Whole Foods should buy Trader Joe's
While it's at it, the retailer could learn a lot from Starbucks about using technology to drive sales.
Starbucks is a tech company in a retail coffeehouse's clothing. You might be tempted to compare it to a retailer like Whole Foods Market (WFM), but Starbucks really is a superior company for the long-term.
On most days, I have nothing even remotely negative to say about Whole Foods from consumer and investor perspectives. I love the company and really like the stock. However, when I conduct a rigorous comparison of Starbucks and Whole Foods, I start to see the latter's flaws.
Starbucks doesn't win out because of scale and size -- it wins because it's cutting edge.
Thanks to a colleague, I got my hands on a Starbucks Steel Gift Card. This is the premium Starbucks card, loaded with $400 and retailing for $450 in a limited quantity of 5,000. The cards sold out in minutes. And now they're popping up on eBay for prices as high as $700 or $800.
Why is this relevant? It's relevant because the Starbucks iPhone app I downloaded a few months ago has made me a loyal customer. I hit Starbucks at least once a day now, sometimes twice. The app got me in the door. Combined with friendly baristas and a solid drink, it keeps me coming back. Talk about driving engagement. That's exactly what the app does. It's exactly what Starbucks intended it to do. It's brilliant.
Whole Foods needs to do something like this. The standard Whole Foods customer, at least in my neck of the woods, is the typical Starbucks customer. They're tech-savvy, iPhone-toting yuppies who already have or are starting to have guppies. Playing with an app in a grocery store is the ultimate diversion from the everyday monotony of life.
There's no excuse not to have a shopping app. Safeway (SWY) has a pretty solid one, Whole Foods does not.
Whole Foods doesn't just needs technology -- it should be more aggressive about growth. I think it should buy Trader Joe's, and here's why.
If you live in a place without a Whole Foods or Trader Joe's, you want one or both. If you live in a place that has both you probably shop at both. I go in waves, but ultimately I split my time almost evenly between the two stores.
Trader Joe's has more than 350 stores, highly concentrated in California but scattered across the nation and growing fast. Trader Joe's stores tend to be much smaller than Whole Foods stores. In the last couple of years, as Whole Foods has focused more on its "generic" Everyday 365 line, the price gap between the two has narrowed. While Whole Foods still sells items at a considerable premium to Trader Joe's, it's no longer Whole Paycheck. You can still drop absurd amounts of money on cheese and salami, but you have more choices than ever before at various price points.
If Whole Foods bought Trader Joe's, it could turn its stores into one-stop-shops for Everyday 365 products and Trader Joe's-branded items. Make it the Whole Foods Market corner store with a small produce section and an expanded beer section. A handful could be turned into full-fledged Whole Foods stores, or used to test concepts.
I may sound like I'm dreaming. Either way, Whole Foods needs to do more to stay competitive long-term. It owns a lifestyle consumer today -- but that could change in a flash.
I understand that messing with the Trader Joe's concept would upset a lot of people, but even the diehards would get over it. They all shop at Whole Foods anyway (even if they say they don't) and they're the same people who claim to hate Starbucks while sipping a grande, extra-hot, double, skinny, no-foam latte with a shot of peppermint.
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You gotta be kidding?
Trader Joes is the best there is. Only 3 miles from my house.
They treat their customers like real customers, and have excellent foods and great bargain prices, especially when you need them too.
btw: Never shopped at Whole Foods. The nearest is at least 12 miles away. ..... but there is another Trader Joes within 6 miles.
Shopping experiences, are in the eye or pocketbook of the Beholder...
We all go different places for different reasons...
Convenience and or Location.(distance)
The quality of merchandise.
The service received and people working there.
Cleanliness in the business
Special sales, discounts or coupons.
To purchase specific items.
Places with wide selections.
And prices in General........I really doubt that very many shop only one or two places.?
Trader Joes is owned by the same trust that owns Albi Nord supermarkets which is not the same as the one that owns Albi Sud (which owns the US Albi supermarkets). A merger of the two Albi groups and continued Albi expansion would seem to me to be much more likely than the group selling a profitable subsiduary.
Of course, everything has a price but if Whole Foods wants to acquire technology and marketing skills, there are probably cheaper ways to obtain them.
Don't know Trader Joes, have heard of it, But do go to Aldis about every 3 months for heavy stocks of staples...Pet foods and loss leaders at Wally World and Hometown for meats and everything else..
It pays to be a smart shopper..
And we have all others inc WHFDS available.
We live in Kirkland, WA. We have a Costco, QFC, Fred Meyer, Metropolitan Market (local upscale chain), Whole Foods, PCC ( NW organic chain), Safeway, Albertson, Uwajamiya (Asian supermarket), United Grocers (restaurant-orientated) , Total Wine, Bev-Mo, within 15 minute drive. Wal-Mart is 20 minutes away.
Anyway, we shop as needed
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