Has Amazon really saved Whole Foods from its ‘Whole Paycheck’ trap?
Amazon.com made clear from the outset of its acquisition of Whole Foods that it planned to lower the chain’s prices. Whole Foods has used the publicity around its lower prices to attract customers from a wide variety of rivals. But are Whole Foods’ lower prices legit? Is it really time to retire its “Whole Paycheck” label or does it still apply?
John Mackey, co-founder and CEO of Whole Foods, recently told Food Business News that Amazon has saved the grocery chain from the “trap” of its high-priced reputation.
Mr. Mackey said Whole Foods has “embraced” Amazon’s pricing narrative, but that speculation by analysts and press reports have fueled the perception that it is now a lot cheaper to shop at the chain’s stores. On its first day under the Amazon umbrella, Whole Foods’ 57th Street store in Manhattan reduced its prices on organic Fuji apples, baby kale, 365 Everyday Value organic butter and other select items between 33 and 48 percent, according to Bloomberg.
The perception of lower prices has helped attract more shoppers to Whole Foods. For example, 10 percent of Trader Joe’s regular customers visited Whole Foods between Aug. 28 and Sept. 16, according to Thasos Group. Eight percent of Sprouts customers did the same as did three percent of Target shoppers and two percent of Costco and Safeway customers.
Kroger and Walmart shoppers have been the biggest sources of new customers for Whole Foods. Twenty-four percent of new customers to Whole Foods came from Walmart while 16 percent were from Kroger. The next biggest sources of new customers were from Costco (15 percent), Target (11 percent) and Sam’s Club (five percent).
Despite the perception, new research from Gordon Haskett fails to find much change in Whole Foods’ pricing. The research firm tracked the price of 110 items sold at a Whole Foods in Princeton, NJ and found that pricing on these items declined only 1.2 percent over a five-week period following Amazon’s acquisition of the grocery chain in August.
- Mackey: Whole Foods set free by Amazon acquisition – Food Business News
- Are Whole Foods’ price cuts game-changing for food retailing? – RetailWire
- Whole Foods price cuts hit hardest at Trader Joe’s, Sprouts: study – Reuters
- Amazon promised to make Whole Foods cheaper. Let’s see how that’s going. – The Washington Post
DISCUSSION QUESTIONS: Do you expect that Amazon’s ownership will result in a real change in Whole Foods’ pricing model? Has Whole Foods put its Whole Paycheck label in the rearview mirror or does the company risk a backlash should customers decide that prices are largely unchanged?