How price competitive does Whole Foods need to be?
Whole Foods Markets, reporting its sixth straight quarterly decline in same-store sales, is apparently finding its “Whole Paycheck” reputation tougher to shake now that organic offerings are widely available across retail at lower prices.
“Does Whole Foods need to be the cheapest or least expensive retailer out there? No. But we also can’t have too big of a gap or people will feel like we’re trying to take advantage of them,” said CEO John Mackey on a conference call last week with analysts. “So we are very conscious of pricing and, in some cases, when we have a particularly strong quality advantage, the gap might be a little larger. But if they’re selling the exact same items and exactly the same brands, we feel like we really need to be competitive on those prices.”
The grocer reduced its sales forecast for the year, announced the closing of nine locations and a slowing of new-store development. Its goal of opening 1,200 plus stores was dropped.
The company plans to “double down on focusing” on its core customer — “the Whole Foodie customer” — that is still shopping its store. As part of that effort, Whole Foods announced a partnership with dunnhumby to accelerate its category management efforts. Stated Mr. Mackey, “If these customers add just one more item per trip, the sales potential is significantly greater than with any other segment.”
Further price investments will continue, and the company is looking for ways to reduce costs, including introducing self-service in departments such as pizza and bakery that don’t impact the shopper experience.
One challenge Whole Foods faces is that conventional grocers allegedly use lower standards to bring down their prices in organics. Whole Foods’ dedicated consumers, however, will be watching its commitment to quality closely.
“If you’re a publicly traded corporation, you have no choice but to maximize short-term profits,” Ronnie Cummins, the co-founder of the Organic Consumers Association, told The Washington Post. “But we are going to be complaining to Whole Foods if they decrease their quality to keep up with the competition.”
- Whole Foods Market Reports First Quarter Results – Whole Foods
- Whole Foods Market Selects dunnhumby to Help Lead Customer Driven Merchandise Strategy – Whole Foods
- Whole Foods Market (WFM) Q1 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Analysis: Why Whole Foods is now struggling – The Washington Post
- Whole Foods says it’s focusing on price because no one wants to feel ‘cheated’ –MarketWatch
- Whole Foods launches Dunnhumby partnership, trims growth forecast – Supermarket News
DISCUSSION QUESTIONS: Is Whole Foods’ quality message getting lost with consumers? Does Whole Foods need to match prices with conventional grocers in staple categories?