retail news in context, analysis with attitude

by Michael Sansolo

It’s always interesting to remember that just as every giant tree began with a seed, every large chain likely began with a single store. Sometimes the memory of the journey presents interesting insights.

The Washington Post ran a fascinating interview this past weekend with John Mackey, CEO of the nearly 400-store, $12 billion a year Whole Foods chain. In the interview, Mackey reflected back more than 35 years, to when he was 25 and just opening a small vegetarian market with his girlfriend.

Not surprisingly, the beginning of the story is filled with missteps starting with his assumption that the food business would be easy, to a severe problem with underfunding. Even the decision to open the first store in a residential neighborhood was one of those mistakes of youth and inexperience.

Where Mackey’s story becomes so relatable to any business today comes later in the interview on some challenges of management and growth.

• Like so many operators, Mackey says one of the biggest challenges in growing came when the company doubled from one to two stores. Instead of being able to watch everything himself, he suddenly needed systems and a team “to organize the company, developing processes and policies, making sure our culture is being extended.”

• Apparently the mocking nickname of “whole paycheck” is no surprise. Mackey acknowledged that early on, Whole Foods paid little or no attention to price largely because the growing chain had almost no competition. That lack of competition led to a lack of discipline on cost controls. Price became an issue of increasing importance as the natural/organic segment started to blossom and conventional stores started vigorously competing with Whole Foods on a range of products.

• Putting a team together is one of the hardest parts of growth, again an insight every businessperson should recognize. Mackey says some of his biggest mistakes involved people, “Whether it was putting my trust in the wrong people, being slow to recognize that someone was in over his or her head (and) not putting enough premium on individuals who were aligned with the company’s philosophy.”• Mackey said he made similar mistakes in the process of acquiring companies by sometimes leaving former executives from those absorbed companies in place, even when they didn’t get the Whole Foods culture. As so many other business leaders say out repeatedly, culture eats strategy for lunch…even if it’s an organic lunch.

• Lastly, Mackey offered interesting insights on the venture capitalists who funded his growth, but at a price. “Venture capitalists…are like hitchhikers with credit cards. They get in your car and as long as you take them where they want to go, they will help pay for the gas. But if you get lost or wander off the road you promised…they will hijack the car, throw you out and bring in a new driver.”

An old proverb says the journey of a thousand miles begins with a single step. Mackey’s story reminds us that even the most successful of those journeys is also filled with missteps.

Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
KC's View:
As an addendum to this story, I thought it was interesting the other day to see in Bloomberg Businessweek that Whole Foods had lowered the price of fresh farm-raised salmon to $10.99 a pound, an approximate 20 percent reduction, which had the effect of giving salmon sales what the company called "a huge lift." The company said that it was pleased with the experiment and plans to expand on it in the fresh foods arena as the year continues. Which means, I think, that as the competitive landscape gets tougher, the journey continues for Whole Foods … and it is not hard to imagine that the coming years could see the company evolve in new and different ways even as it remains consistent about its core values and mission.