Walmart is partnering with Wild Oats and introducing inexpensive organic goods to its stores. This move is supposed to be a threat to organic foods king Whole Foods Market. I don’t see this move being successful at all for Walmart and I doubt that the folks over WFM are worried about this development.
WFM’s primary competitive advantage lies not with its product mix, but in its store environment. Walmart, in comparison, does poorly in store environment. Its low cost business model contributes to its poor store environment.
A key aspect of store environment that often is ignored because of its sensitive nature is the customer factor. The customer factor of store environment, unlike fixtures or lighting, is not under the direct control of the store. What type of people are shopping at the store and how does this influence who decides to shop at the store?
People who shop at Walmart, well, there is a whole website site devoted to mocking them. Here is a short list of possibly very offensive nouns and adjectives describing the Peoples of Walmart (POWs):
- Food stamps
- Blue collar
These are the people who shop at Walmart. They occupy the lowest rungs of our society and higher class people often look upon them with disdain.
Many enlightened people, rich people, brahmins, SWPLs, yuppies, etc, etc, avoid shopping at Walmart because shopping at Walmart requires them to interact with undesireables. Few of them will admit this, and some may even be unaware of their own unconcisous biases, but I think it is true to some extent. Standing in line behind the overweight black single mother, her brood, her basket full of fatty foods, and her fat ass in pants much too tight, is, to put it nicely, disconcerting for your average brahmin, no matter how liberal. Not to mention the fact that she’s trying to use coupons AND food stamps which makes the brahmin in question quite uncomfortable indeed. The fact of the matter is, the peoples of Walmart, are ICKY. ICKY.
The marginal benefit of shopping at Walmart for organic foods(lower price) cannot overcome the marginal cost of a poor store environment. People would rather pay more money and shop at WFM than pay less money and have to look at icky POWs at Walmart.
The only way that Walmart could be successful in organic foods is if somehow POWs become interested in purchasing organic foods, because I don’t think they’ll be able to convince cool people who buy organic foods to come to their stores as long as POWs keep shopping at Walmart. I find it unlikely that POWs will ever want to buy organic foods because POWs don’t much care about their health.
Now on to WFM, where I wrote the first half of this blog post from the balcony overlooking the store sipping an iced coffee made from a Japanese Oji Machine (super neat and makes quite a tasty iced coffee).
WFM has transformed some of their stores into ¨social destinations” where one can not only shop, but hang out as well. It has turned into a place, much like some famous clubs in NYC and LA, to ¨be seen¨. Cool people shop and hang out at WFM and you gain social credibility if you are seen shopping at WFM, even if you are just buying bread, milk, and peanut butter. Most people don’t buy the obscure items that you could buy at WFM, they probably just buy the same stuff they could buy at Walmart or the local grocery store. I’d guess that WFM operates close to the 80/20 Pareto Principle.
WFM, in its past, appealed mostly to granolas, but has managed to transform its image and market itself successfully to rich people from both the left and the right. The healthy living trend of the last decade has contributed to their success.
Nowadays, while you see lots of granolas working at WFM, they no longer compromise the majority of the customers. It is a good thing too, since granolas don’t make a lot of money(because they work at WFM and are writers/artists/musicians on the side), and therefore do not generate a lot of revenue for WFM. Instead, the typical customer is an attractive white woman between the ages of 22 and 45, who wears yoga pants from Lululemon. WFM is a hotspot for ¨MILFs¨.
Shopping at WFM is a lot more appealing for many people than shopping at Walmart because the people are significantly more attractive and of a higher social class.
If I were the CEO of Wild Oats, I would choose to partner with Target rather than with Walmart. People who shop at WFM probably shop at Target too for stuff they don’t get at WFM (such as tampons, because only super devoted granolas buy organic cotton tampons from WFM).
I shop at both WFM and Walmart so I theoretically I am well qualified to blog on this topic.