Innovations in U.S. Food Retailing Trader Joe’s s Founded by a Stanford MBA who owned a number of convenience stores. s Repositioned stores to appeal to worldly, health-conscious consumers. Focused on granola, nuts, dried fruits, vitamins. s Acquired by owners of Aldi in 1979 s Now has 253 stores s Sales estimated at $4.5 billion s Average sales per square foot estimated at $1,500 s Stores have 2,000 items. s Many suppliers are small; also sends scouts around the world to find innovative items s Only added scanners five years ago, considered impersonal by management

Innovations in U.S. Food Retailing Trader Joe’s (continued) s Cornerstones of strategy  Deliver value: “Two-buck Chuck”  Offer mostly private label; sell national brands at major discount  Have staff wear bright Hawaiian shirts  Merchandise a unique blend of products  “We taste everything we sell. Surprisingly few of our competitors do that.”  “Did you find everything you need?” If not, cashier will leave station to pick up item for you.  Unconditional “no questions asked” money-back guarantee.  No loss leaders  new items per week; treasure hunt

Innovations in U.S. Food Retailing Whole Foods s Begun in late 1980 in an Austin Texas neighborhood with a hippie image. s Now has 183 stores in U.S., Canada, and the UK. Annual sales of $4.7 billion s Growth strategy  Purchasing smaller companies (such as 7 Wild & Fresh stores in UK)  Expanding existing stores  Adding new stores s 10 straight quarters of double-digit same store sales growth s Sales per square foot of $783 versus $570 for average supermarket

Innovations in U.S. Food Retailing Whole Foods (continued) s Cornerstones of strategy  Perishables account for 67 percent of total sales  Image of very high quality and high prices (Whole Paycheck)  High levels of product sampling (breads, cheese, fruits)  Organic foods, private label, salad bars, marinated and semi- prepared meats and foods  Deli and meat departments stand out  Environmentally and socially conscious  Unique target market  In-store areas to eat, some outside

Innovations in U.S. Food Retailing Whole Foods (continued) s Organizational Issues  Awards stock options to all employees, not just store managers  90 percent of employees are full-time; non-union  John Mackey, CEO and founder, has salary capped at 14 times average company salary (not counting stock awards and options). Had to forego $46,000 in bonus money in 2005.

Innovations in U.S. Food Retailing Greenmarket –Established in 1976 by the Council on the Environment –Aim was to help small family farmers sell fruits, vegetables, and other farm products –Sells organic fruits and vegetables, eggs, fish, jams and bread products –By law, everything sold at market must be grown or made there –Emphasis is on visual presentation, and quality instead of price

Innovations in U.S. Food Retailing There are 16 greenmarkets in New York City; the Union Square market is the largest, by far. It’s open year-round, 4 days per week (Mon, Wed, Fri and Sat) from 8AM to 6PM with an average attendance of 250,000 customers per week Customers include noted chefs from Union Square area who can be seen buying produce for their restaurants, local “foodies,” and the general public