There’s a lot riding on a robot — the teaBot, to be exact — but not for the Canadian start-up behind the machine.
Rather, it is 365, the much anticipated new grocery concept from Whole Foods Markets, that is banking on the robotic kiosk and a host of other bells and whistles to reverse the company’s waning fortunes. The first store, here in Silver Lake, a neighborhood in the East Side of Los Angeles, opens in two weeks.
On Wednesday, Jeff Turnas, the president of 365, gave a tour of the store, which feels like a sort of foodie playroom. Shelves, racks and refrigerated cases are splashed with bright primary colors and surrounded by exposed insulation and polished concrete floors. All the fixtures are low profile — the highest shelving rises just 72 inches. Electronic terminals are lined up, ready to accept orders.
Instead of a human sommelier, there’s Banquet, a wine app developed especially for 365 stores by Delectable. Want a bottle of special Frankies olive oil for $9.99? The Green Gold olive oil is sold exclusively at 365. The store will also feature “Flash Finds,” the name for goods procured and available only temporarily.
“Look, we’re all foodies here, we love food,” Mr. Turnas said. “I think that’s kind of gotten lost in all the buzz about this store, which has mostly been about the business aspects.”
Over the last couple of years, mainstream grocers like Costco and Kroger, which have studied the Whole Foods playbook, have started to offer big selections of organic and other natural products — often at lower prices — attracting some millennials and devotees of organic and natural merchandise.
The competition has hurt Whole Foods’ bottom line. In the quarter that ended on April 10, the company’s revenue was flat and sales in stores open at least a year fell 3 percent. Profit dropped roughly 10 percent to $142 million, in part because the company had lowered prices and offered discounts in an effort to retain and attract customers.
Its shares are down more than half from their peak in October 2013.
“Right now, the legacy Whole Foods stores have difficulty attracting new customers, customers who don’t already shop there,” said William Kirk, an investment analyst at RBC Capital. “Conventional grocery stores have increased the amount of products they sell that overlap with Whole Foods and are offering them at cheaper prices.”
The company has plans to open at least two other 365 locations this year. The others will be in Lake Oswego, Ore., outside Portland, and Bellevue, Wash., outside Seattle. (Whole Foods plans to open up to 25 traditional stores this year, as well.)
“We’re testing three different demographics to see how different customers react,” said David Lannon, executive vice president for operations, in a phone call from Bellingham, Wash., where a new Whole Foods just opened. He added that the company was also opening larger Whole Foods stores that would allow it to expand higher-margin businesses, like the restaurants and bars inside its stores.
Anticipation of the new 365 store has generated a fierce round of rumors. Mr. Turnas said he was almost as tired of hearing that it would be a cheaper version of Whole Foods as he was of the rumor that it would have a tattoo parlor in it.
Neither rumor, he says, is true.
It does not have a tattoo parlor. Nor is it merely a stripped-down Whole Foods. Instead, it’s more like what Old Navy is to the Gap, or Madewell to J.Crew.
How is it different? The 365 stores will stock roughly 7,000 items, compared with 35,000 to 52,000 for a traditional Whole Foods. Meat is sold only in packages, lowering the cost of offering specialty cuts of meat served up by a butcher.
The store will still sell a wide variety of organic produce, though its selection of conventional produce is wider. As an example of how it might keep prices lower than Whole Foods, Mr. Turnas pointed to apples.
“At Whole Foods, we love big, round apples,” he said. “At 365, we love apples too, and get them from the same suppliers, but they may be smaller, less beautiful.”
Fruit is sold atop bright red fixtures straight out of the boxes and crates in which it is delivered, rather than in the handmade heaps found in a Whole Foods store.
For dry goods, 365 will stock the company’s private-label brand, from which it gets its name, and a few branded products, leaving the shoppers at Whole Foods to scope out the latest interesting natural and organic brands.
Despite the interest in the new line of stores, Mr. Kirk of RBC Capital points out that residents of Silver Lake protested the arrival of the 365 because they wanted the traditional Whole Foods that was originally planned for the site.
“People like me think almost universally this is some kind of panicked or desperate or rushed maneuver that will cannibalize Whole Foods,” Mr. Kirk said. “But I don’t think they’re giving the company enough credit for thinking about this and planning it for a very long time.”
The 365-branded locations will have about 100 employees, compared with 250 to 500 in a traditional Whole Foods.
Mr. Turnas, 44, who typically has a small ponytail and wears a hooded sweatshirt and canvas Camper shoes, looks like the textbook 365 customer. He is even living in a place here that he rented through Airbnb for the month before the store opens.
He got the job after leading the Whole Foods business in Britain, where the company entered the market with the acquisition of a chain called Fresh & Wild in 2007. Mr. Turnas is credited with helping turn around the company’s fortunes there.
“We did everything to make that store about convenience for the customer, and a lot of that is what we’re doing here,” Mr. Turnas said.
In addition to teaBot, which contacted him via LinkedIn, 365 in Silver Lake will have the first West Coast outpost of By Chloe, a hot vegan restaurant in New York City, and an outpost of Allegro Coffee Roasters.
Such partnerships reduce the need for extensive kitchen operations like the ones that churn out hot meals and prepared foods in Whole Foods stores. While 365 does have a kitchen, its main job is to make grab-and-go items like pizza and prepared foods.
“So no, we don’t have a tattoo parlor,” Mr. Turnas said. “But we do have a lot of other cool stuff.”
Source: The New York Times