[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[18 comments]

Will Whole Foods Find Foodies in Detroit?

April 18, 2012

Walter Robb believes Whole Foods will find a following with its first store in the Detroit. But he even admitted the opening is "obviously stretching a bit" in a city that narrowly avoided a state takeover earlier in April.

"We believe it's the right thing to do," the Whole Foods co-CEO said in a speech Friday before the Detroit Economic Club, according to The Detroit News. "I think it was Henry Ford who said a company that just makes money is a pretty poor company. We are committed to bring high-quality food to as many people as we can."

Still, Mr. Robb stressed the store — to open in 2013 with government incentives — will be profitable given his belief that Detroit remains underserved by full-service supermarkets. Studies have shown Detroiters spend more than $200 million a year at suburban grocers partly because it hasn't been able to attract a national grocer in its leaner years.

He also spent much of his presentation marveling at the strong local food movement, citing Avalon Bakery, Charley's Ballpark Mustard and other businesses. City officials heralded the opening as a sign of progress for the city. Agreed Mr. Robb, "This city is at an inflection point."

The store's prospects are expected to be helped by being situated in Midtown, an area surrounded by Wayne State University, the Detroit Medical Center and the Detroit Institute of Arts and Orchestra Hall. The Associated Press said that while the area still suffers from vacancies and lacks the "bustling, thriving feel of some of those larger cities' neighborhoods in transition," it's seeing some revitalization with the help of startups and rehabilitation projects.

Critics questioned the opening's logic given the city's crippling debt load and an unemployment rate ranking among the highest in the country. Kenneth Dalto, a Michigan retail analyst, believes that for Whole Foods will have to emphasize more brand names and stress its recent push toward lower-priced foods. He noted that Zaccaro's Market, a gourmet grocer, opened in Midtown in April 2008 and closed less than a year later.

"The problem is they were too gourmet — this is not a gourmet area," Mr. Dalto said.

Yet Mr. Robb promised residents would get the full Whole Foods experience.

"This is not going to be a half Whole Foods store," Mr. Robb said, according to the Detroit Free Press. "You're getting our A game here. You're not going to get anything less than our very best."

FINANCIALS:     [NASDAQ:WFM]

Discussion Questions:

Discussion Questions: How, if at all, will Whole Foods have to adjust its merchandise and pricing to work in Detroit? What do you think of the overall potential for Whole Foods to succeed in struggling inner cities?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What do you think of the overall potential for Whole Foods to succeed in struggling inner cities?

Comments:

If I were a shareholder, I'd be at the next annual meeting raising hell. What are they possibly thinking? While Whole Foods may not position themselves as gourmet, they are significantly more upscale than your traditional grocery store. If they can lower their prices to work in an inner city, that must mean everyone else is getting gouged at their stores.

[Image of: View Braintrust Panelist button]
Dr. Stephen Needel, Managing Partner, Advanced Simulations

Whole Foods is not running a charity (despite the government incentives) so its choice of location is probably a "leading indicator" for the revival of the Detroit neighborhood in question. And it has opened successful urban locations elsewhere that are underserved by other grocery retailers. Given the "food desert" issue in the headlines (the lack of fresh produce and other choices in may urban centers), Whole Foods is filling a void and should be successful if it leverages its brand equity in a targeted, localized way.

[Image of: View Braintrust Panelist button]
Dick Seesel, Principal, Retailing In Focus LLC

As a Detroiter I take a certain umbrage to both this question and Robb's paternalistic views. He seems to be portraying Whole Foods as the smiling, but clearly superior, colonial capitalist stooping to condescend to bring overpriced "organic" products to the kindly, but slightly less deserving natives of Detroit out of the sheer depth of his corporate heart.

So ... the first thing he needs to change is his attitude.

The second thing he needs to do is change his assessment of the Midtown area, one of the neighborhoods Detroit Mayor Dave Bing -- and nearly every other major civic and corporate leader -- has picked as one of the anchors for Detroit's renewal. He can relax. Midtown residents are used to being gouged on price. When I lived there one could -- routinely -- pay almost twice what suburbanites paid for perishables, except of course the perishables in question looked like they came from the dumpster of suburban supermarkets.

I certainly hope that when city officials took Robb on a tour they stopped to point out that Midtown is adjacent to the Eastern Market where residents flock to to buy high quality organic perishables in bulk -- at low cost. There's also an active, and longstanding, food coop in the neighborhood so maybe he should think his pricing model through very carefully.

As far as merchandise goes, after years of trial and error, scientists have found that Detroiters can survive on a diet not dissimilar to that of normal people. I'm not sure what this part of the question means, but it makes me more than vaguely uncomfortable.

