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Despite Amazon.com’s publicity push to promote price cuts at Whole Foods, the chain remains the highest price grocer in the land, according to a new study by Bank of America Merrill Lynch (BOA).

The study, which included the round of price cuts announced on April 3 that the grocer claimed included deeper discounts and double the number of exclusive deals for Prime members, doesn’t appear to have moved the needle on the chain’s pricing competitiveness compared to other grocers.

BOA’s research included 10 pricing studies in eight different metropolitan areas around the country over the past year. The last of these took place after Whole Foods announced its latest price cuts.

“In Philadelphia, Whole Foods’ basket was still priced at a +39% premium to Walmart (the grocer with the lowest overall average prices). Produce [was] still at a +25% basket premium to Walmart, and center-of-store items at a +58% premium to Walmart,” BOA analyst Robert Ohmes told CNBC.

In an online discussion on RetailWire last week, BrainTrust member Ron Margulis, managing director of RAM Communications, saw Amazon’s failure to shift price perception as a strategic failure.

“Whole Foods is strictly applying science (in this case, data science) to a challenge that still requires some art,” wrote Mr. Margulis. “As much as they’d like to think that their shoppers’ fickleness can be modeled using advanced algorithms, it can’t be.”

Others were decidedly unimpressed by Whole Foods’ failure to bring down prices under the ownership of the e-commerce titan.
“With so many good places to shop for equally good produce and everything else, I dislike the feeling of being robbed at the checkout counter,” wrote Cynthia Holcomb, CEO of Prefeye. “Whole Foods is a presentation experience at best.”

“Whole Foods’ discounts for Prime members are also a reminder that there aren’t discounts for those of us who refuse the pay the Prime fee,” wrote Cathy Hotka, principal at Cathy Hotka & Associates. “It’s one thing to surrender your phone number to get a discount at a traditional grocer; it’s another to have to pay $12.99 a month for it.”

Whole Foods’ premium to Walmart was actually one percentage point higher than BOA’s pricing studies over the past three to four years. While comparing Whole Foods prices to Walmart’s may seem unfair on the face of it, consider that Sprouts Farmers Market, a growing competitor in a similar niche to Whole Foods, had an average premium of 8% to Walmart’s prices.

Most of the price cuts by Whole Foods were in produce, according to the research, with fewer deals to be found in other parts of its stores.

The BOA research supports findings by others that the hoopla around price cuts at Whole Foods didn’t add up to big savings for the chain’s customers. Last fall, a Gordon Haskett market basket study of 108 items sold by Whole Foods found that prices at the chain were only 0.8% lower a year following its acquisition by Amazon. Prime members, who were supposed to benefit most from Amazon’s ownership, only saved an additional $1.54 on a basket of over $400 when compared to non-members.

For some RetailWire BrainTrust experts, though, keeping prices high wasn’t off-brand for Whole Foods’ high-end grocery experience.

“No one bargain shops at Whole Foods,” wrote Tom Erksine, CMO at One Door. “Whole Foods is an incredible example of how a premium experience, including better brand image, premium brands, healthier choices, better overall category curation, and better visual presentation, can translate into commanding a premium price.”

“Whole Foods is clearly the best grocery store (although some units may not be) with the best quality in terms of product, the best environment and the best people,” wrote Lee Peterson, EVP Thought Leadership, WD Partners. “Hence, their prices are higher. So?”

Source: Forbes