Why a Million People Are Lining Up in Front of You at Whole Foods

If the line at your local Whole Foods Market (NAS: WFM) is a little longer than usual over the next few days, don't blame it on a surge in popularity of soymilk or organic cherries.

LivingSocial's national deal -- offering $20 worth of Whole Foods Market groceries for $10 -- was a hit Tuesday, selling out of its million vouchers several hours before the sale was slated to end.

We'll never know if the deal would have topped the 1.3 million Amazon.com (NAS: AMZN) vouchers that it sold at a similar price break back in January, but it would have been close if LivingSocial and Whole Foods hadn't capped the offer at a million coupons.

Premium groceries aren't a niche that consumers typically expect with half-priced offers. Folks who shop at Whole Foods Market or Fresh Market (NYS: TFM) know they will be paying up for choice edibles.

This deal seemed more about upping LivingSocial's prestige than traffic at Whole Foods' 308 stores, as I argued yesterday. I'm not feeling any differently now, even if I underestimated the initial demand.

Regardless of how LivingSocial and Whole Foods are splitting the proceeds, the social coupon website will now be able to show other upscale retailers that if even a classy outfit like Whole Foods Market can play along, why not them?

It hasn't been an easy sell in the past, largely because participating merchants are typically collecting about a quarter on the dollar for every voucher sold. Selling $20 worth of merchandise for $10 -- and then letting Groupon or LivingSocial keep roughly half of the proceeds from the $10 vouchers -- is a hard sell for sellers of hard goods. Social coupons have an easier time swaying restaurant and spa operators who have healthier margins to play with.

Whole Foods Market isn't the only established retailer to go this route. Groupon's aha moment came last summer when it sold 441,000 $50 Gap (NYS: GPS) vouchers for $25 last summer. These are the deals that the media ultimately remembers, and not the 243 vouchers for a suburban Portland cantina that sold yesterday.

Will a million folks heading to an organic grocery superstore during the next three months be enough to give this once-hot investing niche its mojo back? We'll see. Groupon called off its investor road show earlier this month, but a million deal seekers clicking the "buy" button at a smaller rival prove that there's still life here.

If you want to follow the organic grocer to see how it fares after this deal, a dd Whole Foods Market to My Watchlist.

At the time this article was published Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


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15 Comments

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krazzicraig

hhhhhhhhhhhhhhhhhhhhh

September 15 2011 at 10:16 AM Report abuse rate up rate down Reply
wasabimon

too bad--whole foods is a scam----they are on the wrong side of the organic issue in lobbying-----they sell stuff thats no where organic--go to ORGANIC BYTES----AND ORGANIC CONSUMERS ASSOCIATION----just one example--SILK---TOTALLY GMO

September 15 2011 at 7:06 AM Report abuse +1 rate up rate down Reply
1 reply to wasabimon's comment
Mickylitz

wasabimon

Our society has lost all of their marbles, all it take is someone putting some new product or new type of propaganda by the medical profession and automatically everybody jumps on the bandwagon.
I can't believe how many people would be willing to jump off a cliff just because the media or some scientist or celebrity says so , what happened to reasonable thinking folks.?

September 15 2011 at 9:56 AM Report abuse rate up rate down Reply
Mr. Rockafeller

why doesnt Huff Post offer a way to show if you approve or not a comment.....? What are they so afraid of.....

September 15 2011 at 5:15 AM Report abuse rate up rate down Reply
msunshine14u2c

I never heard of Whole Foods before. I live in California way out in the desert and the food prices here are extremely high.

September 15 2011 at 4:56 AM Report abuse rate up rate down Reply
Davina Denis

popular websites like Printapons and retail me not has coupons for pretty much any shopping site I've gone to most of the coupons are valid drops down with coupons without me having to search for them

September 15 2011 at 2:36 AM Report abuse rate up rate down Reply
Rhett C. Bowling

Now that I think about it, there will probably be lines the the job position as well.

September 14 2011 at 10:56 PM Report abuse rate up rate down Reply
Rhett C. Bowling

Whole Foods is coming to Boise, Idaho and that means jobs but how do you get connected to send in a resume for a job position?

September 14 2011 at 10:55 PM Report abuse rate up rate down Reply
WILLS

Seems to me that whole foods would have the most benefit as, even though the offer was only 10 bucks off, it really depends on the shopper and real test will be how many get redeemed. Don't bet on the "lines" at the stores. The organic market represents only a 5% share of the grocery business and if you have not noticed, prices on the shelf have been on the upswing since July. Since they are going to go a lot higher, it will put the niche stores like whole foods in a diffiicult position. I would not be a holder of it's stock.

September 14 2011 at 8:36 PM Report abuse +1 rate up rate down Reply
netexas121

My question: does Whole Foods Market by from local organic farmers?

September 14 2011 at 8:31 PM Report abuse rate up rate down Reply
1 reply to netexas121's comment
Ronald McMillan

Yes, indeed they do. I live in Baltimore and have been shopping there for about a year and a half. The local farmers are an integral part of what makes Wholes Foods appealing to me.

Fruits, vegetables, dairy, poultry and meats, as well as ther relatively local bakers and merchants all supply Whole Foods - wherever the stores are located throughout the country. These growers and merchants have a more sustainable place to sell their goods, which cuts down on transportation cost uncertainties as one byproduct.

Fresher goods in the stores is better for consumers; Both the organically and non-organically grown producers benefit and I do as a consumer. Baltimore has one of the highest obesity rates in the country and sadly, it in noticeable when one looks at the folks whole shop at Whole Foods as compared to Safeway, Food Lion, Shoppers, Giant and the like.

They offer plenty of coupons to make it more affordable and the workers there are on amission to take take care of the customers. I have benefitted as well by buying their stock for my IRA - and no - Iam not earning a huge salary. I made $45,000 with overtime last year.

September 15 2011 at 4:36 PM Report abuse rate up rate down Reply
syntheticlubeguy

Whole Foods aka Whole Paycheck

September 14 2011 at 8:25 PM Report abuse +1 rate up rate down Reply