Whole Foods – The Critical Element

In this post I want to discuss the second factor behind my purchase of Whole Foods and how you can apply it to examining other companies as well. In the first post about Whole Foods I mentioned that you should look for a company that not only sells a product, but also sells an experience along with it. But in order to sell an experience along with a product you have to narrow down your business into one thing, and then execute on just that one thing. It’s not totally necessary, but it does make it easier the way juggling one ball is easier than juggling three. So if you want to do something really well, it helps to focus on just one thing at the outset.

Part of it is because attention is limited, and if you could discretize your entire days’s worth of attention into 100 units, then deploying all 100 units into one task should result in a job better done than dividing it up between 3 tasks with 33 units apiece. So focusing on just one thing should result in a better job.

The other part is because it’s easier to make a name for yourself by carving out a niche. If you attempt to do everything at once then you’re identifying yourself with Karl Popper, “A theory that explains everything, explains nothing”. A lot of very successful companies focus on just one thing, or started out by focusing on just one thing. Starbucks is known for their coffee, and Chipotle for their burritos. So if you want to get a cup of coffee you’re probably more likely to get Starbucks coffee than gas station coffee, because Starbucks has specialized in one thing.

We see that the organic grocery movement is catching on in grocers like Target and Kroger’s, but they won’t be able to carve out the same niche as Whole Foods since they sell organic groceries and non-organic groceries. Whole Foods on the other hand only specializes in organic groceries. So who do you really trust for your organic produce? It’s the same principle as your primary care doctor referring you to an otolaryngologist or a podiatrist for your specific ailments.

So when you’re looking for a company to invest in, ask yourself what this company does and see if you can narrow it down to just one thing. If you can, great, you’ve answered part one. Part two is asking, does the company deliver an experience along with their product? And if you’ve answered ‘yes’ to both of these questions, you may have found a profitable investment.

 

Pre-Alpha Heroku Deployment

The State of Things

As we begin to gear up to deploy our Pre-Alpha Version of Tradeasaurous Rex, the main features that we’ve worked on are:

  1. The ability to screen stocks based upon 3 different statistics:
    1. P/E
    2. EPS
    3. Price
  2. The ability to drill down into a stock and see a data visualization of its Market Capitalization, EPS, and Revenue compared to its competitors:
    1. A pie graph for Market Capitalization comparisons
    2. A bar graph for EPS comparisons
    3. A bar graph for Revenue comparisons

Looking Forward

So most of the features worked on up until this point are nothing more than allowing the user to look at a stock and draw some basic conclusions. We feel that the main value given to the value investor as of Pre-Alpha release derives from the visualizations which allows consideration of a stock in a broader context. This leads into the main problem that Tradeasaurous Rex attempts to solve: The lack of a trading platform that allows for broader context based stock analysis.

If you’re about to buy a car, you’re going to look around at different car companies and car models. If you’re considering buying a house, you’re going to research different houses and their neighborhoods. Why would you not do the same when it comes to owning a share of a company? Before owning a restaurant, would you not want to compare it to other restaurants to see if it’s a good decision? And the Pre-Alpha release of the application has been an attempt to solve this by providing each stock with a list of competitors and some relationships between them to facilitate easier broad context stock analysis.

Do note however that, the conclusions are up to the user herself to draw, and Tradeausaurous Rex only provides an improved visualization for publicly available information.

Some features we have in store for Alpha Release:

  1. The ability to create and log into an account
  2. The ability to create a stock portfolio after creating an account
  3. Visualizations for a stock not just in comparison to its competitors, but to itself in previous years

Whole Foods – The 3rd Place

My most recent purchase was Whole Foods Market (WFM), and if I had another $100,000 to invest, I would definitely do it because Whole Foods is one of those companies that does more than just sell a product; Whole Foods is selling you a feeling. There’s a lot of companies out there that just sell the product – you could say that McDonald’s is in the fast food industry selling hamburgers to people. But you want to find a company that, counterintuitively, is not in the industry they profess to be in. It’s similar to what Howard Schultz said

“We’re in the people business serving coffee, not in the coffee business serving people”

-Howard Schultz

So I read Whole Foods Market’s 2014 10K after reading a short biography of the CEO Walter Robb (in Fortune magazine) and his values and beliefs about eating healthy and how that has transformed Whole Foods into more than an organic grocery store – it’s turned Whole Foods into the “3rd place” that you spend time at, other than home and work. With each store’s little bar area you don’t just do grocery shopping like at a Wal-Mart, but you also go to hangout, have a beer, and meet people. They’re selling more than just organic groceries and this is what brings people back again and again because it’s offering a unique perspective on buying groceries and improving the shopping experience. There’s a feeling you get when you set foot into a Whole Foods that you just don’t get when you step foot into a Trader Joe’s or Sprout’s Farmer’s Market.

Whole Foods is in the people business selling groceries. There is no other organic/natural grocer that compares. When you think organic, you think Whole Foods.

Anytime you read about a company who does something similar to this, where they sell you X but concomitantly offer you Y, take a closer look and see if it’s an idea that pervades the entire company and is integral to the company identity.

This is actually only one of two factors behind buying Whole Foods. Stay tuned for the next one.