Whole Foods' 365 stores continue to bloom under Amazon

Dive Brief:

Whole Foods will open two 365 stores today in Atlanta, bringing the nationwide total for the small-format, lower-priced stores to 12. One location will be in the eastern suburb of Decatur, the other in Buckhead, just north of the city.
As part of the chain's "Friends of Whole Foods Market" program, both new stores will house a Loteria Grill, the Los Angeles-based Mexican restaurant founded by chef Jimmy Shaw that features a variety of main dishes, appetizers and seasonal offerings. Both locations will house local juice bar operators, as well, and the Decatur store will offer a bar-and-games venue called Pour de Leon.
Whole Foods opened its first 365 location in Los Angeles in 2016. Since then, the concept has expanded to locations in California, Oregon, New York, Texas, Connecticut and Ohio. The company is working on opening other locations, including one in Austin, according to the Austin Business Journal.

Dive Insight:

After Amazon bought Whole Foods last year, questions swirled about the future of Whole Foods' 365 format. But it appears the e-tailer is moving full steam ahead with the low-frills, lower-priced stores.

That makes sense, given the lower start-up and operating costs associated with 365. Although the traditional Whole Foods format has proven quite malleable — able to fit into a variety of unconventional urban spaces over the course of its growth — 365 opens up new doors for the company in cities as well as suburban strip malls, providing a more targeted offering for younger consumers.

Amazon has been slow to open new Whole Foods stores — a course many other retailers are following, given macroeconomic headwinds and a dearth of real estate options. But it wouldn't be surprising to see Amazon speed up 365's expansion plan. In addition to lower operating costs, the format boosts Whole Foods' pricing image and can disrupt traditional players.

In Atlanta, traditional players like Kroger and Publix reign supreme, but a boom in the millennial population promises to remake the city's retail landscape. Decatur and North Decatur were both listed as top destinations for millennials by the Atlanta Journal-Constitution, while Buckhead has seen a surge in retail destinations aimed at younger consumers. The Buckhead location will anchor a new 80,000-square-foot retail plaza that also includes an Ace Hardware, AT&T store and a fuel station, while the Decatur location leads a mixed-use development that includes 300 luxury apartments.

Along with 365, Sprouts Farmers Market has targeted Atlanta with its fresh-first store formats. The Phoenix-based chain made Atlanta the hub of its East Coast expansion several years ago when it made the leap from the West Coast and Rocky Mountain regions, and now operates more than a dozen stores in the city.

365 stores have become a proving ground for local restaurants, which could help Whole Foods dig up scalable contenders like Next Level Burger. In addition, 365 stores could be the perfect venue to test the checkout-free technology pioneered by Amazon Go. The Wall Street Journal recently reported that Amazon is testing its just-walk-out tech in a Seattle retail space that's roughly the size of a conventional store. 365 stores, which average around 30,000 square feet in size, could be the next step before Amazon scales the technology to Whole Foods stores and beyond.