Not too long ago, Whole Foods announced plans to open 1200 new stores. But buffeted by new forms of competition and investor pressures, it has not only dropped those plans but also indicated that it will adjust its pricing strategy. Long known, with equal parts fondness and derision, as “Whole Paycheck,” the company will reconsider its pricing structure to compete more effectively with other purveyors of organic products.
A key driver of this shift is the expanding group of competitors in this organic market. As more conventional and even discount grocery chains extend their organic assortment, consumers have realized that they don’t have to visit Whole Foods to purchase pesticide-free broccoli or organic carrots. But Whole Foods also notes that many conventional grocers are not as stringent in the demands and criteria they apply to their suppliers. As a result, they can get products less expensively, even if the quality is not quite comparable.
Rather than risk its reputation for excellent quality, Whole Foods will maintain its own high product standards. In line with this commitment, it will charge more “when we have a particularly strong quality advantage.” But if it is selling the same products as a conventional grocer, it will aim to make the prices on those items equivalent. At the same time, the chain will seek to minimize costs in some areas that are less likely to affect its quality or annoy its customers, such as making the pizza and bakery departments in stores self-serve instead of staffed areas.
With this approach, it hopes to appeal even more powerfully to its most loyal customers, the “Whole Foodies.” If it can convince these loyal shoppers to buy just one or two more items on each trip to the store, Whole Foods believes it can reverse its sluggish sales trends (e.g., six quarters of decreasing same-store sales).
- What is Whole Foods doing to shore up its profit slide?
- Which efforts will make a difference?
- Do you shop at Whole Foods? Why or why not?
Source: Tom Ryan, Retail Wire, February 13, 2017