Monday, April 14, 2008

Retail Format Innovation Memo: The United Kingdom's 'Best' Cybercafe Just Might Be Inside Whole Foods Market, Inc.'s Huge London Flagship Store

Austin, Texas-based supernatural grocery chain Whole Foods Market, Inc. decided to go where few American grocery chains go--overseas, and specifically to the United Kingdom--about a year ago.

Why do we say, "where few U.S. grocery chains go?"

Because it's true. American-based supermarket chains tend to be domestic rather than global enterprises, which is generally the opposite of most other large U.S. corporations, in business sectors ranging from oil and high tech, to automobiles, pharmaceuticals and agribusiness.

For example, the three-largest supermarket chains in the U.S.: Kroger Co. (about $69 billion in annual sales), SuperValu, Inc. (about 44 billion in gross sales per year) and Safeway Stores, Inc. (annual sales of about $42 billion) have no stores outside North America. In fact, Safeway is the only one of the three chains with stores in Canada. Kroger and SuperValu do all there business in the Continental U.S.

The same is the case with nearly every other American supermarket chain. Crossing the Atlantic or Pacific oceans to open stores or acquire foreign-based food retailing companies isn't the industries cup of tea.

Of course, Wal-Mart is a different animal. The world's largest retailer is just that: a global retailer. It owns the Asda chain in the UK, which is that nation's second-largest retailer after Tesco, and has operations in Asia, including Japan, India and China, and in Mexico, as well as Canada. Wal-Mart also is preparing to enter the retailing market in Russia and elsewhere globally.

Wal-Mart however isn't a supermarket retail company. Rather, it's a broadline retailer which sells everything from food and groceries, to books, electronics, garden supplies, clothes, furniture and more.

Austin, Texas-based Whole Foods Market, which also has stores in Canada, decided to break that general U.S. food and grocery retailing parochialism last year however when it opened it's huge, three-story flagship food emporium on Kensington High Street in London, England in the UK.

The store is nearly 75,000 square feet, huge by UK standards, and features an extensive selection of natural, organic and specialty fresh foods and groceries, along with natural and organic health and wellness products, a mega-natural body care department, a fresh produce department itself as big as many London supermarkets, numerous in-store restaurants, and more.

Part of that "more" is an in-store feature that's been getting raves among London's high-tech community as well as just plain folks in the cosmopolitan city which is rivaling New York City as the world's financial capital these days.

On the third-floor of the Kensington High Street Whole Foods mega-market sits a fully-equipped cyber or internet cafe. Cyber cafe's aren't a new development in London--they're located over the city. However, the Whole Foods-London flagship natural foods market's cybercafe is attractive, spacious and rapidly becoming the most popular of the many located in the urbane city.

The open-style, third-floor Whole Foods Market cyber cafe has seating for about 25 people. There are comfortable tables in the open-style cafe as well. Electrical power outlets are in abundance--and the use of the high-speed Wi-Fi internet network is completely free of charge, which isn't the case in many of London's cyber cafes.

The other thing Londoners' are loving about the cyber cafe is that unlike many located in the city, Whole Foods' third floor, in-store operation doesn't put any restriction on how much time a person spends in it using the free Wi-Fi connection. No hassles, not even dirty looks if you spend a full eight hour work day using the internet cafe's free connections and workspaces.

There's not even a restriction that cybercafe users have to purchase anything to eat or drink in order to use the facilities. However, the Whole Foods store offers such a variety of prepared foods and beverages, that one seldom sees a third-floor cyber cafe patron without food or drink of some kind while surfing the net on their laptop computers.

The store has a gourmet pizza station, sushi restaurant, a wine and cheese bar, meat and veggie grilling station, a gourmet sandwich shop, offers fresh coffees and baked goods in the cafe/pastry shop, prepares fresh-squeezed fruit juices and makes smoothies at a separate bar, and has in-store prepared foods ranging from American classics, to British foods, Indian, Thai, Japanese, Chinese and other ethnic cuisines And, this list is just for starters.

Cyber cafe patrons can purchase whatever foods they desire and take them up to the third-floor cafe. All that's missing is being able to wear ones pajamas when using the internet cafe's free high-speed Wi-Fi connections and attractive space.

The Kensington High Street flagship Whole Foods had a bit of a rocky start in the months following its opening about a year ago. However, it's gradually been winning over the stomachs and pocketbooks of Londoners, who marvel at the massive selection of food, grocery and related products the store offers. Both customer count and store sales have been climbing dramatically over the last six months, according to nearly all of the UK analysts we've talked with or who's reports of the store we've read.

In fact, business has improved so much in the last six or so months Whole Foods Market, Inc. recently hired two commercial retail real estate firms in the UK to search for additional sights in London and throughout the UK for the retailer to open more Whole Foods Market supernatural grocery stores. [Read our piece on that search here.]

the inclusion of the spacious third-floor cybercafe in the store is turning out to be a very smart and savvy move by Whole Foods. Even though it isn't a money maker, after all the Wi-Fi connection is free and cafe users aren't even required to purchase anything to use the connection and the space, it's becoming a gathering place, used regularly by everyone from local entrepreneurs and business people to students, as well as people visiting London from elsewhere on business.

We think the popular, and rapidly becoming famous, Whole Foods cyber cafe in its London flagship store is a perfect example of what grocery retailers need to do in order to create brand in a new market--and even in existing ones.
In-store features like the internet cafe also create a "sense of place" in a supermarket, which results in encouraging shoppers to linger and buy more when in the store and to return more often and become primary shoppers of that store.

Not every feature a grocer puts in its stores will be a money maker. However, features such as the Whole Foods-London third-story cyber cafe will make a grocer more money throughout the store. Not a bad trade off.

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