Whole Foods explores promotions as way to shake “whole paycheck” moniker

By Elizabeth Crawford contact

- Last updated on GMT

Source: iStock
Source: iStock

Related tags: Grocery store

After Whole Foods Market failed to shake its unwanted moniker “whole paycheck” by lowering prices on produce and other items that drive in-store traffic, the retailer is now trying its hand at aggressive promotional campaigns, including digital couponing. 

But whether the strategy will work is unclear given its rocky start in the first quarter, which also saw a 1.8% decline in comparative store sales, a 1.6% drop in customer transactions and a 0.2% decrease in basket size in the time period.

Despite these grim figures, which co-CEO Walter Robb attributed partly to “headwinds from a tougher comparison in a highly competitive environment”​ and “negative impact from cannabilizing”​ related to new store openings, the grocery store chain will stick with its new strategy – at least for 2016.

“Over the remainder of the year, we plan to continue our promotional strategy including more personalized offers,”​ such as the customer appreciation “love fest”​ campaign that offered 25 cent deals on high-demand products, such as oatmeal and cups of coffee, and the recent three-day sale in supplements, Robb told financial analysts Feb. 10.

He made the announcement in the same breath as saying traffic in basket trends in both the one and two year basis showed improvement in the first five to 11 weeks of the quarter.

He further explained that the bumped up promotions are part of Whole Foods’ nine-part plan to “improve our price perception and further differentiation and enhance our shopping experience.”

The increased promotions include the addition of digital coupons with the Whole Foods Market mobile app, which also includes recipes and shopping lists, the chain announced Feb. 10.

To use the digital coupons, consumers simply download the Whole Foods Market app, view available coupons under the “sales and coupons”​ tab and then show the in-app digital coupon barcode to the cashier to apply all coupons, the company explained in a release.

“Coupons have been the top request among users,”​ Robb said of the enhancement, adding: “This is a win for customers and a win for us as well as we will gain actionable customer data on a national scale.”

He also noted Whole Foods “will expand and improve on offers as well as launch our national digital sales flier bringing our customers great savings on what they love to their fingertips.”

The digital coupons, which are available nationwide, had a soft launch Jan. 28 and initial response is “pretty darn encouraging,”​ Robb said. “New downloads of the app have increased 43%. We hit a high of active users which was a 50% increase since the end of January and … we’re up 260% folks registering us with the app.”

The digital coupons are both supplier funded and Whole Foods Funded, but Robb declined to give a breakdown.

Price reductions take a backseat

The retailer redirected some of its efforts to promotions from price reductions after a pilot to drive in-store traffic by lowering the price of produce in late 2014​. 

Executives did not comment directly on the success of lowering produce prices, but President and Chief Operating Officer AC Gallo said, “we feel the best way to show our customers value is to ramp up on the promotional side.”

He explained that Whole Foods has not abandoned pricing efforts, but rather plans to do more as the year continues. That said, he explained, the company first needs to “systematically identify”​ areas to move pricing to ensure it is competitive.

Reflecting on pricing versus promotions, Executive VP of Operations David Lannon added promotions, such as 9 cent green smoothies and 25 cent cookies, are what “get people up off the couch and into the store. And hopefully they’ll continue to buy other things when they come in.”

Brand advertising campaign edged out?

The shift towards promotions also seems to be edging out the chain's brand advertising, at least for now.

While the retailer launched this week a radio campaign in 12 markets nationwide to promote its produce quality and price investment, Robb said the company has rethought the large scale campaign​ it launched in 2014. 

“We’re starting with our efforts in promo and price”​ and digital platform for now, but the marketing could evolve to include a brand campaign in the future, he said.

And while the new promo strategy has yet to impact same store sales and basket size, Whole Foods did report a 3% increase in sales to a record $4.8 billion in the first quarter and affirmed its annual guidance of 3% to 5% sales growth.

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1 comment

Produce Pricing and Digital Coupons

Posted by Stella Metsovas,

Whole Foods is making a great decision here. I know their customers would like to see lower pricing on produce, while being able to save on other products from optioning to use digital coupons.

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