Whole Foods Goes Half Paycheck
In a move that should reignite media interest in the social-coupon niche, LivingSocial's offering $20 worth of Whole Foods Market (NAS: WFM) groceries for $10 nationwide today.
It probably won't. LivingSocial's reach has probably grown substantially over the past eight months, but Whole Foods doesn't have the universal appeal of the leading online retailer. A lot of people just don't live near one of Whole Foods' 308 stores -- while we're all a mouse click away from Amazon's virtual storefront.
Then again, this isn't a race. It's really about getting folks excited again about flash sales.
It's been a rough few days for the once-booming industry. Groupon called off its investor road show. A study of Yelp merchants finds that offering a social coupon typically translates into lower user reviews. Google (NAS: GOOG) is beefing up its Google Offers initiative, but some of the other dot-com giants that figured that they could hop on Groupon's coattails the way Travelzoo (NAS: TZOO) and OpenTable (NAS: OPEN) did last year -- Facebook and Yelp, in particular -- scaled back their efforts.
This deal is more about LivingSocial than promoting discounted organic groceries. Whole Foods doesn't need this. It has rattled off several consecutive quarters of booming comparable-store sales. Why would it take a quarter on the dollar -- since merchants usually split the voucher proceeds somewhat evenly with coupon sites -- even if it knows the average customer will be buying far more than $20 worth of natural foodstuffs?
Just as it was later reported that LivingSocial was the one essentially subsidizing the Amazon deal to draw attention away from Groupon, this one smells just as tactical. Aiming at upscale organic shoppers will give other high-end merchants the validation they need to hop on board.
I know. Whole Foods isn't as expensive as some suggest. The "Whole Paycheck" joke is a long-debunked myth. Today's "Half Paycheck" jokes will come. However, the brand itself does represent a respectable, polished, and full-priced brand that LivingSocial and its rivals would love to be associated with right now.
Sweet move, LivingSocial. Now you'd better hope that Whole Foods doesn't take a reputational hit.
If you want to follow the organic grocer to see how it fares after this deal, addWhole Foods Marketto My Watchlist.
At the time this article was published The Motley Fool owns shares of Whole Foods Market.Motley Fool newsletter serviceshave recommended buying shares of Travelzoo, OpenTable, Amazon.com, and Whole Foods Market. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors.Longtime Fool contributorRick Munarrizcalls them as he sees them. He owns shares of Travelzoo and is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Motley Fool has adisclosure policy.
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