It seems as if everybody is paying attention to the prices at Whole Foods. Since its purchase by Amazon, with an announcement that also touted the arrival of lower prices, the grocer has been subject to close scrutiny, as shoppers and analysts attempt to determine if it has lived up to its lower price promise. Such scrutiny is enhanced each time the company announces price savings, such as a recent assertion that it would be achieving lower price points on scores of fresh produce offerings and other items, and these savings would be especially notable for Prime members.
A recent experiment suggests the reality is not quite as promised. When reporters purchased the exact same basket of goods, from the same Whole Foods store, one week apart (once before and once after the announced price cuts went into effect), the total bill was precisely the same. However, the price of LaCroix water decreased, while the price of strawberries increased, and because these items are taxed differently, the amount paid differed by 5 cents. That is, the purchase price was the same, but the tax charged varied by this minimal amount.
The journalists admitted that they did not make use of any Prime membership deals, which may be where Whole Foods is focusing most of its pricing initiatives. A similar experiment, with a matching basket of goods, but obtained using the Prime Now delivery service, revealed a price dip of about 2.5 percent after, relative to before, the announced price cuts.
The focus on giving Prime customers the best deals likely is strategic. Amazon’s data show that Prime customers buy more at Whole Foods, and the membership fees that these consumers pay may help offset some of the cost pressures that Whole Foods (like every other grocery chain) faces in the modern market. If it can convince shoppers, especially Prime members, that its prices are coming down, it may be able to limit the effects of its long-standing reputation as a higher-priced retailer—even as its prices continue to remain approximately 15 percent higher on average than competitive grocery offerings.

Discussion Question:

1. What is the difference between Whole Foods’ stated pricing strategy and its actual pricing strategy?
2. Which service gap is widening with regard to Whole Foods’ pricing strategy?

Source: Zach Wichter and Karen Weise, The New York Times, April 3, 2019