“Always Low Prices,” Except When They’re Not

Imagine a car dealer who has a lot with 100 Porsches on it. 98 are brand new and 2 are used clunkers that barely run because they've been rebuilt after getting into accidents. The dealer's advertising slogan is "You can buy a Porsche here cheaper than anywhere else." It's technically true, but horribly misleading. This, essentially, is what Whole Foods is doing in its new advertising campaign for NYC stressing its low prices:
With its white-apron-clad chefs, who whip up almond crusted flounder for $14.99 a pound, and its rows of hard to pronounce cheeses (consider bleu D'Auvergne, best paired with a Rhône red wine), Whole Foods Market has always felt like the Saks Fifth Avenue of supermarkets. But the organic food emporium, all but synonymous with gastronomic indulgence, now wants to be known for something else: low prices. Yes, low prices. For the next 10 weeks, Whole Foods is running print advertisements in New York City emphasizing "value" and "deals" — two words not generally associated with the chain that inspired the quip "Whole Foods, Whole Paycheck."
The article even cites price testing to "prove" Whole Foods is right. Obviously, Whole Foods has been spooked by Wal-Mart's big move into organics. The fact that the NYT assigned its Wal-Mart reporter, Michael Barbaro, to this story strongly suggests that they think the same thing. Even though the word "Wal-Mart" does not appear once in this story, Whole Foods' laughable misstep into Wal-Mart's rhetorical terrain is a good reminder of why Wal-Mart's slogan is equally misleading. It all comes down to selection bias. The first diary I ever wrote to hit the recommended box on Daily Kos was called, "Wake Up People!!! Wal-Mart's Prices Aren't That Low." It was built around this passage from an article by Iowa State economist and Wal-Mart expert Kenneth Stone:
Price-sensitive merchandise is displayed in prominent places such as the kiosk at the entrance to the store, as well as on end caps, in dump bins, and in gondolas down the main aisles. Consequently, when Wal-Mart customers see the items of which they know the price, the ones always priced lower in Wal-Mart, they start assuming that everything else is also priced lower than at competing stores. This assumption is simply not true.
According to my favorite Wal-Mart employee, the blogger BBCAmerican, the Wal-Mart home office in Bentonville "can order up to a thousand price changes PER DAY." Do you think all those prices are revised downward? If so, I have a bridge to Brooklyn I'd like to sell you. In Lake Woebegon, all the children are above average and apparently at Wal-Mart all the prices are below. Obviously some prices at Wal-Mart are low, but to get an accurate representation of Wal-Mart's prices you'd need many data points from throughout the store AND from stores throughout the country. But if up to 1000 price changes might occur each day, the prices you get might very well change the day after you left. Besides that, write down prices at your neighborhood Wal-Mart and they'll kick you out of the store. It's quite simple really: You get what you pay for. At Whole Foods you get quality food at high prices. At Wal-Mart you get. . . skip it. I don't want to lose my appetite.

Leave a Reply

To prove you're a person (not a spam script), type the security word shown in the picture. Click on the picture to hear an audio file of the word.
Anti-spam image