Whole Foods Market said Wednesday its first 365 store is getting bigger basket sizes than its legacy stores and matching meat and seafood sales at those stores.
365 is matching meat sales against traditional Whole Foods stores. (Photo courtesy of Andrew Wolf)
365 is matching meat sales against traditional Whole Foods stores. (Photo courtesy of Andrew Wolf)
“We’re getting bigger baskets than we traditionally get at Whole Foods, and that’s been kind of a surprise,” John Mackey, co-CEO of the Austin, Texas-based company, told the 16th annual Oppenheimer Consumer Conference in Boston. Whole Foods opened its first 365 store May 22 in the Silver Lake area of Los Angeles.
“We’re actually having to redo the entire front end, including adding two new cash registers. We didn’t have conveyor belts because, with a smaller store with a curated mix, we were expecting that we’d get a lot more small baskets. But it’s been the opposite," Mackey said.
The 365 store carries approximately 7,000 SKUs, compared with 25,000 in a legacy store, “and it’s very aggressive in price,” he added.
Whole Foods took “something like” 1,000 basis points out of costs at 365, which is reflected in lower prices with less service, no service meat and no service seafood, he said.
“Produce is driving overall store sales, but the interesting thing is, we’re doing just as much business in meat and seafood [as at legacy stores], so we are quickly going to school on our learnings from 365. Our regional presidents are meeting together and we’re plotting out the learnings to integrate in Whole Foods Market so we can take cost out of our system and invest that in lower prices.
“One of the questions we keep getting asked is, how is Whole Foods going to react? Well, there hasn’t been much cannibalization [from the initial store], though admittedly [legacy] stores are a few miles away. We’ll have a better comparison when we open our Bellevue store up in Seattle because a Whole Foods Market is less than a mile away.
“Right now we don’t exactly know the right way.  We know what we want to do with 365, but we haven’t figured out exactly how Whole Foods best responds to that. Does it match prices in certain categories? Does it just differentiate away from it? How does it treat 365 as a competitor?

“We know we’re getting a different customer in 365. I never saw so many Trader Joe’s bags in a Whole Foods Market before. I was kind of joking that we should trade out any Trader Joe’s bags that were brought in for 365 bags, but that was interpreted by our team as too unfriendly, so we didn’t do that.
“So we’re going to be experimenting and trying lots of things. Whole Foods is a very experimental, entrepreneurial company, and [legacy stores] will match what they need to and continue to differentiate away from 365, and we’ll learn and evolve.”
The 365 store is attracting a mix of shoppers, Mackey said. During the day consumers tend to be older, while the store gets a younger, Millennial shopper at night, “and most of the business has been done at night,” he pointed out.
He said Whole Foods will integrate learnings from the first store into its next two 365 openings in Lake Oswego, near Portland, Ore., and in Bellevue, Wash., near Seattle.
Mackey said Whole Foods has 20 additional 365 stores in development and expects to come out with updated estimates for growth within the next six to nine months. “I do think 365 is an exciting growth opportunity, and I do think we’re going to have a lot of those stores," he said.
“It has such superior economics because you’re taking capital down by 50% to 66% of what a Whole Foods Market is, and you’ve got more of a cookie-cutter approach, and yet you’ve still got a really exciting format.
“If you get anything close to Whole Foods’ sales per square foot, the economics are astounding. Assuming that the first few stores do anything close to what Silver Lake does, then we’re probably going to roll them out very rapidly.”