Some cuts under Amazon's ownership; '10 cents here and there,' says shopper
Continue Reading Below
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 7, 2017).
Amazon.com Inc.'s bid to revive sales at Whole Foods is showing some signs of success, though the natural grocer's prices are still higher on many items than competitors.
Shoppers interviewed at Whole Foods stores in New York, Chicago and Bay Area said they hadn't noticed much of a change in their grocery bills since Amazon completed its roughly $13.5 billion takeover of the grocer last week.
"It's like 10 cents here and there," said Erika Feehan, a 35-year-old mother of two from Brooklyn, who noticed lower prices on a few products including avocados and eggs.
Several Whole Foods employees said they have noticed an increase in sales at their respective stores since the merger, beyond the expected back-to-school rush. A J.P. Morgan & Chase Co. analysis of four days of car traffic to Whole Foods stores found visits were up compared with averages before the merger and during comparable periods over the previous three years.
Continue Reading Below
But the chain's prices remain higher than those at Wal-Mart Stores Inc. or deep-discounters such as Aldi and Trader Joe's, analysts have found. A comparable basket of Wal-Mart goods is still 37% cheaper than at Whole Foods, according to a store survey by Consumer Growth Partners. Whole Foods had narrowed the gap by 3 percentage points from before the merger, the market research firm found.
"Wal-Mart will not see a major short-term competitive threat even from a repriced Whole Foods Market," said Craig Johnson, the firm's president. A Wal-Mart spokesman said the company felt confident of its position in the industry.
Whole Foods stores in different regions of the country are also holding routine sales that go beyond the Amazon markdowns, a spokeswoman for the grocer said. She said Whole Foods would continue to cut prices, adding that its products are superior to those sold by its competitors. Amazon declined to comment.
Amazon's takeover of Whole Foods has heightened the competition among grocery stores. The increasing number of businesses that sell food and an extended period of lower food prices forced many large chains to sell their products for less while also investing in e-commerce operations. Grocery stocks are down 18% this year, according to FactSet.
A spokeswoman for Ahold Delhaize, owner of U.S. grocery chains such as Food Lion and Stop & Shop along with the Peapod online grocery service, said the company is investing more in e-commerce and private-label brands to compete.
Monique Kofoid, a 52-year-old stay-at-home mother shopping at a Whole Foods in Chicago on Tuesday, said she believes Amazon will transform grocery shopping as it has buying other consumer goods. She said she hopes to buy more of her groceries through Amazon's Prime membership service as the company sells more products there.
Whole Foods hasn't added to the list of items marked down after the merger last week, but some stores have added larger orange signs advertising the discounts. A Goldman Sachs survey of roughly 90 items found that 20% were marked down last week, with produce down by 31%, packaged goods by 20% and refrigerated items by 19% from before the merger.
The Trader Joe's in Emeryville, Calif. was selling some items for less than the Whole Foods in nearby Berkeley on Tuesday and was touting its low prices.
"Our bananas have been priced at 19 cents for 17 years," one sign read. Whole Foods' conventional bananas now cost 49 cents a pound.
"I love the shopping experience here," said Carol Dreher, a nurse shopping for items including flowers, bananas and potatoes at Trader Joe's. "And I love the prices."
But Whole Foods had undercut Trader Joe's on some products. Two pounds of organic Driscoll strawberries were $6.49 at Whole Foods, compared with $6.99 at Trader Joe's. Organic red, seedless grapes, $2.49 at Whole Foods compared with $2.99 at Trader Joe's.
Cutting prices on a few items isn't likely to replenish the ranks of Whole Foods customers that have been declining for nine consecutive quarters, Barclays analysts said. Some shoppers said prices would have to fall by 20% for them to shop more at Whole Foods.
"It's called 'Whole Paycheck' for a reason," said Nora Molina, a 32-year-old Whole Foods shopper in Berkeley, who prefers to buy most of her groceries at Target Corp. stores or her local grocer.
A Target spokeswoman said the company offers sales "on the right products at the right times" to provide customers value at their stores.
--Sarah Nassauer and Annie Gasparro contributed to this article.
Write to Heather Haddon at email@example.com and Laura Stevens at firstname.lastname@example.org
Corrections & Amplifications Carol Dreher shopped at Trader Joe's. An earlier version of this article incorrectly stated the name of the grocery chain.
(END) Dow Jones Newswires
September 07, 2017 02:47 ET (06:47 GMT)