Sprouts mulls loyalty efforts cautiously

Sprouts Farmers Market likes building stores near supermarkets, and drawing customers from supermarkets, but the natural and organic retailer is taking care not to be mistaken for a supermarket, CEO Doug Sanders said during a presentation Wednesday.

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Asked about the possibility of adding a loyalty card to better study customer shopping patterns, Sanders said Sprouts would proceed cautiously in part so that it is not perceived as mimicking a strategy closely aligned with supermarket retailers. Sprouts, he said, was more likely to address loyalty through a new website and mobile phone applications that are currently in development but said that too was under discussion.

Sprouts' new website and mobile app have the capability to conduct loyalty marketing, but "the challenge of it is that we’ve got to find the right way to do that for our customers,” Sanders said at the Bank of America/Merrill Lynch Consumer and Retail Conference in New York. “Because remember, anything that even looks or acts like a conventional supermarket is kind of foreign to natural foods, so you’re going to lose some authenticity if you start acting like a traditional supermarket. So we have to figure out how [loyalty] blends with our customer and how we’d go about it.

“I’m not saying we won’t do it,” Sanders added, “I’m just saying we haven’t figured out if it is the right strategy for us.”

While supermarket retailers are experiencing growth from natural and organic product sales, the channel offers less selection and expertise than Sprouts, Sanders said.

“We have a greater selection of natural and organic, and it’s obviously going to be easier to find them when you don’t have to sort through 80,000 SKUs to find the 5,000 that are natural and organic,” he said. “What you have to remember about natural and organic is it’s more than about stacking cans on a shelf. You really need to understand the products you are selling.”

With its first store in Atlanta set to open in June, Sanders said Sprouts officials would begin pre-opening marketing in the area shortly. This effort includes grassroots community outreach, social media including an effort with area food bloggers. Spouts has acknowledged it would open in four Georgia towns this year — while sources suggest plans for additional stores are on the way including outlying markets like Huntsville and Birmingham, Ala.

“We know the food industry is in a state of transition and the everyday grocery shopper is slowly becoming the everyday natural and organic food shopper,” Sanders said.