The Death of Luxury: Prada, Burberry…and Whole Foods

August 30, 2017

As I learned of the news about Whole Foods dropping its prices, I could only think about how accessible the retailer would now be to everyday people. With the recent, and in some cases significant, reduction in prices Whole Foods is looking to bring in a new customer – one who is as focused on quality as on price. At this point, the store’s nickname is a cliché as news reports frequently site the “Whole Paycheck” reputation that had alienated many and that prompted this new pricing strategy.

The more I think about it, the more it appears this move was an obvious next step for a luxury grocer. Now I understand that “luxury” is a term largely associated with Chanel, Louis Vuitton and the rest of the designers firmly placed on the first 30 pages of any glossy – but for many years Whole Foods shared a lot of characteristics with these brands. It was expensive, exclusive, and unprofitable.

In recent years, luxury brands have hit a wall. In April, Prada reported the lowest full-year profit since its 2011 IPO and Burberry’s shares fell by 6 percent. Now let’s look at how Whole Foods was doing during this same period. Ahead of the Amazon Merger, the company’s same-store sales had declined for eight consecutive quarters. And why is this you ask? Because luxury brands aren’t relevant to customers anymore. Shoppers want quality but aren’t convinced that great products merit a price tag that’s double or triple market value.

Luxury brands have transformed their lines to be more accessible to the masses, and the Whole Foods and Amazon merger will do the same. With other grocers and retailers incorporating natural and organic products into their stores, consumers have more options than ever for procuring healthy food. Whole Foods was struggling to compete with these new offerings, but thanks to Amazon it will now be able to offer a premium on price and service by offering products that cater to the masses.

Digital solutions, like Amazon, have often been blamed for killing brick and mortar retail in both fashion and grocery sectors, but in a lot of ways it’s proven to be its salvation. Luxury brands have had to close several physical locations due to profit loss. However, luxury powerhouses like Louis Vuitton, have seen opportunities to grow their business by investing millions in digital means. This move to digital has democratized luxury fashion in many ways, because it means anyone can access fashion online by viewing product, live-casts of fashion shows, outfit posts on Instagram, and more.

In grocery, we’ve seen the same thing. Physical grocery stores have had slow growth within recent times, but forecasts show that up to 31 percent of consumers are likely to shop for groceries online this year. Digital integrations have already given retailers an opportunity to win and defend market share. Take Aldi for instance, the grocery chain that recently rolled out a delivery service that could take as little as an hour. This new service has enabled Aldi to compete with heavyweights, while still appealing to shoppers who are interested in discount groceries.

Whether it’s fashion or food, the underlying lesson here is that a successful retail strategy is one that connects with shoppers across all spectrums – not just those with deep pockets. To truly secure a spot in today’s fast-changing retail world, we must make take a cue from this merger and make our businesses more approachable and egalitarian, through price, technology and accessibility. After all, a shop that caters to everyone also stands to gain profits from everyone. Our job now is to continue to level the playing field by giving customer’s access to the same assortment of products and services as anyone else.

How do you see this grocery shake-up impacting the industry? Let’s continue the conversation – email me anytime at JimH@daymon.com.

 

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