WILD OATS CHIEF OUTLINES GROWTH STRATEGY

MARYELLEN LO BOSCO

ANAHEIM, Calif. -- Buy-one, get-one-free offers, in-store classes, demos, recipes, brochures and even nutritionists can help natural-food stores compete in the expanding marketplace, said Jim Lee, president and chief operating officer of Wild Oats Markets, Boulder, Colo.

"Building customer value requires education," Lee said at the Natural Products Expo West here. "It begins with a knowledgeable staff and commitment to ensuring there's continuing education." Lee had a long career with Compton, Calif.-based Ralphs Grocery Co. before recently joining the health-food chain.

Services such as in-store classes and demos can help customers understand the rapid developments occurring in the industry, Lee said.

Another way to compete is by changing the perception consumers have of the prices at natural-food stores.

"At Wild Oats we are getting ready to make a major committment to train staff members, which will require a tremendous amount of home-office staff time, regional staff time and money," he said. "We're prepared to [do this] because we owe it to, our staff members and customers."

"One of the biggest opportunities our company has perceived is the need to maintain high quality and fair prices," he continued. "I believe there's a tremendous number of potential customers who are currently secondary shoppers in natural-food stores or shop exclusively in the mainstream, but have a strong inclination for something different. But there's a barrier of price perception."

To attract new and keep existing customers, Lee noted that Wild Oats frequently runs BOGOs. He also said it's important for retailers to ensure that they have sufficient service at night and on weekends, which are prime shopping times, but also when there is not enough customer service.

Lee also urged retail partners -- such as stores, brokers, manufacturers, distributors and trade groups -- to work more closely together for the benefit of all.

"We should focus on sales, which are the lifeblood of the business. Communication must be open and timely," he said.

Partners can work together to achieve mutual cost reductions, through such vehicles as efficient consumer response, for example. This will benefit the partners, as well as ultimately lead to more affordable prices for customers, Lee said.

Lee's comments came after several speakers discussed the impact mainstream supermarkets are having on the natural-food industry.

Though participants said one of the advantages the small, independent stores have over supermarkets is product knowledge, they said mainstream stores are gaining a larger share of the market.

"[Supermarkets] are looking for category management and profit. They are looking at specialty foods, and if there's enough turns and dollars, they will carry them," said Travis Tabor, president of St. Augustine, Fla.-based Sunbelt Sales and Marketing, a natural-food broker.

"The movement into the mainstream [of natural products] is either a threat or an opportunity," added Tom Aarts, president of Nutrition Business International, a San Diego-based consulting firm. "It's going to happen, whether we like it or not."

He related that natural-food sales have been growing steadily at about 20% per year, although he and others predicted that the numbers will begin to level out in the next few years.

"Manufacturers will sell to the mass market," Aarts predicted. "That's how they are going to grow their business."

He advised small retailers to "be an expert in the market; find a niche, or new products that others are not carrying.

"You need to please customers in an age of rising expectations," he advised. "And differentiate. That's the key."

He also noted that "the future of the industry is supplementation into foods" Such foods will have vitamins, minerals and/or herbal ingredients.

Aarts also stressed that there are an increasing number of consumers interested in natural products who need to be educated, and that these consumers will come back to the small retailer for that education.