An article in the October 24th issue of BusinessWeek takes a somewhat critical look at Whole Foods Market (WFM). It questions whether or not the company can sustain its sales gains, ambitious new store growth plans, and its cachet with customers. One of the business areas the article questions is WFM’s decentralized infrastructure.
”As Whole Foods gets scale, its ability to efficiently manage distribution becomes a greater issue, too. It has 11 geographic divisions, each boasting its own president and handling its own store network. That’s fine for a regional player, but a company that aspires to have $10 billion in annual sales within the next few years requires a more centralized strategy. Right now, everything from transportation to product sourcing is local. “They don’t have a professional supply chain,” says one consultant familiar with the company. Whole Foods is working on these logistical issues, but faces less pressure to be efficient because of premium prices.” MORE
Having spent time as WFM’s Director of National Marketing, I experienced first-hand how the company’s decentralized infrastructure fosters bottom-up innovation (not top-down direction) to drive sales and build the brand. To give you a better insight into the unique business and marketing culture of Whole Foods Market, I’ve outlined 10 core philosophies the company follows.
1 | Maximum Freedom. Minimum Governance.
WFM operates under the belief stores should have the freedom to meet the needs of its unique customers and team members. The only governing rule all stores must dogmatically adhere to is all food sold at WFM must be free from artificial preservatives, colors, flavors, sweeteners, and hydrogenated oils.
However, unwritten social rules do govern stores. These unwritten social rules come in the form of ‘best practices’ which its stores and regions openly share.
2 | Small Pieces Loosely Joined
WFM is comprised of entirely teams. Every corporate/regional department is a team. Every store is a team. Every department in every store is a team. And every employee is a team member. The success of the company team is dependent upon the collective success of all the teams.
WFM believes in self-directed teams and its success is dependent upon the shared fate of all team members working together on every team. Every small piece is loosely joined and requires interdependence to reach store level and company level team goals.
3 | Getting Bigger by Acting Smaller
WFM decentralizes nearly every business function. The regions are charged with procurement of product, training of store team members (store employees), PR/marketing activities, and making business critical decisions.
As WFM gets bigger, it actually gets smaller.
In 2002, WFM operated 140 stores with 9 regions. Today, WFM operates 176 locations with 11 regions. By decentralizing decision-making to the increasing number of regions, WFM is able to reduce corporate bureaucracy.
WFM seeks to make as many decisions as possible at the regional level, a level closer to understanding the local shopper than a centralized corporate entity ever could understand.
4 | Food as Theater
A trip to a conventional grocery store is a shopping chore. While a trip to Whole Foods Market is a place to explore.
WFM emotionalizes the shopping experience by appealing to the five senses. Its stores are spotless and the merchandising displays are beautiful to the eyes. Shoppers are encouraged to taste and to touch everything in the store. WFM is a muzack-free zone and thus doesn’t sound like a traditional grocery store. And the smell of bread, coffee, smoked meats, and fruits waft throughout every WFM. WFM celebrates food like it is a theatrical production.
5 | Shoppers as “Brand” Ambassadors
Through extraordinary customer service and exceptional customer experiences, WFM believes it can turn its shoppers into brand ambassadors who will voluntarily extol the virtues of WFM to their friends and family. So instead of using traditional advertising vehicles, WFM uses the influential power of customers as the advertising vehicle.
6 | Education Leads to Appreciation
WFM appreciates and celebrates the role natural/organic foods can play in helping people live a happier, healthier, and more rewarding life. The company believes it can cultivate loyalty beyond reason with its shoppers by educating them on the natural/organic difference as it relates to better tasting food, healthier living, and the positive impact on the environment. At every opportunity, WFM communicates good food feels good.
7 | Everything Matters
WFM’s well-defined quality standards force the company to always question everything about every product it sells. WFM will NEVER compromise its quality standards. To become certified as the first national “Organic” grocer, WFM had to go to extreme lengths to prove to Quality Assurance International (QAI) they maintain the organic integrity of every product they sell. There is not another grocer the size of WFM that has also been certified “Organic.”
8 | Price to Value
WFM has no intentions to ever compete on low prices. WFM prices the products it sells to the value its customers have for the products. Shoppers value WFM’s values of pure, authentic, and flavorful foods so much so they will gladly pay more.
9 | Profit is a Good Competitive Game
WFM is a relentless competitor. The company has very little quit in them and will work extremely hard to overcome any deficiencies in its game.
Deep inside, WFM is infatuated with profit because everyone profits from profits. Team members profit by having more job opportunities because profits enable WFM to grow. Customers profit by being able to enjoy the in-store theater made possible from profits. And the company profits by increasing shareholder wealth.
10 | Team Members Make the Difference
WFM views its team members as being the company’s true competitive advantage. Competitors can replicate its products and programs, but they will never be able to replicate its people.
WFM does not take for granted the power of a knowledgeable, caring, and passionate workforce in creating highly satisfied customers. WFM has created a company culture which connects with their team members and they pass that connection onto WFM shoppers.
If one were to take the WFM team member out from its business, Whole Foods Market would not be the successful company it is today.