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Profit Case Study: Whole Foods Market

Business 304, Fall 2013

Eryn Eledge

Whole Foods Market Case Study

AbstractThe 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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Table of ContentsAbstract..........................................................................................................................................ii

Executive Summary.......................................................................................................................4Introduction................................................................................................................................4Problem.......................................................................................................................................4Options and Criteria..................................................................................................................4Recommendations......................................................................................................................5Conclusion..................................................................................................................................5

Background and History...............................................................................................................7Founding.....................................................................................................................................7Mission Statement......................................................................................................................7

Overview.........................................................................................................................................8Structure.....................................................................................................................................8Products and Services................................................................................................................9Target Market..........................................................................................................................10Competitors..............................................................................................................................10Place in Industry......................................................................................................................11

Problem.........................................................................................................................................12Increased Competition as a Problem.....................................................................................12Those Affected by the Increase in Competition....................................................................13Past Action................................................................................................................................13

Options Analysis..........................................................................................................................14Addressing the Problem..........................................................................................................14Decision Criteria......................................................................................................................15Option 1: Creation of a Rewards Program...........................................................................16Option 2: Broaden the Target Audience...............................................................................19Option 3: Reduce Percentage of Perishable Products..........................................................22

Solution.........................................................................................................................................24Pros............................................................................................................................................24Cons...........................................................................................................................................25

Conclusions and Recommendations...........................................................................................25

References.....................................................................................................................................27

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Executive Summary

IntroductionWhole 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 America’s 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.

ProblemAlthough 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 Joe’s, Sprouts Farmer’s

Market, and Wild Oats Market serve as WFM’s 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 CriteriaIn 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.

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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 Profit Return on Investment

Competitive Advantage

Customer Satisfaction TOTAL

1. Create a Rewards Program X XX XXX XXX 9

2. Broaden the Target Audience XX XXX XX XXX 10

3. Reduce Percentage of Perishable Products XX XXX X X 7

RecommendationsThe 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.

ConclusionWhole Foods Market’s 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,

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Whole Paycheck” reputation while still maintaining its reputation of offering the highest quality

products and shopping experience.

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Background and History

FoundingWhole 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 StatementUnlike 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.

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We promote the health of our stakeholders through healthy eating education.”

(Whole Foods Market IP. L.P, 2013)

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 Market’s 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 with other members of the Executive Team [as] one of

mutual respect, trust, and equality [...as the] Whole Foods Executive Team makes [its] most

important decisions through consensus” (Mackey, 2010). With the commitment to incorporating

the ideas and opinions of his fellow team members, John Mackey creates a cohesive corporation

that serves its customers to the best of its ability.

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Since their humble beginning in Austin, the company has grown exponentially and currently has

362 stores globally. Below is a table of the current Whole Foods Market locations from their

2013 annual report:

Source: (Whole Foods Market Inc., 2013)

Products and ServicesAs 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 defined “by evaluating the

ingredients, freshness, safety, taste, nutritive value and appearance of all of the products [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.

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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 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 MarketThe 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).

CompetitorsContrary 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. WFM’s main competition come from other markets that

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specialize in natural and organic products, such as Sprouts Farmer’s Market, Wild Oats

Marketplace, and Trader Joe’s. 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.

In addition to direct competition, Whole Foods Market faces indirect competition from well-

known 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 WFM’s

hold on the market (Philpott, 2012). WFM is facing increased competition from every angle.

Place in IndustryAlthough Whole Foods Market initially placed itself into a limited niche market industry, the

increased competition that it is facing is challenging its place as the industry leader. Currently,

WFM remains a leader but the company’s “competitors have been steadily creeping in and

stealing market interest. [For example], Kroger is aggressively expanding into organic and

natural food selection while also attempting to compete on price.” (QuandaryFX, 2012).

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ProblemWith 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. Below is a chart showing the market share held by specialty stores, like

Whole Foods Market, compared to that of its competitors (USDA, 2013):

Increased Competition as a ProblemWhole 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. WFM’s competitors are forcing the company to reevaluate their business decisions on

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a daily basis. Although increased competition can prove to be beneficial for the consumer due to

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

react.

Those Affected by the Increase in CompetitionWith 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-so-

impressive 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 ActionAs 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, WFM’s 365 Everyday Value brand is still unable to

compete with the low priced items at the competitors like Trader Joe’s, 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

Joe’s:

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Whole milk (gallon)

Eggs (12 count carton)

Sugar (5 lb. bag) Canned soup

365 Everyday Value (WFM) $3.49 $2.99 $5.99 $2.99Trader Joe’s $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 Joe’s 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

company’s competitors still remain the leaders in value-based items.

Options AnalysisAs previously stated, Whole Foods Market’s 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 ProblemThree 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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Decision CriteriaThe 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 Profit Return on Investment

Competitive Advantage

Customer Satisfaction TOTAL

1. Create a Rewards Program X XX XXX XXX 9

2. Broaden the Target Audience XX XXX XX XXX 10

3. Reduce Percentage of Perishable Products XX XXX X X 7

X- Adequate XX- Satisfactory XXX- Exemplary

ProfitProfit 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 company’s position in

an industry and possibility of a future.

Return on InvestmentReturn 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 AdvantageWith a problem that focuses largely on WFM’s 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 SatisfactionCustomer 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 ProgramThe 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 Farmer’s Market, Wild Oats, and Trader Joe’s have not implemented

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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.

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.

ProfitThe 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 InvestmentThe 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 eco-

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friendly, 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

possible reaps large benefits for the long term, which creates a large return on investment for the

company.

Competitive AdvantageAs 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 WFM’s 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 Joe’s,

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 SatisfactionAlso 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

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the money they are spending. As a company that is known for having highly priced items,

WFM’s 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

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 AudienceAs 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

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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

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.

ProfitBroadening 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 InvestmentAlthough 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

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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 AdvantageCurrently, 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

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 SatisfactionBroadening 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 WFM’s 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 WFM’s 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.

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Option 3: Reduce Percentage of Perishable ProductsWith 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

stores. Below is a table from WFM’s 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 company’s 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.

ProfitAs 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.

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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.

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 InvestmentAs 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 AdvantageIn 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.

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Customer SatisfactionAs 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

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.

SolutionIn 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

today’s expanding natural and organic product market.

ProsMany pros arise with the broadening of WFM’s 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 Market’s have in the minds of some consumers, which will encourage more people

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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.

ConsAlthough 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 RecommendationsIt 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,

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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

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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team-together-10-more-years

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PDFs/WFM-2013-10-K.pdf

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from http://seekingalpha.com/article/743931-the-decline-of-whole-foods-market

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VitalCashFlow. (2012). Gift and loyalty card program. Retrieved from

http://www.vitalcashflow.com/giftCardProgram.html

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