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Whole Foods to Test Lower Margins at Some Stores

NEW YORK — Whole Foods Market, Austin, Texas, plans to experiment with lower margins in some urban markets, though it does not plan any major changes in its pricing approach chainwide, Walter E. Robb. co-chief executive officer, told an investor conference here Tuesday.

"If we start getting into places where we're just about price, we'd be getting away from our mission as a company and what we know how to do really well," Robb said. "However, we have modeled some stores that are lower margin to put in certain urban markets, and I think there is some potential there, and you will see us do some experiments around that, just to see what that looks like.

"But right now there is so much opportunity with what we are already doing, and when you have that in front of you, why wouldn't you just press on and do that?"

Read more: Whole Foods Invests in Price

He made his remarks at the Deutsche Bank Consumer, Retail, Gaming and Lodging Conference here. According to Robb, Whole Foods is doing a better job making sure it is competitive.  

"One of the things we realized during the downturn in 2007 was that we didn't have the analytics to really understand our business beyond the intuitive. We now have a data base on every competitor and more analytics on our customers."

He said Whole Foods measures about 800 items from between 60 and 70 competitors across 13 marketplaces every month — "not on what they say but what they actually do on the shelf, including perishables and non-perishsbles — and this year I think we will expand the item count to 1,000."

Robb also said Whole Foods has historically run promotions in the 12% range, "but you can see us moving toward 14% and 15%, and we are going to use those more aggressively, whether it's a one-day sale or a three-day sale. Early-bird specials turn out to be a great thing, so it's a combination of price points and promotions [that work well]."

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