My cognitive dissonance meter started to peg about the time I reached the fish counter.
In Austin, Texas for a conference (working, not attending), and a retail marketer from way back, I had to visit the flagship store of Whole Foods, the behemoth ($14.2 BB in 2014 annual revenue) organic grocery chain that calls that burg home. I’m glad I did if only to have had an experience that locals get an opportunity to indulge in on a more or less regular basis.
By this point, Whole Foods is not the unknown quantity it was when I first walked into one of its stores in 2001 or so. Back then the expansion strategy was to acquire regional chains and co-brand the stores, at least for a while. So in the Mid-Atlantic States we had Fresh Fields. In Providence it was Bread & Circus. In Atlanta, Harry’s Farmers Market. It seems like only after the 2007 acquisition of Colorado’s’ Wild Oats Markets that unifying under one marque became a priority.
Fast forward to April 2015 in Austin.
The arty display above the seafood counter works hard to allay any doubts a shopper might have about having fish for dinner. So the three-foot tall sign that says ‘Sustainability’ has an important role to play. To be fair, though, it’s a big improvement over the former branding of the department. Pigeon Cove. What do pigeons have to do with seafood?
(I was curious enough about that to investigate. Evidently Whole Foods owns a fish processing plant in Gloucester, MA that is located on Pigeon Cove. I’d bet dollars to donuts that the idea was to give fish purchasers a story to tell about what they were serving.)
Avian concerns aside, words ought to mean something. Austin is 218 miles from the nearest saltwater. That’s a 3 1/2 hour drive and I’m reasonably sure the fish aren’t swimming up to the store. On the day I was there a featured special, as it is in the photo above, was salmon. Farmed salmon has been reported to be among the most wasteful ways of converting protein to edible protein. (To be fair both the NOAA Fisheries page and one of Canada‘s leading aqualture firms say otherwise.)
But hey, it’s just marketing, right? After all, this is retail and good retail is theatre, as Marvin Traub famously said. I went to a school with a strong theatre department and I appreciate a good set as much as the next man. It was the restaurants and bar that knocked me out.
In the New York market, with our endless rules about what can and cannot be done and the fact those rules change when you step across the street into the next state, Whole Foods offers an extensive array of prepared foods and a place to sit and eat if you’re not taking out. In Austin, you can go to Whole Foods to have a complete meal or just drink.
Turn to your left at the fish counter and you’re facing a pretty authentic looking fish shack–the kind of place I’ve eaten in all over the Florida keys and anyplace else I’ve fished. Further back there’s a BBQ pit (surprisingly good; we lunched there because a friend recommended the one in the New Orleans Warehouse District store) and a craft beer bar.
Facing the limits of my imagination is always a humbling, if necessary, experience. It wouldn’t occur to me to put a restaurant inside a grocery store, let alone that people would come there just to eat and drink. Yet there they were. And so I sat, and ate, and observed the clientele.
What I realized is that Whole Foods has pulled off a pretty remarkable marketing coup. Consider: the Food Marketing Institute says the average American makes 1.6 trips to the supermarket each week spending just over $30 per visit. They also say the net profit margin for a supermarket operator is 1.3%. Well if I did the math right, the comparable net, according to Whole Food’s 10-K filing for 2014, is about 4%.
The key to that over-performance I think, and I’ll leave all the criticisms and cautions to the analysts and advocates already on the case, is right there in the aisles. Austin, while in line with the country on a household income basis, is overwhelmingly white, skews a bit more Asian and Hispanic, is almost 50% college educated and is a city of renters. You can bet that some of the money that might be paying down mortgage principal is hitting Whole Foods’ bottom line judging from the crowds at 2 o’clock on a Saturday afternoon.
So what gives? Why would anyone pay more than they have to, especially for groceries, a category with seemingly limited upside. I think it has to do more with identity and less with biological necessity. What Whole Foods managed to do was shed the distasteful aspects of the organic movement.
Sure, they started out steeped in patchouli and peasant skirts like the rest of the gang. But along the way they ditched the crunchy granola vibe and went upmarket. That store environment isn’t cheap to maintain and no one really thinks those canned and frozen goods with the 365 Everyday Value label don’t come from the big guys in processed food. No, what’s happened is that a supermarket has been remade as a positional good.
While I linked to Wikipedia above, Investopdeia has a definition I like even more which I’ll quote here:
[Positional goods are] Goods which act as a status symbols, signaling their owners’ high relative standing within society. Positional goods often exhibit superior quality and features. However, these goods derive most of their value from the level of reliability with which they serve to distinguish their owners as members of the favored group.
Those aisles and coffers aren’t full because a big subset of the population has gotten true religion about eating right. They’re full because people want to demonstrate where they stand in the scheme of things.
And while we could argue about the morality of such demonstration it is, in the end, a social fact. And Durkheim told us social facts are real things.
Real enough, in fact, to allow for over-performance by a factor of 3. No doubt, would-be competitors have taken note. But that’s a different social science.