Did Trader Joe’s lower prices to thwart 365 by Whole Foods?
Recent price checks by Deutsche Bank show that there really is no comparison between Trader Joe’s and Whole Foods.
In a market basket comparison of 77 similar items, Trader Joe’s was 21 percent lower than Whole Foods, consistently offering greater savings on both perishables and non-perishables. Trader Joe’s had the lower price of the two on 78 percent of items checked, while 13 percent were the same price. Whole Foods only had an edge on nine percent of the SKUs checked.
Of particular interest is the gap between Trader Joe’s and Whole Foods on similar private label items. Trader Joe’s prices were 15 percent lower, on average, than Whole Foods. Deutsche Bank analyst Karen Short expressed surprise at the gap between the two chains as previous checks have shown greater parity on prices.
The disparity in private label pricing raises a couple of possibilities. Firstly, that Whole Foods reduced the price investments it has made in private label in an effort to bolster its bottom line. The second — the one seen as more likely by Deutsche Bank — is that Trader Joe’s lowered prices on a large number of items to gain an edge in head-to-head comparisons.
Trader Joe’s certainly has motive. It seems logical that management would choose to preemptively lower prices in an effort to thwart the new small box concept, 365 by Whole Foods, being developed by its rival. It has been widely assumed that 365 stores would compete directly with Trader Joe’s because of plans by Whole Foods to emphasize its private label. Of course, that was at a time when price checks showed there was an even match in the comparison.
- Trader Joe’s Might Be Once Again Catching Whole Foods Off Guard With Price Investments – Benzinga
- Trader Joe’s is reportedly slashing prices – Business Insider
- Will ‘365 by Whole Foods’ spell trouble for Trader Joe’s? – RetailWire
What is your analysis of the pricing disparity between Trader Joe’s and Whole Foods, particularly as it relates to private label? How might this news affect what Whole Foods does with its new 365 by Whole Foods concept?