Whole Foods cutting some prices after Amazon takeover

Amazon's takeover of the Whole Foods grocery chain came into effect on Monday, and the store began cutting some its prices to mark the occasion. The company has been clear about which products will be first to see drops in price.

CBC News decided to gather a sample of grocery prices around Vancouver to see how Whole Foods' prices compare to other stores.

All the stores included were checked on Monday, Aug. 28 and quantities were converted to make a clear comparison.

Of the items Whole Foods has reduced in price, only organic bananas were included in the CBC test sample.

The price for bananas was reduced from $1.09/lb to $0.89/lb, shifting Whole Foods from the range found at most shops to the low end, nearly as low as Walmart's price for a pound of organic bananas: $0.87/lb.

In most other cases, the regular Whole Foods prices are toward the expensive end of the scale.

As an example, Whole Foods customers will pay $18.90/kg for extra lean beef. That's $2.65 more expensive than Walmart's $16.25/kg, the next highest store.

Organic carrots cost $1.99/lb, compared to Urban Fare's $1.76/lb, the next highest, and on the low end, $1.04/lb at Walmart.

Lower prices a gamble

According to David Hardisty, professor of marketing at University of British Columbia's Sauder School of Business, lowering prices is a strategy that could wind up harming a retailer like Whole Foods.

"Whole Foods needs to be careful that when they change their prices they may also change people's perception of quality, because we tend to use prices as a heuristic for quality. So that if something's expensive, we must think it would be good as well," said Hardisty.

"It is possible that this could even hurt them, right, if they lose their market leader position. Right now they're seen as kind of top tier quality in grocery," he said. "Do they lose that edge if they cut prices?"

Lindsay Meredith is professor emeritus of marketing strategy at Simon Fraser University's Beedie School of Business. He sees the top tier status Whole Foods has held as constantly under attack by other retailers selling products like pricey organic groceries.

"The problem you get into is that Whole Foods, these markets, these niche markets get under pretty savage attack by other people too," said Meredith, who sees the price drops as a way to try to keep an edge and maintain market dominance — something, he says, Amazon is especially adept at doing.

"Would Whole Foods have done this probably on their own? Eventually they would have. Was this basically sped up by Amazon? Of course it was. Amazon are, if nothing, consummate players of market share dominance," he said.

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But Meredith does see the inherent risk in the strategy.

"Can you reposition and make a mistake? That's called alienating your original market segment. So in this case, Whole Foods cuts prices, people say, 'gee, the food quality's not there,' and they stop shopping."

But he thinks, ultimately, the gamble will pay off for Whole Foods.

"Will they be able to put in some price cuts and still maintain their market share, their customer loyalty? Very, very likely, yes."

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