My $80 Bag of Groceries

Bag Of GroceriesMemorial Day weekend, my girlfriend and I enjoyed an especially relaxing Saturday afternoon. (There’s got to be a better term than “girlfriend” for a divorced guy who’s 50 years old, but that’s neither here nor there.) We started out with a couple of hours of tennis, which I’ve discovered is quite a bit better exercise than golf. Then we moved to my house to grill dinner on the deck. On the way, we stopped at Whole Foods to pick up supplies.

We ended up with a gorgeous-looking ribeye steak, along with some pasta salad in lieu of the usual baked potato, limes for Liza’s drinks, and a 6-pack of St. Pauli Girl nonalcoholic beer for me. (Costs the same as the fully-leaded version — there’s a lesson in that.) We also picked up some hamburger for later in the week, plus a loaf of organic bread and some avocados for my teenage daughter, who’s a Level Three vegan (she doesn’t eat anything that cast a shadow.) The clerk at Whole Foods then swept all the groceries into a single bag, and presented me with the bill — which, if you read the subject line of this email, you’ve already guessed came to $80.

$80 is a lot for a single bag of groceries. I think that’s high even for Whole Foods — and remember, lots of people call it Whole Paycheck, because it really is the priciest place in town.

I didn’t complain, because I knew what I was getting into. (That ribeye really was good, even at $18.99/pound.) And the place was packed with people who weren’t complaining, presumably because they knew what they were getting into, too.

Groceries are a hyper-competitive market. The average profit margin is about 2%. Most stores sell the same items — the Oreos at Kroger aren’t any better than the Oreos at Albert’s. The Triscuits at Target are pretty much the exact same Triscuits you’d get at WalMart. And specials, sales, and coupons make it easy to compare prices. You wouldn’t think there would be much room for a competitor to make its name by charging more.

Pricing is something all of us struggle with. (That’s true even here at TaxCoach. Just this Monday, one of our members in New Jersey told me we don’t charge him enough for what we deliver.) Pricing your service is especially difficult if you think your client can go out and get the same thing cheaper from someone else. The net result is that most of you are afraid to charge more than your competition.

So how does Whole Foods do it? The same way you can do it: by selling something more valuable than their competitors. They do it in one of the most competitive, price-sensitive markets in business. They target a market with money to spend, and they give that market something worth spending on. (Pay attention there. Yes, groceries are something people need. But fresh and healthy groceries are something people want.)

What can you point to that will differentiate your business in your market, that would give you the same pricing power that Whole Foods has in theirs? Put some thought into it — that unique difference could lead to Brinks backing a truck up to your door to start hauling off the cash. OK, maybe a little exaggeration there — but you get the idea!