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Trader Joe’s Puts Whole Foods On Notice With Price Differential

Trader Joe’s has scored a victory in the rivalry for most affordable prices in the high-end grocery business, according to a report from Deutsche Bank Securities. In checking prices throughout New York market stores, the report found that one Trader Joe’s location had a price advantage of 26% over a nearby Whole Foods Market.

The study examined the prices of 77 similar items at Trader Joe’s and Whole Foods Market stores. Upon selecting the items at Trader Joe’s, the basket totaled $240, a far cry from the Whole Foods price of $303.

While Trader Joe’s has not confirmed any price cuts, and the testing was conducted in only two neighboring stores, the stark difference does suggest that these retailers price a wide range of products quite differently.

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For its part, Whole Foods is certainly seeking to build a position as a private label retailer offering products at value prices with its “365” concept stores, which will begin operating this year. The current private label price differential is significant: the study revealed that similar items sold at Trader Joe’s are actually 15% cheaper than at Whole Foods. The report indicated that prior checks haven’t shown a similar disparity.

The full implications of the alleged price cuts are yet to be seen, but the way that this has been carried out silently suggests that Trader Joe’s may be trying to catch the competition off guard.

A number of grocery stores have been gravitating toward the organic, natural health foods market, so there has already been major pressure put on the “Big Two” players in this space. Sprouts Farmer’s Market, in particular, has doubled its store total from 109 in 2011 to more than 220 today, and had a year-over-year adjusted profit boost of 21%. Name players such as Wegmans, Kroger and Costco have also taken large steps into the health foods arena, so Trader Joe’s and Whole Foods will need to stand out through showcasing the product lines that made them successful in the first place.

Regardless of the direction Trader Joe’s or any competitor has taken, Whole Foods will have a difficult time engaging in a price battle going ahead. With Whole Foods expecting to triple its current store count to 1,200, it is unlikely the retailer will be able to focus on mass expansion while simultaneously prioritizing competitive prices. In fact, the retailer has been operating in a cost-cutting mode, notably at the expense of 1,500 jobs.

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