Trader Joe’s seems to beating Whole Foods Market when it comes to competitive pricing.
Deutsche Bank analysts compared the prices of 77 similar products at a New York Trader Joe’s with those of a nearby Whole Foods, and found the prices were 26 percent cheaper at Trader Joe’s than at Whole Foods, a report by Business Insider said earlier in March. The cart of product at Trader Joe’s rung up at $240, while the one at Whole Foods came to $303.
CNN reported that the product purchased at both grocery chains during the study was largely perishable goods, and though they sold comparable products, Trader Joe’s came out overwhelmingly cheaper.
“Of all the items tested, which included a mix of perishable items, private label products and non-food items, Trader Joe’s had the lowest price on 78% of the items. Whole Foods offered a lower price on seven products.”
Trader Joe’s was 30 percent cheaper than Whole Foods for perishables and 24 percent cheaper for nonperishables. There was also a large difference between the two companies’ private-label brands, with Trader Joe’s coming in at 15 percent cheaper than Whole Foods’ 365 Everyday Value branded products.
— Supermarket News (@SN_news) April 3, 2016
Notably, this is a wider price gap than previous checks, which lead the report to speculate Trader Joe’s may be slashing its prices across the board to put pressure on its rival supermarket chain, which prides itself on being “America’s healthiest grocery store.” Trader Joe’s strategy may be to catch its competition off guard.
“TJ’s might be once again catching WFM off guard because prior checks have not shown such disparity,” Deutsche Bank’s Karen Short wrote in a research note quoted by Business Insider. “The wide price delta between TJ’s private label products and WFM’s ‘365’ private brand… was a surprise to us given that the ‘365’ brand strategy has generally been to match TJ’s on price in private label despite the fact that WFM’s private label is meaningfully higher in quality and therefore justifies a premium. In prior price checks, WFM’s private label has matched TJ’s item by item — until this most recent check.”
Now that Trader Joe’s has over 450 stores open, it may be slashing its prices. The move wouldn’t be unprecedented for the quirky grocery chain; in 2013, when it boasted around 300 locations in the U.S., it cut prices for over 200 items.
Both supermarket chains claim to offer healthy food free of artificial ingredients, trans fats, GMOs, preservatives and other ingredients they label as being potentially unhealthy. However, Trader Joe’s has arguably projected more of a populist image, in contrast to Whole Foods’ “Whole Paycheck” reputation for pricey, upscale food.
A basket of 77 items at Trader Joe’s was 26% cheaper than its equivalent at Whole Foods https://t.co/5LZDrRS4Zo
— Fortune (@FortuneMagazine) April 2, 2016
It certainly doesn’t help matters that Whole Foods recently agreed to pay $500,000 in a scandal where it was accused of overcharging its customers for some of its packaged foods, particularly its sandwiches and sliced fruits. CNN reported that New York’s Department of Consumer Affairs launched a probe looking at 80 different types of products, finding all of them mislabeled.
Julie Menin, New York’s consumer affairs commissioner, told CNN the inspectors called it “the worst case of mislabeling they have seen in their careers.”
For their part, Whole Foods denied any intentional wrongdoing in the price violations and has been promising to lower its prices and offer more limited-time discounts. Delish also reported that Whole Foods will be opening a new, cheaper supermarket chain, allegedly to be named “365 by Whole Foods Market,” to target price-conscious millennial shoppers.
Even though Whole Foods reported its same-store sales growth was down 1.8 percent in the first quarter of 2016, the company announced it plans to open three “365” brand stores within the fiscal year 2016, and up to 10 more in the fiscal year 2017.
Trader Joe’s and Whole Foods have declined to comment on their respective pricing strategies.
[Photo by Spencer Platt/Getty Images]