Whole Foods Market founder John Mackey has revealed that it plans to slash the size of future stores in a bid to crack the UK.
Following a talk at Oxford University about his new book, Conscious Capitalism, the US retailer’s co-CEO told The Grocer it would target stores as small as 15,000 sq ft in the UK from now on - a fraction of the size of its 80,000 sq ft Kensington flagship store and the 20,000 sq ft plus stores it has opened more recently.
“We are going to open smaller stores,” said Mackey. “We are not leaving the UK. We are going to invest, but we can’t open the big 40,000 sq ft stores that have been so successful in America. The market isn’t right for it here.”
Mackey also told The Grocer a tour of Whole Foods Market stores in London had left him worried about staff morale. He said staff seemed “sky-high” when he visited, but he couldn’t be sure if it was a “temporary effect” because they were being toured by senior management.
“We know from our morale surveys the UK scores lower than the US,” he said. “They are still scoring very well, but they are not scoring as well. It is a concern.”
In July 2012, Whole Foods Market reported a £4.4m loss in the UK. Although sales improved by 9%, profits slid a further 30% on its £3.1m loss in 2010.
Mackey suggested the upmarket retailer, which has seven UK stores, had been “less successful” in the UK because “food consciousness” was not as advanced as in the US.
“My conclusion having spent a week here is that the UK is not in the same place as the US in terms of foodie culture,” he said. “The US is the most advanced nation in the world in that respect, but the UK is fairly much a laggard.
“Our UK shoppers are either from the US, or they are young people. We are not getting middle-aged adults that grew up in the UK. But consciousness evolves, and it’s evolving in the UK. Whole Foods takes a long term view. We will be very patient. We hope to help accelerate that evolution.”
Conlumino analyst Neil Saunders said the move towards smaller stores was a “reasonable idea”, but warned that it would face stiff competition for sites.
“There is an opportunity for something more upmarket and creative and certain locations could be very successful,” he said. “However, it is an incredibly competitive market and there is intense competition for smaller sites.”
The multiples also had a massive advantage on price, brands and own label, he added. “Whole Foods Market will have to work really hard to carve out a niche.”