There's lots of money in Midtown and more coming in every day, but my bet is Whole Foods needs to understand that, as Aretha Franklin reminds us, doing business in Detroit is first and foremost a matter of R-E-S-P-E-C-T!

[Image of: View Braintrust Panelist button]
Ryan Mathews, Founder, ceo, Black Monk Consulting

Just a note for the non-Detroiters on RW. Midtown is physically located in the central city, but it's hardly a typical "inner city" -- whatever that means -- neighborhood unless your idea of inner city includes multi-billion dollar medical complexes, a large university, museums and galleries and an opera house.

This is the problem folks -- every neighborhood in Detroit is not a ghetto.

[Image of: View Braintrust Panelist button]
Ryan Mathews, Founder, ceo, Black Monk Consulting

It is erroneous to suggest that Whole Foods needs to emphasize more brand names and stress its recent push toward lower-priced foods. That is not who Whole Foods is! Either they will make it in Detroit -- or they will not.

[Image of: View Braintrust Panelist button]
David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

The city of Detroit is broke -- not [all] the people who live there. Whole Foods should already know that there is a sufficient population of adequate incomers to support the store. Otherwise they shouldn't build it. And they shouldn't change their pricing or merchandising strategy one bit. They are Whole Foods -- not ALDI.

[Image of: View Braintrust Panelist button]
Ben Ball, Senior Vice President, Dechert-Hampe

Can anyone else promote the values of Detroit as well as Ryan has ... and can Whole Foods find a way to respectfully reach into the hearts of those American citizens living in Detroit? Yes, hopefully!

Showing respect is a two-way street. Whole Foods will take the first step in that regard when it opens its store and then honestly offers the same quality and valuable merchandise and service as it would in offer in the suburbs. This will be a challenge since WF is a high priced retailer and their new public in Detroit has a historical right to be skeptical.

In turn, and assuming WF doesn't try to gouge its new customers, Detroiters shopping at WF must support its new retailing entrant. Another possible revitalization is available for Detroit by the WF event providing neither WF nor some Detroiters exploit the other participant.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

Inasmuch as every store need to tailor its offerings to the local consumers, why is this a separate question for Whole Foods? If the Midtown area is near Wayne State, how different will this location be from other university neighborhoods? Checking the local food co-ops and other solutions that have been adopted by the consumers need to be considered when entering the market. Again, understanding the local competition is relevant for any retailer in any location.

[Image of: View Braintrust Panelist button]
Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Whole Foods just needs to do what they do. Other than perhaps fronting more of the 365 brand, I wouldn't touch a thing if I were them. BE the brand, and they'll win.

[Image of: View Braintrust Panelist button]
Lee Peterson, EVP Creative Services, WD Partners

Whole Foods has established itself with a clear position in the grocery industry. It has often been successful where more traditional chains have struggled.

The last time I checked, Detroit was a city of roughly a million people. It is ludicrous to conclude that it can't support one grocery store built in an upscale neighborhood. I've seen horrible neighborhoods in Chicago evolve into fashionable areas with stores like Whole Foods.

Ryan is absolutely correct in being indignant over the implication that Detroit is just one big ghetto.

[Image of: View Braintrust Panelist button]
Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

On a positive note, this is a good move for the City of Detroit. Whole Foods is opening in an area that is far better than the ghetto environment we see portrayed of Detroit in the news media. It will be difficult for Whole foods to show the numbers other stores in the chain have. But, over the long haul, this can become a good move.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

There are many businesses and government agencies which succeed and even thrive in economically shattered urban areas. The individuals in care of these institutions live and work in specific neighborhood locations. A strategically positioned, well-known retail business designed to cater to the tastes of the affluent classes should capture a modest and uncontested success and at the same time add to the tax base and create a few jobs. Great idea!

'gjarnoldjr'

Right on Ryan! Also, when I compare most prices from Whole Foods to say a D'Agostino in NYC, the prices at WF seem to be on par or even less. Furthermore, the quality of Whole foods in produce, fish and meat are significantly superior so even when some things may be a little more, it is worth it.

[Image of: View Braintrust Panelist button]
Zel Bianco, President, founder and CEO, Interactive Edge

Incentives and smarts got Whole Foods to build a store in Midtown. They wouldn't do it if their real estate and strategic planning teams didn't see the potential for sustainable/profitable business. I lived in Detroit for 7 years and am actually spending a weekend in that very neighborhood. I wish the store was open and post grand opening to report on the experience.

In the meantime, kudos to Whole Foods and I sincerely hope that the City of Detroit will not be the first major US city to die. Leaders like Mike Illitch and the Ford Family will continue to support the city and make it great again. For those on either coast who haven't spent more than an hour in Detroit other than at the airport, go to the Detroit Institute of Arts (DIA) or the new Tiger stadium, or Greenfield Village/Henry Ford Museum or even jump over to Ontario for shopping via tunnel or bridge.

