Friday, May 9, 2008

Don't believe the hype

I have been writing a paper for Environmental Marketing about organic food pricing strategies.

I decided to choose this topic because I know someone who loves paying more for things at Whole Foods. I wanted to see exactly how organic foods are priced when compared to non-organic versions. I also wanted to see how much more Whole Foods charges for its organic products.

I priced out a few different products but I think the B.C. gala apples are a great example of how things are priced because I was able to find both organic and non organic versions. At Whole Foods, they were $2.49. At Safeway, the organic versions were $1.79 and the non organic version was only $1.49. Whole Foods is charging a full dollar more a pound for the organic part of the product and then 70 cents more because it is Whole Foods.


I contacted Whole Foods and they said "Whole Foods Market’s prices are equal to or better than the average supermarket’s for products of similar quality".

More interesting.

So I then looked at profit margins and found out traditional grocery stores earn a profit margin of about 1%, yet our friends at Whole Foods earn close to 3%.

Now I wasn't able to do any type of full on consumer behavior study but I would bet that Whole Foods is able to get away with this because the people who walk in there are simply willing to pay more. Perhaps they don't know to price organic foods. We have been buying non-organic product for years and we might know what somethings costs when it's non-organic. Once the organic label is placed in the banana, how much more should it be?

I think that Whole Foods customers don't even care. Whole Foods owns them the second they walk in the door. They situate their stores where people who have money like to shop. I used to work near one in Toronto (notice I say work and not live) and it was in Yorkville, where most of the cars are at least a BMW.

Imagine that, you own a business and your customers don't even care what the price of something is. That's gold right there.

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