Why Kroger Can Do This, But You and Whole Foods Can’t (and shouldn’t even try)

Competition

Have you ever been frustrated by that large chain pharmacy giving medications away for free? Or even that mail order compounder who dramatically undercuts what should be considered a usual and customary price, or worse yet, takes their predatory “coupon skills” to your back yard, calling on your docs?

The simple truth is, some companies can dramatically undercut and sell products at a loss, basically because they are goliath, they are big enough to absorb the loss in other areas…but that’s OK.

THIS IS NOT YOUR MODEL, DON’T GET CAUGHT UP IN IT

They might say that they do it to ensure their customers get their medications at a reasonable price. Or in the case of Kroger grocery, selling organics at close to cost, Chief Operating Officer Mike Ellis described the strategy in a recent conference call with investors: “Our customers don’t want to have to pay a premium for natural and organics. And we’re trying to make sure that they can get a good quality product at a price that’s comparable to the nonorganic brands and in some cases actually the same price.”

Is this a winning situation for Davey? Will Whole Foods rebound from their declining store sales as Kroger continues to increase organic revenue? How can you respond with such challenges, say from a cheaper supplement prices from competition?

It’s easy- service, quality and experience.

Think about the core needs of the consumer- or should I say the values that the cultural creative, health driven consumer.

These are the folks with the expendable income; these are the folks who have the willingness to part with their hard earned cash for these core reasons…

Natural wellness via quality nutrition:

  • Brings in better profit margins than most offerings in the pharmacy
    •       Provides monthly refills and resales of products with little to no effort
    •       Brings in a clientele who is healthy minded, willing to spend, and often has a higher income (but ability is not a necessary component as much as willingness is)
    •       Differentiates a practice
    •       Often sells a product that competition resistant- if promoted correctly.

    The natural wellness crowd/baby boomers/cultural creatives want 5 things:

    1.      Trust and transparency- not to be ripped of
    2.      Time saved
    3.      Life made easy
    4.      Alternatives and options
    5.      Quality and Value

Notice…I said value. Not cheapest price. There is a difference, and your customers will pay.

A great example…look at the King of Low Price and Margin cutting sales- Walmart.

Walmarts stock is down over 30% this year since their profits did not meet predictions. That’s profits….NOT SALES. All the while their same store sales are flat, which means, they are selling the same, and taking home even less.

An even better example is Apple. Apple is not a cost cutter- they are an experience enhancer and culture builder. Essentially they sell the same technology as others- but make a heck of a lot more money. There are way more androids on the planet than iPhones, although, the iPhone consumer is the consumer much akin to the cultural creative/wellness crowd I mentioned above. They have the expendable income AND the willingness to spend.

Apple has posted revenues of $51.5bn ($33.7bn) and profits of 31 per cent for Q4 2015, closing the company’s financial year.

Year-on-year, revenues increased by 22 per cent and profits by 31 per cent, driven by ‘record fourth quarter sales of iPhone, the expanded availability of Apple Watch, and all-time records for Mac sales and revenue from services’, according to Apple.

In apples case, profits outpaced revenue…just the opposite of the cost cutting bottom feeder brands.

Before you start thinking “my customer won’t pay for that”- in regards to higher priced supplements, understand that they will. And the more you sell, the more you make, the better you help your customer.

And remember what they are looking for as you incorporate it into your business model:

  1. Trust and transparency- not to be ripped of
    2.      Time saved
    3.      Life made easy
    4.      Alternatives and options
    5.      Quality and Value

Speak Your Mind

*