The beginning of this week saw Amazon’s purchase of grocery brand Whole Foods Market complete, and the impact on the retailer was almost immediate. Prices on popular items like apples and avocados were instantly reduced by as much as a third as Amazon leveraged its huge reserve of capital and enabled Whole Foods to decrease its profit margins on individual items.
Whole Foods has cultivated a reputation for high prices during its rise, but with Amazon using its acquisition as a way to finally break into the groceries market, the firm is cutting prices to widen its appeal and, more importantly, steal customers away from dominant brands like Walmart. Amazon is hoping that the temporary decrease in revenues from Whole Foods will be balanced out by long-term gains in new customers.
Before the deal had even finalised, Whole Foods and Amazon had indicated that it would be selectively cutting prices, with more discounts set to arrive in the future. Shares for existing major supermarket chains and grocery sellers including Walmart, Costco, Kroger, Supervalu and Sprouts Farmers Market have all fallen following the $13.7bn (£10.6bn) merger due to fears that Amazon is set to disrupt the grocery market.
While Whole Foods’ prices vary from region to region, the brand is now competitive with Walmart on common items including eggs, milk, bananas, almond butter and organic pasta sauce. Prices on organic apples and avocados both dropped by 33 per cent, while boneless rib eye beef was slashed by nearly 18 per cent in the grocery’s downtown LA branch.
The price cuts weren’t the only sign of Amazon’s ownership present, either. Amazon’s Echo and Echo Dot hands-free smart speakers were now on sale at select Whole Foods branches for the same price they are available on Amazon.com. Technology teams from the two firms are also working on integrating Amazon Prime into Whole Foods’ point-of-sale systems, which will provide Prime members with special savings and in-store benefits.
“It’s been out mission for 39 years at Whole Foods Market to bring the highest quality food to our customers,” said John Mackey, CEO and co-founder of Whole Foods Market. “By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food.
“As part of our commitment to quality, we’ll continue to expand our efforts to support and promote local products and supplies. We can’t wait to start showing customers what’s possible when Whole Foods Market and Amazon innovate together.”