Whole Foods Market Case Study
MGMT 702-101 Case #1
Prof. James Farmer
Pranav Kurlawala: 3000777737
January 28th, 2015
1) Are there any particular strategic reasons for Whole Foods Market to use large-scale (large square footage) stores to sell organic and natural foods?
Whole Food Markets was founded in 1980, from where it evolved from a local super market into world’s largest retail chain of natural and organic foods supermarkets. During the year 2008, Whole Food Markets have acquired 276 stores. In 2000, the optimum point, which made the company most beneficial for most markets, was the company’s store size. Yes, there were various strategic reasons to use large –scale stores: The Company had realized that the larger store size was being more beneficial according to the rule of economies of scales. Which means that a company, which has a larger size, has more advantage of cost as the output of the product is increased due to the larger size. The larger store size attracted the customers and the perishable nature of their item requested immense cell rack spaces and fitting stockpiling and in this manner it obliges expansive store The idea that the WFM had developed was that they didn’t wanted people to just come and shop from their store, but also that they should have a interactive and soothing experience. It was only due to the larger store size that the company could make such a pleasurable experience for the people. The large size of the store could make it possible to set up lot of things that the normal organic stores could not offer. The stores were colorful, they had chefs working in the open kitchen for the people to view them, salad bars, dining areas, restaurants, recipe cards, valet parking, café, home delivery, people who would give massages and much more things to offer the people who walk into their stores. The one main reason why this could be possible was the store size that ranged beyond 30000 square feet. Different locations had different themes to make an unseen experience for the people. The annual sales of the company averaged more than $800 per square foot. This was far more than what their competitors were making. From 2002 to 2006 the WFM had made it possible to open 10 to 15 stores in the metropolitan cities each year. These stores have size from 40000 to 70000 square feet. These were at much higher scales than the other organic food companies. Thus the large size of the store not only benefited to increase the company’s output, Since development in square footage of store is thought to be the fundamental explanation behind retail industry but also created a strong bond with the customers leaving to the customer loyalty for their brand.
2) During recessionary times (or during periods of slow economic growth) can Whole Foods Market maintain unit sales volumes and profit margins? A) Whole foods Market has been consistent in gaining profits by making huge sales due to its overwhelming strategies to make their customers happy. Various factors like the customer service that is being provided to the people have developed a strong bond between the company and the customer. People prefer their products as they are totally natural and also because the company provides their customers with exceptional service. The era between the year 2007 and 2009 is marketed as the most tragic times in the US due to the biggest economic crisis in the market. . That entire era is termed as the recessionary time. And even during this time, when the entire market is falling down WFM could maintain sales of 62 billion. Of the entire grocery market, WSF was able to maintain 7.3% of their share in the US grocery sales. People normally buy WFM’s products, as it is better for their health in comparison to the other products, which would have more of the artificial ingredients in them. The company may suffer a little lesser demand of the products but it...
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