Discounts are driving traffic to Whole Foods
- Amazon’s discounts at its newly acquired Whole Foods stores drove more customers to the natural and organic retailer, according to The Wall Street Journal. An analysis by J.P. Morgan & Chase Co. found that car traffic increased over previous periods this year and in years before.
- However, numerous analyses also found that the retailer’s average prices dropped only slightly. A comparison of similar Whole Foods and Walmart baskets by Consumer Growth Partners found Walmart’s prices to be 37% cheaper.
- A Whole Foods spokeswoman told the Journal that Whole Foods divisions are running their own specials that go beyond the initial price cuts. A spot check of 90 items by Goldman Sachs last week found that 20% had reduced prices.
Numerous analysts have tested Whole Foods prices in the wake of its “affordable for all” discounts unveiled by Amazon on August 28, when the tech giant assumed ownership. And each one has noted that average prices remain unchanged, or only slightly lower.
“PR at its best,” is how Barclays researchers put it after performing spot checks on high-frequency items like Newman’s Own salad dressing and Amy’s frozen pizza and finding no change in price.
Indeed, Whole Foods’ prices are still glaringly high at a time when most major players are cutting prices throughout their stores. Walmart and Whole Foods may serve different customer segments, but the 37% difference in price between the two underscores just how far Amazon and the natural and organic retailer are from the “value” territory reflected in their early messaging.
Nevertheless, shoppers have been eager to check out the new deals, and to no doubt see what a grocery store owned by an online behemoth looks like. Credit to Amazon for discounting high-impact products that made Whole Foods look less like “Whole Paycheck.” But the company must know it can’t continue to simply market a lower-price image — it has to actually do it. Several customers interviewed by The Wall Street Journal seemed to get the picture, noting there were few discounts besides orange-tagged promotional items
As Amazon’s recent press announcement along with store signage has indicated, this is only the beginning. But the beginning of what, exactly? Amazon will likely institute more price drops, but will it raise prices on other items to compensate? Will the company touch those high-frequency items and take a deep hit on profitability?
Given its history of slashing prices and hoarding market share, Amazon will most likely lower overall prices in the weeks and months to come. It didn’t need to cut prices to the bone in the first week, after all. With its deep pockets and experimental spirit, Amazon is willing to lose money — but not any more than it has to.
- The Wall Street Journal More Shoppers Head to Whole Foods After Amazon Merger
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