Why a Whole Foods in Savannah makes more sense than you think

I recently devoted a column to the strong likelihood that the Backus Cadillac property is being redeveloped for a Whole Foods Market. That idea had been rumored for a couple of years, but for a long time it didn’t make much sense. I routinely tried to dispel the prospect when rumors resurfaced.

But the connections between the developer, the site plan submitted to the MPC, and Whole Foods can’t be easily dismissed. Click here for a post with more detail on those facets.

I didn’t know of anything in the works in January when I mentioned that 2012 could be the year for an announcement of a Whole Foods.

I got some blowback from that speculation from people who simply don’t see Savannah as large or prosperous as it needs to be to support that chain. But Savannah is changing — and business models are changing.

I recently noted an interview with a Whole Foods exec about the chain’s evolving business model, and now there’s an interesting piece in the WSJ: Whole Foods Aims to Alter ‘Price Perception’ as It Expands

I’m inside the WSJ firewall, btw, and I’m not sure if that link will take you to the entire article.

But here’s a snippet:

In its recent quarter, Whole Foods opened six stores, focusing on these new markets where its says rent is lower, square footage is smaller and competition for natural, organic food isn’t as heated. The new stores saw sales per square foot rise 29% from a year earlier. In general, total sales at Whole Foods stores that have been open at least 53 weeks rose 8.7% in the quarter compared to the year before.

“We’ve done surprisingly well in some of these secondary markets; a lot better than we thought we were going to do,” said Co-Chief Executive Walter Robb on a conference call with analysts last week. “It’s a very powerful economic model, so I think we’re going to open a lot more of those types of stores.”

To counter its reputation for being expensive, Whole Foods is offering more price promotions and discounts in all of its stores, and lately it has held many of its grocery prices flat despite its own costs rising. The idea is for customers to feel that while there may be certain product prices that are going up, they are finding plenty of good deals to make up for that, said executives, who call the strategy “price perception.”

The article notes some challenges — including competition and the fact that new customers in small markets spend far less per person than their established customers — but the chain seems to have found a thriving model. Profits are up, and long-term plans call for tripling the number of stores from 317 to about 1,000.