Millions of shoppers are abandoning Whole Foods -- and it's not just because of high prices

Whole Foods has been trying to lure back lost customers by cutting prices, but business has yet to improve.

The supermarket chain's same-store sales, or sales at stores open at least a year, fell 2.8% in the most recent quarter, continuing a long stretch of declines for the once-dominant grocer.

Analysts have repeatedly blamed Whole Foods' lack of competitiveness on price as the primary reason for its shrinking pool of loyal customers.

But according to Neil Saunders, managing director of of the retail consulting firm GlobalData, the grocery chain is facing a host of issues that have nothing to do with prices.

"That Whole Foods can't turn around its fortunes is, in our opinion, the result of several fundamental flaws in its business model," Saunders wrote in a note to clients. "Over the past few years, these cracks have become more pronounced, and the company has done seemingly little to correct them."

He outlined three main issues:

1. Stores are cramped and uninspiring.

"A host of older stores, especially those in cities, are plain shabby and down at heel," Saunders writes. "Even newer shops, barring some flagships like the new Bryant Park location in New York City, are not particularly revolutionary or impressive. By comparison, some mainstream grocers — like Price Chopper and its new Market 32 format — are coming out with store designs that are much more creative and inspiring than Whole Foods."

RELATED: See the most popular grocery store in every state

52 PHOTOS
The most popular grocery store in every state
See Gallery
The most popular grocery store in every state

ALABAMA: Publix 

Photo credit: Getty

ALASKA: Safeway 

Photo credit: Reuters 

ARIZONA: FrysFoodStores 

Photo credit: Getty

ARKANSAS: Harps Food Stores

Photo credit: Getty

CALIFORNIA: Trader Joe's

Photo credit: Getty

COLORADO: King Soopers

Photo credit: Getty

CONNECTICUT: Whole Foods Market 

Photo credit: Reuters 

DELAWARE: Food Lion Grocery Store 

Photo credit: Getty

WASHINGTON, D.C.: Whole Foods Market

Photo credit: Getty

FLORIDA: Publix 

Photo credit: Getty

GEORGIA: Publix 

Photo credit: Getty

HAWAII: Safeway 

Photo credit: Getty

IDAHO: Albertsons

Photo credit: Getty

ILLINOIS: Jewel 

Photo credit: Getty

INDIANA: Kroger 

Photo credit: Getty

IOWA: Hy-Vee 

Photo credit: Getty 

KANSAS: Hy-Vee

Photo credit: Getty

KENTUCKY: Kroger 

Photo credit: Getty

LOUISIANA: Rouses Markets 

Photo credit: Getty

MAINE: Shaw's 

Photo credit: Getty

MARYLAND: Safeway 

Photo credit: Getty

MASSACHUSETTS: Whole Foods Market 

Photo credit: Reuters 

MICHIGAN: Kroger 

Photo credit: Getty

MINNESOTA: Cub Foods 

Photo credit: Reuters 

MISSISSIPPI: Kroger 

Photo credit: Getty 

MISSOURI: Hy-Vee 

Photo credit: Getty

MONTANA: Albertsons

Photo credit: Getty

NEBRASKA: Hy-Vee

Photo credit: Getty

NEVADA: Albertsons

Photo credit: Getty

NEW HAMPSHIRE: Shaw's 

Photo credit: Getty

NEW HAMPSHIRE: Shaw's 

Photo credit: Getty

NEW MEXICO: Albertsons

Photo credit: Getty

NEW YORK: Whole Foods Market

Photo credit: Getty

NORTH CAROLINA: Food Lion Grocery Store

Photo credit: Getty

NORTH DAKOTA: Hombacher's

Photo credit: AOL

OHIO: Kroger 

Photo credit: Getty 

OKLAHOMA: Homeland Stores

Photo credit: Getty

OREGON: Safeway 

Photo credit: Getty

PENNSYLVANIA: Wegmans Food Markets

Photo credit: Getty

RHODE ISLAND: Shaw's

Photo credit: Shutterstock

SOUTH CAROLINA

Photo credit: Getty

SOUTH DAKOTA: Hy-Vee 

Photo credit: Getty

TENNESSEE: Publix

Photo credit: Getty

TEXAS: H-E-B 

Photo credit: Getty

UTAH: Smith's

Photo credit: Getty

VERMONT: Shaw's 

Photo credit: Getty

VIRGINIA: Food Lion Grocery Store 

Photo credit: Getty

WASHINGTON: Safeway

Photo credit: Reuters 

WEST VIRGINIA: Food Lion Grocery Store

Photo credit: Getty

WISCONSIN: Pick 'n Save 

Photo credit: Getty

WYOMING: Albertsons

Photo credit: Getty

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

2. Food quality is "excellent," but the taste is "bland and dry."

"The offering from the hot food counters is bland and dry; prepared packaged foods are hit-and-miss; and, the cake and patisserie offer is often less than inspiring," he writes.

Mainstream grocers like Wegmans are dominating Whole Foods in that department, according to Saunders.

"We think that Whole Foods makes too little effort on the 'taste' front," he writes. "The result is that it is trounced by a retailer like Wegmans, which devotes enormous resources to ensuring that its products are mouthwatering."

3. Organic and fresh is no longer a differentiator for Whole Foods.

Traditional and discount grocers like Kroger, Aldi, and Walmart are investing heavily in expanding their organic, natural, and fresh food selections — and they are stealing customers from Whole Foods in droves.

In March, Barclays analyst Karen Short estimated that Whole Foods has lost as many as 14 million customers in the past six quarters, and that most of them are going to Kroger instead.

"The magnitude of the traffic declines ... is staggering," Short said. "As most retailers know — once traffic has been lost, those patterns rarely reverse."

Kroger Marketplace (62)Business Insider

Kroger now devotes several aisles in its stores to organic and natural foods and offers a variety of organic meat and fresh produce. The chain has its own line of organic goods under the "Simple Truth" brand, and it's prices are about 15% cheaper than Whole Foods' prices, according to a study last year.

Kroger's sales of organic and natural food totalled $16 billion in the past year, compared to $15.8 billion at Whole Foods, according to Barclays.

Whole Foods CEO John Mackey recently acknowledged the growing threat from conventional grocers, without specifically naming Kroger.

"The more conventional mainstream supermarkets have upped their game," Mackey said on a call with analysts in February. "We're going to do the best job that we can to keep our core customers from migrating back over to those guys."

NOW WATCH: A nutritionist reveals the 3 foods that boost your energy levels

See Also:
Kroger will now chop vegetables for you
​​​​​​'Don't treat us like a pariah': In rare interview, Sears CEO blames media for company's downward spiral
Amazon strikes back again at Walmart's free 2-day shipping offer

SEE ALSO: Kroger is launching a Blue Apron killer — and it has two huge advantages

Read Full Story

Markets

DJIA 21,796.55 85.54 0.39%
NASDAQ 6,382.19 -40.56 -0.63%
S&P 500 2,475.42 -2.41 -0.10%
NIKKEI 225 19,959.84 -119.80 -0.60%
HANG SENG 26,979.39 -151.78 -0.56%
DAX 12,115.28 -96.76 -0.79%
USD (per EUR) 1.17 0.00 0.16%
USD (per CHF) 0.97 0.01 0.77%
JPY (per USD) 111.22 0.13 0.11%
GBP (per USD) 1.31 0.00 0.13%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.