Whole Foods Plans Natural Food E-Commerce Site

Consumers looking for wheat bread with no preservatives or meat not beefed up with animal growth hormones will no longer have to drive to the nearest health food store. Whole Foods Market (Nasdaq: WFMI) plans to compliment its chain of 88 health stores in the U.S. with an online electronic commerce site by the Spring.

Leveraging the Net for Growth

Grocery chains have been struggling for ways to use the Internet to increase product sales for quite some time. With product margins low, grocery companies have had difficulty developing a sound, profitable distribution mechanism. Specialty stores, such as Whole Foods, have had a bit more success, because consumers are often willing to pay a premium for their products.

The Texas-based company expects its new e-commerce site to become profitable in two years. Whole Foods needs less than two percent of its existing customer base to purchase $100 (US$) of goods online each year to meet that goal.

Specific Plans

The new site will launch with approximately 6,000 items and expand to 10,000 products during the coming months. The firm plans to begin offering non-perishable items that will be shipped to all 50 states from a central distribution center and eventually add perishable offerings.

The natural food supplier views its electronic commerce site as complimentary to its stores and plans to market its services first to its current customers. The firm claims that approximately 1.5 million customers visit Whole Foods Market stores each week. To increase the hit count, the company plans to spruce up its site with more than 20,000 pages of content related to natural foods, plus a heavy dose of community information.

The company will also implement a promotion, incentive and awareness campaign in all 88 Whole Foods Market locations nationwide. Plans include an employee incentive program that will reward the company’s 14,000 employees for sending customers to WholeFoods.com. In addition to bonuses, Whole Foods plans to supply employees with buttons, t-shirts, coupons, and business reply cards that encourage electronic commerce registration and purchases.

The initial version of WholeFoods.com is scheduled to launch on March 22. In-store promotions of the site are slated to begin April 12, when in-store signage programs will be implemented at all Whole Foods Market stores.

Recent Financials

The company announced first quarter earnings last week, for the fiscal quarter ended January 17, 1999. Sales during this sixteen-week period were $456 million, an increase of 12% over sales of $408 million for the same period of the prior fiscal year. Net income for the quarter was $13 million, approximately the same as last year’s first quarter. Diluted earnings per share were $0.47, compared to $0.48, excluding merger expenses, in the prior year.