Dive Brief:
- Whole Foods’ prices are higher following its second much-publicized round of discounts, according to an analysis by research firm Gordon Haskett, cited by Bloomberg. Based on a basket of 110 items purchased at a Whole Foods in Princeton, New Jersey, analyst Chuck Grom found that prices had increased 1% since late September.
- While produce prices did fall 4.9%, according to Business Insider, snack foods rose 5.2%, dry grocery increased 2.5%, and beverages and bakery items both rose 1.3%. Overall, Grom found that Whole Foods’ prices are just 1.1% lower than before Amazon acquired the chain.
- These findings are surprising, Grom wrote, considering all the publicity surrounding the discounts and Amazon’s promise to lower prices at Whole Foods stores. "Demonstrating lower prices to this new customer will be critical to the early success of the integration, in our view – first impressions are the most lasting," he wrote in a note.
Dive Insight:
Amazon appears to be getting a sizable sales boost from its price cuts. The first round of cuts at Whole Foods stores, instituted when it assumed ownership in late August, contributed to a 25% boost in first-week traffic. Although customer visits moderated, the move gave the specialty retailer a much-needed shot in the arm, with sales up 4.4% in the fourth quarter, according to a filing with the Securities & Exchange Commission.
This comes much to the consternation of other retailers, who frankly don’t see what all the fuss is about.
“They’ve said they have cut prices and then they get a $1 billion worth of publicity, which is a bunch of smoke,” Kemper Isely, president and co-chairman of Natural Grocers by Vitamin Cottage, said during the company’s most recent earnings call last month.
“They got a lot of publicity for not doing much,” Mike Donnelly, executive vice president and chief operating officer with Kroger, told The Wall Street Journal.
The latest analysis from Gordon Haskett seems to back up these assertions. Despite its promise to bring down Whole Foods’ prices and make organic “affordable for all,” it appears the e-tailer is doing this in word only.But what matters is customer perception, and on that front Amazon is winning.
“Literally what they did was take their prices from being outrageous to being high,” Neil Stern, senior partner at retail consulting firm McMillanDoolittle, told Food Dive.
To Amazon's credit, it is driving more customers to Whole Foods stores without sacrificing much in the process. But one has to wonder if the fact that it’s not moving the dial on average pricing will eventually catch up with it. Shoppers could latch on to headlines proclaiming Whole Foods is still “Whole Paycheck,” and may not see a reason to continue visiting the stores.
Certainly, Amazon can’t hope to improve Whole Foods’ performance by giving it one shot in the arm after another. However, the online retailer may be effectively buying time until it can roll out marquee initiatives. What those initiatives will be, exactly, are the subject of much debate, but if they’re as game-changing as many believe they could be, pricing may take a back seat.
