Amazon cuts prices on items at Whole Foods

29 August 2017, 12:32 | Andres Norman

FTC Clears Purchase by Amazon of Whole Foods Market

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Do Google, Amazon, and Walmart just want to free Americans from the chore of grocery shopping?

The purchase of $13.7 billion by the tech giant of Whole Foods sent big warnings through the supermarket industry of $800 billion in the USA earlier this year.

Answer: To dominate the grocery business like it has many others by increasing the number of customers while undercutting the competition.

Amazon says there'll be immediate price cuts on many grocery staples including vegetables, fruit, fish, meat and eggs.

Amazon is already a retail giant taking in 76 percent of all online retail according to Wired.

"The pot of gold at the end of the road for Amazon is groceries", said Cooper Smith, an Amazon analyst at L2 Inc. When Amazon is able to achieve that seamless view, traditional retailers will be pressured to stop viewing their worlds by channel. Well, only if Amazon slashes those Whole Foods prices considerably, spreads like wildfire, and cuts wages for Whole Foods employees.

"That's been the biggest boondoggle around Whole Food's neck for years", Lempert said of the supermarket's high-price reputation.

But one other big change within Whole Foods locations might be just as important - if not more so - than those other factors. Whole Foods, which started in Austin, Texas in 1980, operates 468 stores in North America and the United Kingdom. But under Amazon, those stores will be turned into warehouses that can distribute groceries to homes around the country.

"What they're really doing is they bought 440 distribution centers", said Pachter, referring to the rough number of Whole Foods locations in the U.S.

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There is room for expansion, as well.

Monday's deals will be available for all Whole Foods shoppers, but to take advantage of all future price cuts you'll have to be member of Amazon's $99 yearly subscription service, Prime. "So is Whole foods going to help us do that?"

The new Whole Foods prices, in some cases, were lower than those at a nearby Ralphs grocery store. "It could open the doors for any medium-size city in the country". In turn, Prime members will receive exclusive offers and discounts at Whole Foods stores.

Amazon has chosen Whole Foods to be their partner, and quality seems to be the main thing Whole Foods is known for. As its consumers base grows, the company will have to drastically increase its shipping and delivery capabilities. Since Amazon had nearly no presence in the grocery industry when it inked the agreement, it didn't qualify as a direct competitor.

"All the signs in the store are saying, 'Look what Amazon's doing for you, '" said Stephen Beck, who owns a management consulting firm in NY.

P&G's product line was so large, extending from Ivory soap to Duncan Hines cake mix, that it was already the nation's largest national TV advertiser. By offering a huge range of products - nearly 400 million - Amazon entices more than half of online shoppers to bypass the usual search gatekeepers and start their product hunt directly on its website.

"They have to make a change, stay relevant and give shareholders some benefit", he said. "Food retailers of all sizes need to look really hard at their pricing strategies, and maybe find some funding sources to build a war chest". During that time, the FTC fought a remarkable campaign to prevent companies from using promotional advantages to colonize new markets.

On average, she said, supermarkets only squeeze about $1 of profit out of every $100 in revenue.

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