Will ‘365 by Whole Foods’ spell trouble for Trader Joe’s?
Trader Joe’s is going to have to up its fresh foods game or the grocery could be in serious trouble with the launch of Whole Foods’ new "365" concept. That’s one of the first thoughts that popped into my brain last week when Whole Foods released more details on its new small store concept, currently in development.
If 365 — which takes its name from the natural grocer’s "365 Everyday Value" store brand — simply matches Trader Joe’s approach (quality, selection and price) with its own private label in refrigerated, frozen and shelf stable categories while living up to Whole Foods’ standard of quality in fresh, it will have an immediate head-to-head advantage. I’m typically among the first to decry mirroring competitors, but a me-too plus strategy might work in this case.
Here’s my thinking: The one clear Achilles heel of Trader Joe’s is its fresh business, particularly produce. Consumers commonly say they shop at Whole Foods for produce because of better selection and quality. The same shoppers will say they buy packaged organic and gourmet items at Trader Joe’s because it is comparatively cheaper and the quality is there.
![[Image: Whole Foods 365]](/public/images/discussions/18346/wf-turnas-still.jpg)
Of course, there isn’t any indication Whole Foods is planning to take my advice.
"These stores are going to be cool. They are going to look great. They’ll be fresh. They’ll be bright. They’ll be the right amount of technology to make it so it’s utilitarian and useful and not technology for technology’s sake," said Jeff Turnas, president of 365 by Whole Foods, on a company video to announce the concept.
"We are not looking at a discount model. We are not looking at a dumbed-down version of Whole Foods because we are never going to sacrifice our quality standards," he added.
Discussion Questions
Do you think Whole Foods should focus on the customers of specific competitors (e.g., Trader Joe’s) as it rolls out its new 365 concept beginning next year? Do you see produce and other fresh foods as a vulnerability of Trader Joe’s that 365 by Whole Foods Market could exploit?
Poll
BrainTrust
Bob Phibbs
President/CEO, The Retail Doctor
Zel Bianco
President, founder and CEO Interactive Edge
I get it, they’re going after cheap Millennials by promising a cool experience. I think many retailers are trying to have it all instead of focusing on how to do what they do best and cultivate those clients they already have. Whole Foods offered a Groupon a couple of times which I think diminished their brand. I wonder if this will do the same thing.
Whole Foods is an expensive place to shop and that is my PERCEPTION not just based on a dispassionate assessment. Whole Foods might fix the pricing problem but they will have a long way to go to fix the perception problem. I would not be too worried if I were Trader Joe’s.
Fresh foods is definitely a vulnerability for Trader Joe’s — they will have to address this issue, as well as the amount of packaging on their produce, if they hope to stand strong against 365. I wonder if simply un-packaging their produce might make a difference for shoppers’ perception of Trader Joe’s.
However, Trader Joe’s continues to have specialty products that will keep bringing shoppers into their stores — even if they skip the produce aisle.
It remains to be seen if 365 has the pulling power of the mother ship, given the reduction in size, SKUs and scope of fresh offerings. My experience tells me that they will not be the magnet that Whole Foods has become. That said, it would appear that 365 locations will be optimally located in reasonably upscale areas where empty-nesters, Millennials and foodies are in abundance. Urban enclaves of younger, upwardly-mobile shoppers should be a great match. If Trader Joe’s are present in these trading areas they will need to pay attention, especially in perishables, to insure they do not lose more than their fare share of shoppers.
My sense is that if 365 is to flourish, they will also need to appeal to several important shopping segments that frequent traditional supermarkets such as Kroger, Wegmans, Publix, HEB, and other similarly-positioned chains. These chains may have to raise the game a bit to diminish the 365 impact.
Ultimately the success of any retail grocer is heavily dependent upon securing the right locations with access to an abundance of compatible shoppers. As long as they are smartly located, in contrast to many of the unsuccessful fresh and easy stores, 365 should make its mark.
If Whole Foods brings a closer, faster, more convenient version of the core Whole Foods items to Whole Foods’ target market — they have a winner.
If Whole Foods tries to out-trade the Trader with 365, they are going to go home with a lame horse.
Whole Foods should identify and then focus on its core market, but tweak when the opportunity arises to grab share from a specific competitor, including Trader Joe’s among others. Of course “tweaking” can be a slippery slope, but my gut is that Whole Foods will get it right. Yes, produce/fresh are relatively weak at Trader Joe’s and Whole Foods will exploit that. Why the heck wouldn’t they?
How are the new 365 stores not going to cannibalize Whole Foods’ existing stores? If Whole Foods does not bring down the price of their products, consumers will have little reason to switch. Trader Joe’s is an established brand that connects with consumers on many levels. If 365 does not connect with consumers in a similar manner, Trader Joe’s has little to fear.
