Whole Foods Price Cuts Appear to Be Drawing Shoppers

And nearby rivals feel the pinch

Author: Patricia Orsini

October 10, 2017

Amazon’s widely reported price cuts at its newly acquired Whole Foods unit appear to be driving foot traffic to the store—and away from some competitors.

A study by data intelligence firm Thasos found that foot traffic to Whole Foods rose in the wake of the acquisition and price reductions. It also found that the closer a retailer was to a Whole Foods, the more likely it was to lose shoppers to the chain.

Specialty grocery retailer Trader Joe’s and organic grocery chain Sprouts Farmers Market saw the highest rates of decline in foot traffic in the first weeks after the acquisition and price cuts were announced.

Related Links

Big Shifts

What's Changed at Whole Foods Since Amazon Buy

Thasos analyzed foot traffic at Whole Foods stores as well as competitors located within a 20-mile radius of those stores, including supermarket chains, warehouse stores and mass retailers. It examined data over the course of four weeks: one week prior to the price reductions, and the three weeks immediately after.

Topline data from the study reported that average daily foot traffic to Whole Foods locations for the week ending September 3—the first week of price cuts—increased 17% vs. the same period in 2016. Not surprisingly, three weeks after the price reductions were announced, foot traffic increases had fallen back to 4% year over year.

Once their curiosity was satisfied, it seems the majority of new shoppers returned to their regular shopping habits. However, for a subset of grocery retailers—those offering a selection of fresh and ethnic foods—the data indicates heightened competition.

Thasos reported that Trader Joe’s lost about 10% of shoppers in the first week; the defections remained relatively high, at 6%, throughout the reporting period. Sprouts, perhaps the closest competitor to Whole Foods in terms of product selection, also saw high rates of shoppers checking out the competition—8% in the first week, and nearly 7% by the third week.

Market research firm Willard Bishop identified limited-assortment stores such as Trader Joe’s and fresh-format stores like Sprouts and Whole Foods as two of the grocery retailer types with the highest growth in both retail sales and number of stores in 2016. These retailers have managed to differentiate themselves from traditional grocers, which are struggling as shoppers opt for healthier and fresher options.

However, Amazon’s entry into the marketplace with its Whole Foods acquisition has changed the playing field for specialty grocers. As Whole Food experiments with price cuts, other retailers will need to continue to differentiate in this more competitive marketplace.