifiable in the eyes of the
executives of WFM because a future return can be collected. Reducing the loss that is procured
through inventory creates higher expenditures for other segments of the company as well. The
investment needed to reduce the percentage of perishable goods will create a return for the
company in many aspects as they will see higher profits and increase their ability to maintain its
high quality standards in the ways it promotes a sustainable future.
Competitive Advantage
In terms of its competitors, Whole Foods Market maintains a much higher percentage of
perishable goods. With this in mind, the percentage of perishable goods that WFM provides
gives them a noticeable competitive advantage. Therefor, reducing the percentage of perishable
products in their stores will have a negative effect on their competitive advantage because it will
decrease the diversification between WFM and its competitors. Reducing its competitive
advantage will loosen the grasp that WFM has on the position of industry leader and therefore
give their competition room to intrude on their market share.
Customer Satisfaction
As a company that knows the impact that its customers have on its future, Whole Foods Market
must measure how decisions will affect the consumers. Loyal WFM customers chose WFM over
tis competitors for its highly diverse selection of different organic products. Almost 20 percent of

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Whole Foods Market Case Study


the products available in WFM stores consist of prepared foods. The prepared foods section of
the stores bring in a different target market who appreciate healthy food but may not have the
time in their days to prepare it themselves. The prepared goods section also serves an education
tool showing customers how the produce and products sold in the store can be turned into meals
that they can create on their own. Reducing the amount of perishable products will decrease the
customer satisfaction in every store, which can negatively affect the success that the company
has in its future as well as decrease the value of the company as compared to its competition in
the eyes of the consumer.

Solution
In the analysis of options, it is determined that broadening the target audience is the best solution
that Whole Foods Market has to responding to the increased competition that it is facing in
todays expanding natural and organic product market.

Pros
Many pros arise with the broadening of WFMs target audience. Broadening the target audience
diversify the customers that are able to shop at WFM and therefor increase the revenue that the
company can collect. WFM has a reputation of requiring its patrons to spend their entire
paycheck in order to do their weekly shopping at the locations. Adopting the solution that
broadens the target audience will diminish the bad reputation and the negative connotation that
Whole Foods Markets have in the minds of some consumers, which will encourage more people
to go into the stores and see what they have to offer. Also, broadening the target audience will
allow WFM to adapt to changing economic conditions and remain successful in the future as the
customer base will be large enough to support a future.

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Whole Foods Market Case Study

Cons
Although the solution to broaden the target audience of Whole Foods Market is the most
appropriate, there are cons that arise from this solution that must be addressed. Broadening the
target audience has the possibility of displeasing the loyal WFM customers who appreciate the
high-end feel they take from shopping at WFM. With this con in mind, it is important that WFM
does not decrease the quality or atmosphere of the stores that the loyal customers value.
Although it will be providing items and services that appeal to a larger target audience, WFM
does not have to stray from its intention of offering high quality natural and organic products in
stores that offer high quality experience and knowledge. Additionally, the initial costs that are
incurred with this solution act as a con for WFM. With a company as profitable as WFM it is
important to focus on the return on investment of ventures. Although the costs may initially be
high, the costs will be counteracted by more customers shopping at WFM which will create
higher revenues in the long run and promote a longer future for the company.

Conclusions and Recommendations


It is recommended that Whole Foods Market take the necessary steps to broaden its target
audience. Although the three options presented ranked closely in together, the second option out
ranked its competition. As a company that relies heavily on its customers to make its future
successful, WFM will gain the most benefit from diversifying its target market with the second
option. Additionally, this option ranked exemplary in a qualitative criterion, as well as a
quantitative criterion, showing its diversity in rewards. In order to broaden its target audience,
WFM can offer low cost items, create a product delivery system, or offer a larger amount of
coupons to its customers on a regular basis. Implementing these programs will draw in the
consumers who desire a healthy lifestyle on a lower budget, as well as the consumers who have

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Whole Foods Market Case Study


busy schedules or do not have access to transportation to get to actual WFM locations. A broader
target audience will increase the success that Whole Foods Market will have in the future as well
as increase its global impact.

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Whole Foods Market Case Study

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Whole Foods Market Case Study


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