Trader Joe's Catches Whole Foods off Guard by Slashing Prices

TJ's wants to be a cheaper alternative to "Whole Paycheck"

In the battle between upscale grocery store chains, Trader Joe's may by trying to gain an advantage by undercutting Whole Foods. Business Insider reports Trader Joe's prices are now about 26 percent cheaper than Whole Foods, which is a wider margin than in previous checks by market analysts.

Analysts for Deutsch Bank reportedly checked prices on 77 "similar items" at New York locations for Trader Joe's and Whole Foods. The grocery basket at the former came out to $240, while the latter cost $303. "TJ's might be once again catching WFM off guard because prior checks have not shown such disparity," a Deutsch Bank analyst told BI.

This may be an attempt by Trader Joe's to gain customers by capitalizing on Whole Foods's "Whole Paycheck" image, which has proven to be a problem for the Austin-based chain. A recent survey found shoppers no longer see Whole Foods as a leader in quality, and therefore view it as overpriced. That, combined with an overcharging scandal and some curious items recently found on its shelves, have led to the perception that Whole Foods is out of touch. In the first quarter of fiscal year 2016, the company saw its largest same-store sales decline since 2009.

Whole Foods is attempting to combat those image issues by launching a new brand, 365 by Whole Foods Market. The new stores will be smaller and cheaper, and they'll try to capture the coveted millennial demographic. To further those efforts, the 365 stores will partner with location-specific businesses — millennials love local, after all — such as body-care product vendors, record shops, and tattoo parlors.

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