Natural Foods Merchandiser

Price still a polarizing issue

One of your customers opens up a newspaper to see advertisements for Albert?s and Bernard?s, two different natural foods stores. Which message would appeal most to this customer? If you don?t know, you should.

The Natural Foods Merchandiser asked survey respondents which store they were more likely to visit based on these two advertisements (at right). The low-price message came out on top with more than 50 percent of respondents indicating they are more likely to visit Albert?s. Price works as an advertising message when stimulating a first store visit.

But a sizable minority of respondents was more attracted to the Bernard?s message. About 30 percent indicated they are more likely to visit the store with the great service. Even more interesting is that those who indicated that they were much more likely to shop at Bernard?s were also likely to spend 40 percent more than the bargain-hunting Albert?s shoppers for food.

This is good news for the independent, natural foods retailer. While competing on price with the likes of Wal-Mart, Costco and Whole Foods may be difficult for some, sending a clear service- and value-driven message to shoppers has the potential to boost sales, attract new customers and create more loyalty.

?The research shows us that this is a polarizing concept. Very few respondents were on the fence about their preferences,? says Sherwood Badger Smith, president of The Intelligence Agency, the marketing strategy firm that created the NFM survey. ?In other words, it?s difficult to position your store as both the price leader and the service leader at the same time. You need to put your weight behind one or the other. Don?t be afraid to leave the price game alone. There are a significant number of people who will respond to the service message, and they?re going to be people who spend more and are very loyal.?

Whatever your message is, it needs to be clearly defined. ?To succeed in retail, you have to have an identity, an image that people recognize and that you deliver on,? says Phil Lempert, a food industry analyst who runs ?First, find out what your identity is. It could be low price; it could be the freshest produce, the widest selection, the biggest selection of organic coffee. Whatever it is, you?ve got to decide on it, then present it to people the best way you can.?

Winning on service
For small retailers, service may be a great attribute with which to define themselves. ?Many more independent stores are smaller and more focused,? says James Tenser, principal at VSN Strategies, a Tucson, Ariz.-based consultancy. ?They don?t have the ability to win the game on price wars. There?s where value-added service can create a loyal, core customer base.?

Susan Cook of Overland Park, Kan., divides her naturals shopping between Wild Oats, Whole Foods and a local health food store, Emerald Forest. ?They don?t offer the variety that the larger stores can offer,? she says. ?But they do give great advice on supplements, and are always very friendly.?

This service strategy is one that Fayetteville, Ark.-based co-op Ozark Natural Foods has successfully implemented. Located right next door to Bentonville, where Wal-Mart was founded, the town is home to two Wal-Mart Supercenters and two Wal-Mart Neighborhood Groceries. But according to Jerry Huddleston, Ozark?s marketing manager, the co-op thrives because it is strong in areas where the retail giant is not. ?You will never beat Wal-Mart on price. You might as well just suck it up, accept it and get on with your life,? he says. ?But Wal-Mart isn?t hard at all to beat on service.?

Ozark?s business grew by 14 percent last year, says Huddleston, because of the store?s steadfast attributes: a well-trained staff, exceptional customer service, an attractive layout, its healthy and environmentally friendly philosophy and a welcoming atmosphere. ?You?ve got to let that message hang out there for a while,? he says. ?You?ve got to remain consistent.? One way that Ozark has literally done this is by creating and continually delivering on a clear set of product standards that are posted on a huge banner hanging in front of the store. ?We let people know up front what gatekeeping we do for them so that when they shop, they don?t have to do as much policing.? Standards such as having 100 percent organic produce can be pricey to maintain, but Huddleston says remaining true to this ideal has created loyal customers who are willing to pay more.

Product selection: the silver bullet
Ozark?s dedication to product quality and standards may be an example of the one aspect of store operations that beats out all other messages. NFM?s research shows that about 35 percent of those who are price-sensitive Albert?s shoppers also said they care about product quality and selection more than any other factor. They will drive farther and pay more for the freshest natural products with the best selection.

What does all this mean to the independent natural products retailer? Keep your identity. Build a relationship with those who value service while winning over a chunk of superstore shoppers with your superior selection of fresh natural, organic and health products.

O?rya Hyde-Keller is a freelance writer in Madison, Wis.

Natural Foods Merchandiser volume XXVI/number 8/p. 18

Spending profiles of ?Albert?s shoppers? vs. ?Bernard?s shoppers?

Spending organic food

Spending supplements

Spending body care

Spending total

Much more likely Albert's





Somewhat more likely Albert's





Equally likely





Somewhat more likely Bernard's





Much more likely Bernard's










Total spending of the committed Bernard's shopper over the committed Albert's shopper: 39.2%

Stores can attract dedicated, high-spending naturals shoppers by being like Bernard?s, with a focus on quality, service and commitment to health.

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