25 August, 2017
As soon as technology teams have integrated Amazon Prime into the Whole Foods point-of-sale system, Amazon Prime will become the store's customer rewards program, and Prime members will benefit from special savings and in-store benefits. The companies plan to offer other discounts in the coming years.
The announcement that Amazon will reduce prices on grocery staples at Whole Foods signals a clear intention to remedy what has been one of the grocery chain's biggest weaknesses.
In addition, AmazonFresh, Prime Pantry, and Prime Now will begin selling Whole Foods Market's private label products, including 365 Everyday Value, Whole Foods Market, Whole Paws, and Whole Catch.
The supermarket business has already been upset by the entry of Aldi and Lidl, the European discounters who have been expanding rapidly in the U.S.
Amazon has sent shockwaves through the global grocery business by slashing prices on a whole basket-load of products sold by its new acquisition Whole Foods Market, effectively opening up a new front in its battle to seize market share from its real-world retail rivals. Amazon is certainly a new threat to the grocery industry now that it has all of Whole Foods' 460 stores under its belt, but its online retail scale is still its best asset.
Whether Amazon will succeed in the fiercely competitive grocery segment is unclear, but customers are going to benefit from the attempt, said Charlie O'Shea, lead retail analyst at Moody's Investors Service. "Its shareholders are agnostic about profit, and seem more interested revenue and market share". Worryingly for others in the market, these things are only the opening salvo in what will be a time of rapid change. The Kroger Co. dropped almost 8 percent, and Supervalu Inc. fell more than 6 percent. Target, Costco and Supervalu all fell. German discount grocers like Lidl and Aldi are expanding in the US and Walmart Stores Inc. has been investing in more discounts too.
"Lower prices could be catastrophic for some operators", said Madeline Hurley, a senior analyst at market research firm IBISWorld.
About 60 percent of Whole Foods shoppers are already Prime members, CIRP estimates. "This shows that Amazon is taking a very hands-on approach". It's a tricky balance that Amazon itself seemed to acknowledge in its statement.
The companies are working on merchandising and logistics to enable lower prices for Whole Foods Market customers. Its shares were down 0.6 percent to $952.45 on Thursday.
