Submitted by Salil Mehta via Statistical Ideas blog [3],
Whole Foods has just been caught ripping-off customers, above and beyond their typical rip-off prices. Whenever I shop at Whole Foods, up and down the Northeast, I observe that more than 2/3 of customers pay with bank cards. Part of the issue with this payment method is that few customers then do what they should be doing. Being a math guy for example, I always add up the prices of anything I am about to buy, before I get to the payment cashier. It's not that hard!
And every couple of weeks, at all sorts of global merchants (from stores, to restaurants, to service companies), I come across price discrepancies. I always feel obligated on behalf of all fellow consumers to notify the business staff (whose only incentive at the counter is to pump you for a loyalty discount card in exchange for your valuable personal data), and most of the time the "mistake" is in their favor. Certainly not in anyone else's. The "mistake" comes down to corporate heedlessness at best, and an obvious lack of respect [4] for their customer's finances. Many times I actually get a dirty look (like I am the jerk for catching their own error!), and only some of the time do I notice businesses promptly take the corrective actions so that no one else would be impacted. If one mindlessly just throws over their bank card and personal data with every purchase, then (as we'll see below) they will often be overcharged.
This particular news is happening with a company that already has a high-profile and checkered track record of doing good. Just before the global financial crisis, CEO Mackey thought it was better to ignore his customers and mask his online identity with the alias "Rahodeb". Squandering his time instead by falsely denigrating [5] Wild Oats, and simultaneously falsely promoting Whole Foods. In a similar playbook as they have today, this insulting set of affairs only came to an abrupt end when Whole Foods was busted.
Also this news is happening with a company that is now suffering intense competition from better-priced competitors. The organic marketplace is well-overdue for price reform. As even billionaire investor Warren Buffett [6] quipped recently "I don't see smiles on the faces of people at Whole Foods." Though on a tangent, we don't see smiles on the faces of his Berkshire stockholders in recent years either (here [7], here [8]). Particularly if they then shop at Whole Foods afterwards, only to get served a second beat down.
So what does Whole Foods' leadership [9] finally do about the recent pricing scandal? Create a feel-good advertisement! No staff changes nor any attempt at financial regress for the systematic and ongoing misconduct. They've already double bagged and taken home those ill-gains. Here we see Walter Robb, and Rahodeb confusingly justify the "rigorous science" surrounding pricing a fruit in the 21th century:
Straight up, uhhh, we made some mistakes. We want to own that, and tell you what we are going to do about it ... We know they are unintentional because the mistakes are both in the customer's favor and sometimes not in the customer's favor. It's understandable that sometimes mistakes are made. They are inadvertent. They do happen.
They also fictitiously blurt out to anyone mathematically illiterate, that in a "very, very small percentage" of times that errors occurred. What's missing is that really in a "very, very, very small percentage" did this ever work in their customer's favor. That's three "very's" using the thumbed-on Whole Foods scale. Which is why eventually they were busted.
This brings us to statistics on our blog, because it would be informative to show people the number of different ways Whole Foods -or similar merchants- can systematically cheat consumers, and still later hole up behind the lawyered company comments above. We'll go through examples, each time merely using two hypothetical products for illustration. We expose in each variation, how even the most fair mis-pricing will generally be "straight up" not fair.
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