LAS VEGAS — When Jack Sinclair started as Sprouts Farmers Market’s CEO in 2019, he had no intention of bringing e-commerce sales above 2% of total sales. Then the COVID-19 pandemic unfolded, and the specialty grocer saw online sales jump to 15%. Five years later, that percentage has managed to hold steady, Sinclair said during a keynote session at Groceryshop on Tuesday.
Sprouts’ growth and ability to sustain e-commerce was “not because I planned it,” he said.
“One of the things that’s very encouraging about the digital business is that fresh produce is the same percentage of the basket and digital as it is inside the store,” Sinclair said.
E-commerce is just one facet of Sprouts’ growth that has surprised the industry. Sprouts struggled during the pandemic, but emerged a stronger company as it rapidly expands its footprint, works to establish a self-distribution network and rolls out its first-ever loyalty program.
Sinclair made it clear onstage at Groceryshop that the company’s store growth relies on building out distribution centers that can support the chain’s reliance on produce. According to Sinclair, fresh produce accounts for 20% of Sprouts’ sales, with organic fresh produce representing between 55% and 60% of those sales.
In addition to planning stores within a 250-mile radius of a distribution center, Sprouts also uses an “evolving model” that identifies where the grocer’s target customers live and ensures that there is a large enough presence to support a Sprouts location, Sinclair said.
“We’re very comfortable being a complementary dealer. We’re very comfortable being next to other people, because we can play off the traffic [and] because we’re not actually trying to win a trip from anything. What we’re trying to win is a little bit of share of wallet,” Sinclair said.
The CEO noted that Sprouts will reach its goal of opening 35 new stores by the end of 2025, with plans to raise the bar next year by opening 40 new locations.
Sprouts’ store growth has been heavily focused on its small store format, something that goes back to Sinclair’s early days as CEO when he noticed that the chain’s smaller San Diego stores were the most productive and interesting to customers.
Building loyalty
Arguably, Sprouts’ biggest initiative of this year has been the launch of its first-ever loyalty program, which Sinclair said will likely be rolled out chainwide by the end of October.
“We’ve worked pretty hard on that through the last year, investing a lot of money to get the customer experience on our loyalty program really clear,” Sinclair said. “[It] surprised me quite how much money and time we’ve had to do to make it work so the customer has a seamless experience, and that’s been something we’ve made a lot of progress on.”
Sinclair said that the company is encouraged by the number of sign-ups and customer feedback on the loyalty program, as well as the data Sprouts is collecting from the platform. Up next, Sprouts plans to use that data to create a more personalized experience for loyalty members, he said.
“The aspiration for us is [to] have a very well-embraced loyalty program moving forward that really takes into account… customer dynamics,” Sinclair said.
