Whole Foods halts 365 concept’s growth
Whole Foods Market will not be opening any new 365 stores because management believes the recent price cuts instituted since Amazon.com’s acquisition of the grocer have made its namesake locations more price competitive.
Seen aimed at Millennials, the first 365 opened in May 2016 with the smaller format focused on Whole Foods’ private label and a no-frills design to pack more value for consumers. The format was conceived as part of Whole Foods battle against its “Wholesale Paycheck” reputation.
In an internal memo acquired by Yahoo Finance, Business Insider and other outlets that details the expansion halt, Whole Foods’ CEO John Mackey wrote that the initial goal of 365 was to “create a more value-focused and streamlined shopping experience that maintained the integrity of Whole Foods’ quality in a convenient format that’s less expensive to build and operate.”
Earlier last year as 365 opened its first location on the East Coast in Brooklyn, speculation ensued that the smaller concept could open inside Kohl’s locations as Amazon deepened its relationship with the chain.
But since Amazon acquired the organic grocer in August 2017, Whole Foods has lowered prices on staples, introduced special discounts and weekly specials for Amazon Prime members and added more store brands inside Whole Foods’ locations.
“As we have been consistently lowering prices in our Whole Foods Market stores over the past year, the price distinction between the two brands has become less relevant,” wrote Mr. Mackey. “We believe that the price gap will further diminish.”
Analysis by some Wall Street firms has found overall prices at Whole Foods have mostly remained the same, although surveys show that consumers perceive they’ve improved under Amazon’s ownership.
The 12 Whole Foods 365 locations will stay in business and transition to being led by local regions, according to the company memo.
Reports arrived at the close of last year that a national expansion of Whole Foods is being planned in part to support Amazon Prime’s growth. The company will also add more of its smaller format AmazonGo convenience stores, but Whole Foods has indicated these moves played no role in the 365 decision.
- Exclusive: Amazon-owned Whole Foods scraps smaller 365 store expansion – Yahoo Finance
- Whole Foods halts growth of its cheaper ‘365’ stores – Business Insider
- Whole Foods planning more 365 stores – RetailWire
- Analyst: Whole Foods’ lower price claims are mostly ‘noise’ – RetailWire
- Will 365 concept prove to be the future of Whole Foods? – RetailWire
- Will ‘365 by Whole Foods’ spell trouble for Trader Joe’s? – RetailWire
- Amazon Plans to Add Whole Foods Stores – The Wall Street Journal
DISCUSSION QUESTIONS: Do you approve of the decision by Whole Foods Market to end the expansion of its 365 store concept? Does the move signal a change in Amazon’s intentions about its grocery business?