Whole Foods’ new chain of stores will be almost as cheap as Trader Joe’s.
The chain, called 365 by Whole Foods Market, will primarily feature the company’s store brand products — which are only about 2% more expensive than Trader Joe’s, according to a new price comparison study by Bloomberg Intelligence analyst Jennifer Bartashus.
Bartashus purchased 35 identical private-label items at each store for the study.
The Whole Foods items cost $US88.86, while the Trader Joe’s basket cost $US86.75.
Whole Foods has a reputation for being expensive, while Trader Joe’s is best known for its low prices. Trader Joe’s also sells twice as much per square foot as Whole Foods.
The study proves that Whole Foods will now be able to compete with Trader Joe’s and other specialty grocers on price, Bartashus writes.
But the cheaper prices could end up hurting Whole Foods’ existing stores, according to Deutsche Bank analysts.
“It could backfire if price points are materially different, because an obvious price spread between the two formats could create doubts with their existing loyal customer base, and this could lead to erosion of their very strong brand equity,” analysts write in a recent research note.
Whole Foods could also face a challenge keeping rent and labour costs low enough to make the “mini-me millennial” stores profitable, according to the note.
“Real estate and labour are both becoming scarcer, which could complicate this endeavour,” the analysts write.
The new chain, which will start opening stores in 2016, will be led by 20-year Whole Foods veteran Jeff Turnas Turnas was previously president of the company’s North Atlantic region.
“We are excited to introduce 365 by Whole Foods Market to bring healthy foods to even more communities with a fresh, quality-meets-value shopping experience that’s fun and convenient,” Turnas said in a statement. “A modern, streamlined design with innovative technology and a carefully curated product mix will offer an efficient and rewarding way to grocery shop.”
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