I mean, I live in an area where there’s a Whole Foods within two blocks’ walking distance of two other grocery stores (one mid-market, one down-market.)

I think this isn’t actually that uncommon; people don’t see Whole Foods as actually satisfying the demand for “a grocery store” in an area (as it doesn’t carry many of the things people expect a larger grocery store to carry—it may have decent produce, deli, bakery, etc. sections, but its grocery section is rather lacking in anything other than up-market “bougie” brands) so if there’s an existing other grocery store, and then a Whole Foods also gets built, that doesn’t much decrease the traffic to the other grocery store to the point that it would close down.

The only problem is property developers marketing a new neighbourhood that only has a Whole Foods as being “close to a grocery store”, and people believing them and moving there. That Whole Foods was probably already there before the neighbourhood was, serving as an outlet to travel to for the larger region that that the new neighbourhood is located in; but the other parts of the region were being served by grocery stores located closer to them, and this new neighbourhood actually doesn’t have one of those.