David Slavick, Director, Loyalty & Retention, FTD.com

It's clear from Mr. Robb's comments that he understands that presenting a Whole Foods store in Detroit will require "stretching it a bit." Going into the core of any major urban area in the United States requires "stretching it a bit." Detroit is no different. A great retailer looking to expand their market has to "stretch it a bit."

There are, in spite of perception, some really great things happening in Detroit. Quicken Loans has brought thousands of jobs downtown. Chrysler Group, LLC is bringing 1,200 jobs downtown in the very near future. Several colleges and universities mentioned in the piece are thriving in the city's core. In addition to those mentioned are Detroit Mercy and University of Detroit, as well as Detroit College of Law (DCL).

Every smart retailer should tailor their presentation to the demographic, market, and other influences, for differences where they are located. It only makes sense. How often have we all discussed that here?

Mr. Robb and the Whole Foods organization deserves commendation for their commitment to enter a market that few others even would or have. The major Michigan and regional food chains have not. Meijer has just recently, but they are at the fringes, not at the city's core. Spartan Stores has quite a few of their supplied independent stores operating inside the city limits. Yet, it has taken a national operation to recognize the opportunity that exists there.

Detroit has taken so many hits for so long. No one in Michigan or nationally can afford for it to fail completely. The automakers are not the sole answer. They have already all but left, besides administrative centers. Detroit has a rich history and to a great extent provided the industrial might that delivered the freedom that we enjoy today.

I don't see a single thing wrong with Mr. Robb's attitude or approach. I think he's well aware of where he's going and has a keen sense of what they may need to do to serve this market. Making adjustments to do so only means they are nimble and aggressive. Meeting the needs of Detroiters absolutely may be different from those in Annapolis, MD, or any other area where they have landed a store. It should be expected that they adjust accordingly.

There is some grit left. Those of us in Michigan welcome anyone who wishes to visit and see once it opens. I will plan a visit myself. It will be a great combination trip along with a visit to Comerica Park. Those of us in Michigan would also welcome anyone to visit one of the great places in the country to see baseball.

As a suburban "Detroiter" for the majority of my life and still a Michigander, I welcome them to join in on capitalizing on a great city at an "inflection point." Let's watch. We all may learn a lot from it.

'Scanner'

Historically, very high among the reasons given to researchers for picking one supermarket over another is proximity. And also historically, we in the business have interpreted that to mean proximity to home. However, some of us have wondered if it can't also mean proximity to work. Why can't a shopping trip be conducted on the way home at a store near the employment location? Beyond "Honey, pick up some milk on the way home," why can't an entire grocery list be completed at a preferred store -- like Whole Foods -- near the workplace? Especially among working moms, I suspect that it happens all the time. Hey, no kids to drag around!

In Detroit's Midtown, according to the Black Monk's description, there are businesses and institutions that surely employ thousands of commuters. They can't all work AND live in Midtown. So, one issue that pops up in the "proximity-to-work" scenario is the survivability of chilled and frozen items during the commute home. A remedy could be reusable thermal bags printed with the WH logo and made available to customers at a very reasonable price (Google "thermal bags for food"). Pre-frozen ice packs could also be sold cheaply, to be exchanged free for returned ice packs during the next shopping trip. To me, this sort of service fits precisely into their retail strategy. Oh, and a martini bar in the store.

[Image of: View Braintrust Panelist button]
M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Whole Foods will probably not change much of anything other than operate out of a tiny box. I think the potential is pretty much zero. And they know it. That's why they need incentives. They would never do this on their own dime. Detroit has plenty of full-service, independent supermarkets supplied by Spartan, Nash Finch and Supervalu. There is a good reason Kroger closed their Detroit stores, Meijer has never entered, and Farmer Jack went broke. They can't make a profit and they can't find employees willing to venture into the city to work.

David Livingston, Principal, DJL Research

As another lifelong Detroiter, I will vote for success for Whole Foods. I will also echo the sentiment that WF needs to remain true to their brand. In the summer, they will have competition from the wonderful experience available at Eastern Market, but competition will keep them on their toes and learning to serve their shopper base as it develops.

Midtown is vibrant, eclectic and cool. WF is too. Let's let it play out and let's give Detroit a hug once in a while. My vote will be with my wallet, even though I live much closer to both of their other two stores in Oakland County.

[Image of: View Braintrust Panelist button]
Anne Howe, Senior Vice President, Shopper Solutions, part of Acosta Mosaic Group

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters