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After buying Whole Foods in 2017, Amazon made two bold statements about price cuts in the grocery chain. He made a third this week, claiming that he was offering lower prices on hundreds of items, especially fresh products, without going into details. It also offers additional discounts to people registered with Prime, the company's membership service.
"We will continue to focus on lowering prices and improving the quality of our customers," said John Mackey, General Manager of Whole Foods Market.
But we wanted to see for ourselves if a typical grocery bill would change a lot.
To test the new prices, we selected a dozen items from the bakery that we buy all the time, not necessarily the fresh products on which the price changes would be centered. Eggs? Check. Milk? Check. Beer? How could we go without?
We made these races Tuesday at Whole Foods, across from Bryant Park in Manhattan. Then we bought the same items in the same store on Wednesday, after the price cut. We have not applied for premium membership at any one or the other purchase.
The result: we saved a dime.
The savings were achieved through a small reduction in the tax burden and not a specific price change. Strawberries, the only product we bought, cost 50 cents on our second trip. But this change was offset by the cost of LaCroix, which had dropped by 50 cents.
The pre-tax total for the bill was $ 53.98 on both days. But Wednesday, the tax burden was $ 1.61 against $ 1.66 Tuesday because the LaCroix is taxed and strawberries are not.
On Amazon's Prime Now delivery application in Seattle, price declines were a little more noticeable. Whole Foods has some variations in its selection online and in different states. The basket was slightly different. The total amount of the order, including taxes and the suggested tip of $ 5, increased from $ 60.10 to $ 58.60, a saving of 2.5%. The two-hour Prime Now delivery service – and the $ 2 rebate organic strawberries – are reserved for Premium members, which Amazon claims heavy lawsuits because they spend a lot more.
The Whole Foods announcement announced average price declines of 20% for the hundreds of newly-discounted items, but the low financial impact of our basket should not come as a surprise.
For more than a year after the purchase of Amazon by Whole Foods, prices have gone down. In March, a basket of 60 items monitored by Morgan Stanley was 7% lower than March 2017, before the acquisition of Amazon. Prices in typical grocery stores fell by nearly 3% in both years.
But, like other grocery stores, Whole Foods has recently faced market stress as producers are subject to weather, flood and tariff pressures. This same basket of 60 items Whole Foods was 2.5% more expensive in March than a year ago.
Grocers have been able to bear costs on consumer goods companies, but retailers have also had to raise their prices, said Phil Lempert, a food marketing analyst.
"The money has to come from somewhere," said Lempert.
Whole Foods costs a lot more than its traditional competitors. Its prices were 15% higher than those of a typical grocery store, driven by a 30% premium on protein, such as meat, according to a Morgan Stanley analyst's note. Even excluding protein is almost 10% more expensive, writes Morgan Stanley.
Whole Foods is focused on discounts to Premium members, but Morgan Stanley said they were highly variable, depending on the month and the store. At times, the Prime discount had a "negligible" effect on their basket of goods, although at some point in the fall, it was more than 4%.
This new series of cuts will not do big enough to let Whole Foods get rid of its nickname "Whole Paycheck," said Lempert. "It will never be eradicated."
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