The grocery chain, which mostly entices young, trendy city dwellers,
is now moving into smaller, suburban areas where its new, smaller
stores are seeing stronger returns. But to make it work, Whole Foods
has to rid itself of its top-dollar reputation. A nickname like "Whole
Paycheck" will make it tough to draw in the new demographic, since
lower-priced competitors are homing in on the fresh-food fad.

In its recent quarter, Whole Foods opened six stores, focusing on
these new markets where its says rent is lower, square footage is
smaller and competition for natural, organic food isn't as heated. The
new stores saw sales per square foot rise 29% from a year earlier. In
general, total sales at Whole Foods stores that have been open at
least 53 weeks rose 8.7% in the quarter compared to the year before.

"We've done surprisingly well in some of these secondary markets; a
lot better than we thought we were going to do," said Co-Chief
Executive Walter Robb on a conference call with analysts last week.
"It's a very powerful economic model, so I think we're going to open a
lot more of those types of stores."

To counter its reputation for being expensive, Whole Foods is offering
more price promotions and discounts in all of its stores, and lately
it has held many of its grocery prices flat despite its own costs
rising. The idea is for customers to feel that while there may be
certain product prices that are going up, they are finding plenty of
good deals to make up for that, said executives, who call the strategy
"price perception."

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