Whole Foods Rethinking Stores Sizes And, Oddly Enough, CRM

When it comes to store size, is bigger or smaller better? Whole Foods, in a change of direction for its store sizes, says both. And for more Whole Foods change, the legendary resistor to any kinds of CRM (due to shopper privacy concerns) is now saying that it's preparing to offer a CRM program, albeit one that is supposedly very different from any that exist today.

CRM "is something we are looking at," said Co-CEO John Mackey, during an investor's call. Mackey said: "We wouldn't do the kind of loyalty program that other traditional food retailers are doing. We are not too impressed with those type of programs. But we are looking at something that will have a unique Whole Foods Market flavor to it. We don't have anything imminent."

Whole Foods has thus far declined to elaborate, including one of the more delightful non-elaborations we've seen in a long time. Immediately after Mackey's comment, Co-CEO Walter Robb made the following comment verbatim: "There's all the ducks around the pond in the room. All the ducks are very calm about the water but our feet are definitely paddling below the water but nothing to really show you."

What the company was willing to discuss, though, were store sizes. The chain generally tries to rollout stores that are 40,000-45,000 square feet. A few years ago, it tried letting the stores grow larger. The chain has been surprised at how well those larger stores have done, prompting them to consider creating more stores with a larger footprint.

"I found very interesting that our largest store, the cohort of stores between five and seven years old," Mackey said, "as these stores get a little bit older, they are still coping very strongly and ROICs are going up. We think those stores have much higher long-term potential because they have so much more parking" and the stores can "leverage less spoilage and just become more and more efficient, so it's going to be very interesting to watch the larger store awards as they reach their maturation phase and we starting to move 10-plus years. We have so many of these larger stores being opened back kind of back when the economy fell out 2007, 2008, 2009, that now are performing very well for us leading us to rethinking, maybe we need a few bigger flagship stores of some of these markets, because we are doing so well with the ones we have."

But it's not all "bigger is better" for Whole Foods store sizes.

Supermarket News quoted Whole Foods' EVP for operations, David Lannon, discussing the surprising strength of one of its newest stores—which also happens to be its smallest.

After Whole Foods bought six Johnnies Foodmaster locations in the Boston area last year, it reopened the first one, in Brookline, Mass., under the Whole Foods banner a month ago. That store is only 16,000 square feet. "It's off to a good start and doing better than expected," Lannon said, "and we're bullish on replicating that strategy."

Mackey added: "We expect a sea change in the retail food industry, with smaller independents closing stores or looking to get out, and we see additional opportunities for us to [acquire and] invest in some of those stores."

For more:

- See Supermarket News story
- See investor call transcript

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