Whole Foods plans to scrap its 365 By Whole Foods store format, less than two years after launching the concept, which offered lower prices and a more local flavor than the company’s traditional WFM units.
The news first broke on Yahoo Finance, which reported on an email to company associates from the retailer’s co-founder and CEO John Mackey. In the email, Mackey said, “As we have been consistently lowering prices in our core Whole Foods Market stores over the past year, the price distinction between the two brands has become less relevant. As the company continues to focus on lowering prices over time, we believe the price gap will further diminish.”
The news did not come as a surprise to analysts since the chain had lowered some of its prices since being acquired by Amazon in June 2017, leading to less differentiation between the 365 and traditional WFM formats.
Soon after acquiring the Austin, TX based retailer, Amazon also began offering discounts to Amazon Prime members and selling Amazon devices in Whole Foods stores. Additionally, Amazon began offering free grocery delivery for Prime members at select locations last year and gave customers the option to pick up their online orders at nearby Whole Foods locations. That program has been expanded and will eventually cover all markets where Whole Foods operates. Also being broadened is the company’s “Prime Now” program, its two-hour delivery service for select items, which is currently offered in about 60 cities throughout the U.S.
Perhaps also related to the decision to end the 365 format is the company’s current focus on its other bricks-and-mortar retail division, Amazon Go. Both 365 and Amazon Go are smaller sized prototypes offering fewer items than a traditional supermarket. What sets Amazon Go apart is its extremely small footprint (about 1,500 square feet), its cashier-less design that gives customers a quicker, more streamlined shopping experience that focuses on quick purchases of often-needed items. It currently has opened 10 “Go” units in major cities, locating those stores in busy downtown urban sites.
The first 365 debuted in the Silver Lake area Los Angeles in May 2016. The stores focused on Whole Foods’ less expensive private label “365 Everyday Value” brand, designed to appeal to a younger demographic as well as to price-conscious shoppers who avoided Whole Foods, which consumer sometimes referred to as “Whole Paycheck.” The 365 stores are smaller (about 25,000-30,00 square feet) than conventional WFM units (about 38,000 square feet on average, but as large as 80,000 square feet). The smaller format carries far fewer SKUs (7,000 vs. 20,000) and does not feature full service departments like bakery and deli.
As recently as May 2017 (one month before the company was acquired by Amazon for $13.7 billion), Mackey told investors that the company had plans for 22 additional 365 stores in development and that he expected that number to increase.
Currently, there are two dozen 365 locations, in California (5 units), Georgia (2), Texas (2), Ohio, Oregon and New York (Brooklyn). All are currently expected to remain open and operate under the 365 banner.
The first 365 location in our region opened in the Fort Greene section of Brooklyn in January 2018. The last two 365 stores opened in December 2018 – in the Buckhead section of Atlanta and in Decatur, GA.
Per the Whole Foods website, as of last month there were 11 planned 365 stores, including two in the Mid-Atlantic and Northeast regions. A long-planned location in Fairfax, VA is still on the books and ground has been broken on a new 365 location in Weehawken, NJ, both new urban-type developments.
Other planned new locations are in more advanced construction development. At presstime, the company revealed that it would instead open some of the planned 365 units as conventional Whole Foods stores, but did not provide any details on plans for specific locations.
Oversight of the current 365 stores will be rolled into the retailer’s current regional structure and Jeff Turnas, who has served as president of 365 since 2015, will move to another role at Whole Foods. The company said it would absorb 365 employees into existing Whole Foods divisions.
While there will be no new plans for 365 locations, recent speculation has focused on Whole Foods’ potential interest in now shuttered Sears and Macy’s locations as it seeks to bulk up its bricks-and-mortar presence. According to industry insiders who spoke with Yahoo Finance, Amazon is interested in opening new Whole Foods stores and expanding the chain beyond its current 475 U.S. locations.
Additional bricks-and-mortar locations could also greatly increase the company’s ability to offer in-store pick-up of online orders, as well as provide additional space for Amazon to store more products, a key synergy that could be realized by the combined Amazon-WFM entity.