Innovations in U.S. Food Retailing

Trader Joe’s Founded by a Stanford MBA who owned a number of

convenience stores. Repositioned stores to appeal to worldly, health-conscious

consumers. Focused on granola, nuts, dried fruits, vitamins. Acquired by owners of Aldi in 1979 Now has 253 stores Sales estimated at $4.5 billion Average sales per square foot estimated at $1,500 Stores have 2,000 items. Many suppliers are small; also sends scouts around the world to

find innovative items Only added scanners five years ago, considered impersonal by

management

Innovations in U.S. Food Retailing

Trader Joe’s (continued)Cornerstones of strategy

Deliver value: “Two-buck Chuck” Offer mostly private label; sell national brands at major

discount Have staff wear bright Hawaiian shirts Merchandise a unique blend of products “We taste everything we sell. Surprisingly few of our

competitors do that.” “Did you find everything you need?” If not, cashier will leave

station to pick up item for you. Unconditional “no questions asked” money-back guarantee. No loss leaders 10-15 new items per week; treasure hunt

Innovations in U.S. Food Retailing

Whole FoodsBegun in late 1980 in an Austin Texas neighborhood with a hippie

image.Now has 183 stores in U.S., Canada, and the UK. Annual sales of

$4.7 billionGrowth strategy

Purchasing smaller companies (such as 7 Wild & Fresh stores in UK)

Expanding existing stores Adding new stores

10 straight quarters of double-digit same store sales growthSales per square foot of $783 versus $570 for average

supermarket

Innovations in U.S. Food Retailing

Whole Foods (continued)Cornerstones of strategy

Perishables account for 67 percent of total sales Image of very high quality and high prices (Whole Paycheck) High levels of product sampling (breads, cheese, fruits) Organic foods, private label, salad bars, marinated and semi-

prepared meats and foods Deli and meat departments stand out Environmentally and socially conscious Unique target market In-store areas to eat, some outside

Innovations in U.S. Food Retailing

Whole Foods (continued)Organizational Issues

Awards stock options to all employees, not just store managers

90 percent of employees are full-time; non-union John Mackey, CEO and founder, has salary capped at 14

times average company salary (not counting stock awards and options). Had to forego $46,000 in bonus money in 2005.

Innovations in U.S. Food Retailing

• Greenmarket– Established in 1976 by the Council on the

Environment– Aim was to help small family farmers sell

fruits, vegetables, and other farm products– Sells organic fruits and vegetables, eggs, fish,

jams and bread products– By law, everything sold at market must be

grown or made there– Emphasis is on visual presentation, and

quality instead of price

Innovations in U.S. Food Retailing

• There are 16 greenmarkets in New York City; the Union Square market is the largest, by far.

• It’s open year-round, 4 days per week (Mon, Wed, Fri and Sat) from 8AM to 6PM with an average attendance of 250,000 customers per week

• Customers include noted chefs from Union Square area who can be seen buying produce for their restaurants, local “foodies,” and the general public