Mar 4, 2024

Amazon’s Whole Foods to Open New Small-Format Stores in Cities

Jaewon Kang, Bloomberg News

A pedestrian wearing a protective mask walks by a Whole Foods Market Inc. grocery store in Washington, D.C., U.S., on Tuesday, Oct. 6, 2020. For several months the Trump administration has operated at the White House in violation of several D.C. virus regulations including holding gatherings exceeding the 50-person limit where most attendees did not wear masks. Photographer: Graeme Sloan/Bloomberg , Bloomberg

(Bloomberg) -- Whole Foods Market is going small.

The Amazon.com Inc.-owned grocer is opening new small-format stores aimed at serving quick-trip urban consumers.

Called Whole Foods Market Daily Shop, stores will range between 7,000 to 14,000 square feet – a fraction of Whole Foods stores, which average about 40,000 square feet. The Daily Shop will offer a similar but slimmer assortment of products, ranging from fresh produce and frozen food to prepackaged meals and Whole Foods’ 365 branded products. The locations won’t have buffet bars or meat counters.

“The introduction of home delivery has changed customers’ mentality. People want things fast,” said Christina Minardi, executive vice president of growth and development at Whole Foods Market and Amazon.

Whole Foods, which operates more than 530 stores, is the centerpiece of Amazon’s grocery business. It wrestled with slowing traffic as the pandemic forced the shutdown of its popular food bars and samples — features that have now been brought back.

Amazon, which is aiming to lure more grocery spending, has said it is pleased with Whole Foods’ growth. The e-commerce company is also developing a lower-priced chain under the Amazon Fresh brand.

Austin-based Whole Foods plans to open the first Daily Shop on the Upper East Side in Manhattan by this fall. It has signed five leases in New York City for the concept and will explore expanding into other cities across the US. Stores will have cashiers, self-checkout stations and Amazon One, the company’s palm payment service, Minardi said. All products sold will follow Whole Foods’ quality standards banning ingredients like high-fructose corn syrup.

In 2016, Whole Foods opened smaller stores called 365 by Whole Foods Market that specialized in cheaper private-label groceries to appeal to more shoppers. It pulled the plug on the concept about three years later. Those stores were bigger than the planned Daily Shop locations, at about 25,000 square feet, and were full-service locations with food bars.

Minardi said she has been thinking about a smaller, convenience store-type format since 2010, and her team started building out the concept over the last two years. Bigger space is hard to find in urban markets and smaller stores require less time to design and open, she added.

Whole Foods has said in recent years that it wants to open more locations and test new formats. Jason Buechel, chief executive officer since 2022, has said he wants to refresh stores by adding more samples, events and other experiences that went on hold during the pandemic. Stores are also expanding their prepared-foods offerings.

Some locations are expanding bagging areas of self-checkout stations to ease big purchases, while others are upgrading parking lots to better handle online orders. The company consolidated operating regions and laid off hundreds of employees as part of restructuring last year.

US retailers are experimenting with their real estate strategies in response to changing consumer behavior. Target Corp. is adding larger-sized locations, while Sprouts Farmers Market Inc. is doubling down on small stores. Best Buy Co. is exploring new formats and refreshing stores while Walmart Inc. plans to build or renovate about 800 locations in the coming years.

Related: Amazon Closing Cashierless Stores in NYC, San Francisco, Seattle

Whole Foods is credited for popularizing organic and natural foods in the US. It was bought by Amazon in 2017 following a sales slump and activist pressure, as traditional grocers and mass retailers started selling organic foods for cheaper. In addition to Whole Foods, Amazon operates Amazon Fresh grocery stores and has said it sees opportunity in food retail. It hired Tony Hoggett, a former Tesco executive, in 2022 to lead grocery efforts. The e-commerce giant has continued its focus on groceries while retreating from apparel and other retail businesses.

--With assistance from Spencer Soper and Matt Day.