Karen Short, Managing Director at Deutsche Bank Securities, says Whole Foods Market, Inc. (WFM) is planning to open a second format of store called 356, which is intended to be more of a value-oriented shop. She says the company is planning to open the first five stores in 2016 and then another 10 in 2017.
“It’s going to take a lot of time because they are stuck in a place where they don’t believe that they are going to get credit at their Whole Foods stores for reducing prices because the experience is such a theater-type of format in terms of wine bars and pasta stations and prepared foods,” she says. “It’s hard for a consumer to associate any of that with value.”
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Short says Whole Foods made some progress in 2008-2009 toward changing consumers’ perception that it only carries expensive items. But, the company suffered a setback when a recent Department of Consumer Affairs audit that found some stores in New York were overcharging for random weight items.
“The big issue now is that Whole Foods definitely has this kind of whole-paycheck reputation, whether they think that or whether they like it or not,” Short says. “They tried to improve their image, and I just think that the fact that the story went viral so quickly is indicative that their haven’t changed their price positioning with the consumer.”
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