Amazon slashes Whole Foods prices; supermarket shares plummet

by Susie Olson August 26, 2017, 1:16
Amazon slashes Whole Foods prices; supermarket shares plummet

Amazon will acquire Whole Foods on August 28 and they are planning to lower prices on select best-selling grocery items immediately.

Amazon said that starting on Monday, it will cut prices on organic grocery staples such as bananas, avocados, brown eggs, farmed salmon and tilapia, baby kale and lettuce, some apples, butter, and other products.

Another change consumers will see is that Whole Foods' private label products (365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch) will be available to order through Amazon.com. "And this is just the beginning - we will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we invent together". Whole Foods - nicknamed "whole paycheck" in some circles - has long struggled to shed its reputation as a pricey alternative to other supermarket chains.

Adding Whole Foods benefits should help Amazon attract more shoppers to its successful Prime scheme, which features two-day shipping for eligible purchases and unlimited streaming of movies and TV shows.

But industry experts say the Google-WalMart deal has little chance of getting in the way of Amazon's ambitions.

"We're determined to make healthy and organic food affordable for everyone", said Jeff Wilke, chief executive of Amazon Worldwide Customer. They can also do product returns to Amazon via their Whole Food store.

Amazon will make Whole Foods more accessible to more consumers.

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Whole Foods now represents less than 2% of the overall grocery market.

While Whole Foods accounts for less than 3 percent of USA grocery and supermarket sales, the purchase gives Amazon a foothold in a fragile industry that can ill-afford more price cutting.

Shares of other large grocers like Kroger, Costco, Target, and Walmart were down on Thursday after the announcement.

Amazon's willingness to take lower profit margins ups the ante in the increasingly costly grocery price war. As the deal was cleared this week by the FTC, Amazon and Whole Foods unleashed their new grocery strategy, causing retail stocks to plunge downwards.

With every new Whole Foods customer, Amazon will expand its core business, which is based around the Amazon Prime membership. The Amazon case shows how a once unthinkable business-to-business venture can come off, where one company associated with the digital sphere can effectively synergize with a non-digital brand.

Amazon announced plans to buy Whole Foods in June. Walmart, which has the largest share of the USA grocery market, is expanding its grocery delivery service with ride-hailing service Uber and announced Wednesday that it will join forces with Google to let shoppers order goods by voice on Google devices.


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