The Silver Lake store will include a vegan fast-casual restaurant called by CHLOE, a craft coffee and beer bar from Allegro Coffee Company and a kiosk called teaBOT allowing shoppers to create customized tea blends – as part of a new ‘friends of 365’ initiative involving partnerships with local businesses.
The 365 stores – which will be around 25-30,000sqft vs around 40-50,000sqft for a regular Whole Foods store - will “open up a whole new set of customers who, so far, have for various reasons, have not liked Whole Foods Market”, according to co-CEO John Mackey, who told analysts last year that the new stores would offer “very, very competitive prices”.
With each store, we’re looking to curate a unique experience
The new 365 stores will include self-serve prepared food bars and will offer online ordering and delivery services through Instacart, said Jeff Turnas, president of 365 by Whole Foods Market.
“With each store, we’re looking to curate a unique experience. Allegro’s craft brew bar will provide a casual place for Silver Lake residents to relax before or after they shop, while teaBOT’s unique service will offer a quick, yet deeply personalized tea-making experience.”
Asked about the challenges the company faced in securing good locations for the new stores on the Q1 earnings call in February, Jim Sud, EVP, growth and business development, said: “We're looking everywhere; the plan is to try and cluster stores, where possible, and we're doing that in Southern California. But we also have leases in other isolated markets as well.
“We're also finding that we're able to acquire these stores on very favorable rents, less in general than our Whole Foods Market stores.”
Ken MeyerEVP, operations, added: “The 365 stores are going to leapfrog ahead on many of the practices that we will be evolving in Whole Foods Market... So we can go radical on 365 stores and assuming those are going to work as well as we think they do, they will serve to help accelerate transformation within the mother brand.”
‘The 365 stores are going to be incredibly profitable’
Asked about the costs associated with the new 365 format last year, Robb said the 365 stores would have a simpler design and lower labor costs as they would require fewer staff, and fewer specialist staff.
He added: “We actually think we'll get superior ROIC (return on invested capital) with the 365 format. We're going to have significantly reduced capital investments, as well as significantly lower labor costs.
“If we get anything close to what Whole Foods Market sales per square foot are in our new stores, the 365 stores are going to be incredibly profitable, and with very high ROICs, even with reduced gross margins. Will there be some cannibalization of Whole Foods? I mean probably. But… it'll probably be less than when we open up an actual branded Whole Foods Market store, because it's going to appeal to a little bit different customer, we think.”