This quote caught my eye in reading an interesting article on Whole Foods in the NY Times today (“Wall St. Sours on Whole Foods”)
“Wall Street tends to understand the transactional much better than deep customer relationships”, said Paddy Spence, a veteran of the natural foods business…“Natural grocers, like high-end retailers, have a relationship with their customers that goes way beyond the transactional and is very hard to put a value on.”
I agree that customer value is difficult to quantify and communicate. With all due respect to Arthur M. Hughes (author of Strategic Database Marketing), lifetime customer value has never caught on in the C-suite or on Wall St. In retail, $/sq ft – and comp sales – have always been the benchmark stats. I’m sure that Whole Foods is analyzing differences in $ spend/customer based on various customer attributes & segments, but this customer view is not something that is easily communicated to the Street.
Having grown up and recently spent a good deal of time in Pittsburgh, PA – I’m seeing Whole Foods battle head on with the local favorite – Giant Eagle (or “Igle” as we’d say in true Pittsburghese). Giant Eagle’s new Market District stores are huge and include a nod toward “organic” and “local”. This is likely appealing to demographics that may be starting to trend younger and more affluent, although I’d estimate that the bulk of the Pittsburgh population still skews older and low-middle income – making shopping at Shop N’ Save – where produce is sold almost exclusively in saran wrapped packaging – completely acceptable.
Anyone who has visited the South Hills Village Mall in Pittsburgh will likely have seen the enormous new Whole Foods store under construction (due to open in Spring 2016) just across Route 19. But if my relatives are any indication, there’s significant education needed in the Pittsburgh market as to the quality and sourcing of Whole Foods product. Although Giant Eagle now includes product from locally sourced farms like King’s (I grew up not 5 miles from the King’s farm in Valencia, PA), the “what is organic…really?” question looms large.
Customers of the Whole Foods Shadyside location, the affluent sweet spot of Pittsburgh, have likely moved beyond organic and are now inline with us Californians in embracing the locavore movement. Case in point: it wasn’t long ago that my own Pittsburgh relatives laughed at the thought of anyone paying $2 for a cup of coffee. Let my recent visit to the Canonsburg Starbucks be proof to the contrary: the morning drive thru line wraps around the entire building! My own experience points to many in Pittsburgh being skeptical of the higher prices being charged for “organic” products.
Bottom line: Whole Foods has their work cut out for them in terms of educating various markets about things like the environmental impact of farm raised salmon (ie. there’s a reason sustainably raised salmon tastes better and is better for the environment – and that’s why it costs more). The optimal marketing approach for Whole Foods will require tailoring the message – in this case perhaps by market or more precise geo-targeting – ie. giving the Pittsburgh market different marketing content than what is delivered in Seattle, NY or San Francisco – in recognition of the fact that grocery buying habits – and opinions toward the value of organic farming – vary across the U.S.