Trader Joe’s sales per square foot is like Secretariat in the Belmont. Whole Foods is a distant second. They are so far ahead and have a cult like following. It would take a monumental effort to impact Trader Joe’s.
Trader Joe’s will be challenged in several ways, not only by fresh food offerings. Whole Foods has a more transparent food-sourcing policy, generally a more stable product assortment, and is more willing to allow the third-party verification of claims than Trader Joe’s. Will they hurt Trader Joe’s? Who knows, but the opportunity is there.
We’re talking apples and oranges here (sorry!). Trader Joe’s is a specialty market, not a supermarket, which is what 365 will attempt to be. And given a probable price differential, Trader Joe’s shouldn’t worry. I do wonder if 365 will cannibalize Whole Foods itself …
WFMI should focus on bringing their existing strengths to a larger audience through a faster and more convenient shopping experience. Smaller formats and fewer products.
I think that freshly-prepared foods are a greater vulnerability to Trader Joe’s than the fresh foods. There are a growing number of places to purchase quality produce. Whole Foods will have a competitive advantage if they can deliver on their ready-to-eat meals in the 365 format. This will drive traffic and sales. An ideal customer comes for an immediate meal and leaves with food for the next two days.
I am most intrigued by the passing reference to “right amount of technology to make it so it’s utilitarian and useful….” With a highly mobile and socially-responsive shopper, 365 is positioned to actually be the first grocer to fully deploy leading edge technology to engage the shopper appropriately and enhance their experience.
Joel wrote about perception. I agree with him. Perception for Trader Joe’s is that it is a “cool” place to shop with friendly associates willing to help. Perception about Whole Foods is it is a trendy, expensive place to shop. I can’t see how Whole Foods can focus on changing those perceptions while overtaking Trader Joe’s with the devoted customer base TJ’s has.
It will take a lot more than 365 products to outdo Trader Joe’s. The Trader is the MAN in specialty, fun, interesting, unique products. 365 is just the house brand of Whole Foods. Great products, don’t get me wrong, but not even in the ball park. IMHO
And for my 2 cents!
While I’m not normally one to question WFMI’s strategies, and I wish them well, I’m not enthusiastic about this project…so far at least. It’s easy to say what “Whole Foods” is all about, not so clear what a smaller version will be. Logically it might be called “Half” or even “Quarter” Foods …not much worse names than they’ve chosen, I’d say, and I can’t escape the feeling this is a classic reactive move, it’s wanting to do “something” without really knowing what it is. Hopefully they’ll prove me wrong.
Market share! This is what Whole Foods needs to find the growth and profit taking necessary to sustain the company. They seem to be of the opinion that the Trader Joe’s customer is vulnerable to this market plan and ready for a change or return to better days. Perhaps this is where their departed customers now shop after experiencing our economic decline as a member of the victims list. The risk in this move is in the Whole Foods corner. This is because the solution offered does not bring anyone back, it simply adds to the offers in a crowded market.
I recall about a decade ago that Trader Joe’s was going to be in trouble because Fresh & Easy was coming to America. As far as 365 goes, I would not even begin to make a prediction on how they will impact the market. Sprouts, Fresh Market, Fresh Thyme, Earth Fare, and Plumb are really just Whole Foods wannabes, but can’t quite get to Whole Foods’s level.
Will 365 just be another wannabe to their big brother, Whole Foods? Trader Joe’s with its Aldi DNA, is so oddly different than other retailers. Whole Foods appeals to your eyes, mouth, and nose. Trader Joe’s gets right into our heart. Whole Foods is like the prom queen. Trader Joe’s is the cute girl in art class, with natural talent, that we can’t get our mind off of.
Whole Foods has built its brand around quality and its prices reflect this. It will take a lot of work to keep shoppers from associating 365 with a watered-down version of Whole Foods. As many of the commenters have pointed out, Trader Joe’s has built a strong following among shoppers of all ages. It is high quality and still low cost overall. Produce would be a great place for 365 to fill in gaps that Trader Joe’s has to try to convert some of their customer base. 365 has a lot of branding work to do in order to pose any real threat to Trader Joe’s.
The 365 idea is long overdue, but better to do things right than speedy IMO. Sure, they’ll compete with Trader Joe’s, but mostly because there are no Trader Joe’s! As an example, the Columbus, Ohio metro area is 1.4M people and we only have 2 Trader Joe’s. As a comp, we have 3 full size, mega-successful Whole Foods. Why there’s not 15 TJ’s here only speaks to their ability to handle logistics and sourcing, which is obviously not good.
So, to me, the 365 vs TJ’s gold rush could be a tortoise vs hare adventure. If 365 chooses to be a hare, that is.