In February, we speculated how growing online grocery ventures might affect bricks-and-mortar stores. Beginning this month, retailers get to watch a prime case study unfold in the marketplace, as Whole Foods Markets launches WholeFoods.com – and uses its 14,000 staffers in neighborhood stores to do it.
The Austin, TX-based chain figures it can avoid cannibalization and territorialism by asking staffers to spread the brand loyalty message among shoppers. The model might not work for price-driven traditional grocers, but could do wonders for specialty retailers with a loyal customer base.
The site launched March 22 with 6,000 nonperishable items, and plans to expand to 10,000 items (including perishables) and 20,000 pages of information on natural foods and a lifestyle magazine called Whole Living. The site also hosts community forums and chats.
Web site prices are as much as 35 percent lower than bricks-and-mortar Whole Foods stores. The company projects first-year sales of $4 million, and expects to be profitable in two years. Projected sales are only 0.3 percent of Whole Foods’ $1.3 billion in store sales, says John Fischer, director of marketing for WholeFoods.com. “Any cannibalization will be offset by increased basket size in stores, and by making customers more brand loyal,” he says.
In fact, loyalty may be one of the natural foods supermarket’s biggest assets: Its employees and its upscale, well-educated consumers buy into the chain’s granola philosophy and love being part of its enlightened community. “Customers have a different relationship with our brand than with other grocery stores,” Fischer says. Whole Foods fans have more education, more income, and more computers than average grocery shoppers. And the staff is “the biggest stick in our organization to get something moving,” he adds.
Whole Foods is as close as it gets to a national grocery brand, with 88 stores and 32 more coming by 2001. But it has no loyalty card program, and the company is so decentralized (its seven regions run independently) that it’s hard to enforce a corporate marketing mandate.
Instead, the company commits to one major corporate initiative every year, persuading staffers through their paychecks with its Team Member Incentive Program. Last year, Whole Foods was launching private-label products; this year, it’s WholeFoods.com. Over the next nine months, Whole Foods will spend $3 million on employee incentives to launch the site. Stores compete to earn a 10-cent-to 20-cent-per-hour bonus for each employee, on three months’ worth of pay. Each store competes within its region to register shoppers on the site and pump online sales.
Three quarterly promos build off each other. The first leg, running April 12 to July 4, gives a 10-cent bonus to stores that put up signs and posters for WholeFoods.com, and a 20-cent bonus to the top 25 percent of stores that register online shoppers. The second and third legs, through Jan. 16, 2000, give 10-cent perqs to stores that beat the previous quarter’s new-shopper registration, and 20-cent raises to the top 25 percent of stores in the region with the highest online sales.
Individual staffers also can earn up to $200 for registering online shoppers. Each employee gets 30 cards to hand out to favorite customers, who mail in for a chance to win $5,000 in Whole Foods gift certificates. Shoppers register at the Web site, or mail in the cards with their e-mail addresses and the employee I.D. numbers (cleverly disguised as a “contest code” filled in by employees beforehand). The 300 staffers with the most registrations win $100 each; the top 50 win another $100. The contest runs 10 times throughout the year.
Staffers compete nationally, but only against similar departments – front-end checkers against each other, produce prep people in the East against produce prep people in the South. That spreads the motivation out evenly, so checkers and customer service folks can’t hog all the loot.
Since Whole Foods has no national marketing director, each of the seven regional marketing directors gets $1,000 per store to promote the site, and can earn another $1,000 per store by registering online shoppers (at a rate of 25 cents for every shopper).
WholeFoods.com tracks consumer registrations by employee I.D. number, store location, or ZIP code to give each store credit for the shoppers it delivers. The company may continue to track those store affiliations after the incentive promotion ends, but has no plans now for using the info.
Ironically, Whole Foods can make money talk with its employees because money – price comparison – doesn’t matter to its shoppers.
“We’re not a commodity play,” Fischer explains. “We have a very specific product mix you don’t find in other stores.” That lets Whole Foods operate on a more profitable margin than traditional grocers while building brand loyalty.
And hey, it doesn’t hurt to keep the hired help happy, either.
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