Expect lower prices, better delivery and possibly even Prime rewards for shopping at the high-end grocer
Alexa, can you save me money at Whole Foods?
As it turns out, the smart home device may soon be able to. Amazon announced today that it would acquire Whole Foods Market for $13.7 billion, the largest acquisition ever made by the Seattle-based internet behemoth. And the union of the high-end grocer, which introduced organic food to many Americans, and Amazon could well mean an end to Whole Foods’ “whole pay check” moniker.
Increasing competition has already led recently beleaguered Whole Foods to plan price cuts recently, especially on dairy products and frozen foods. Still, Amazon’s famously disciplined approach to cost control and passing on savings is likely to mean even better deals for customers. “They could use their private labels like Whole Foods 365 to set boundaries,” says Robin Sherk, vice president at Kantar Retail, who thinks Amazon could push other more premium brands to go as close to 365 prices as possible.
A 2016 Wedbush survey found that items sold at Whole Foods’ 365 budget line were about 23% cheaper on average than at the parent grocer, though still slightly more expensive than Trader Joe’s. “Amazon is not trying to be the cheapest thing, but they bring good value to the market,” says Sherk.
One way this could take place is by reducing staff. Tim Barrett, senior research analyst at Euromonitor, notes that Amazon is testing stores where customers can just walk out without the usual check-out process— their Prime account will be billed instead. “I wouldn’t put it past them to try something no one else has tried before,” he says.
The deal is likely to be especially sweet news for Amazon Prime subscribers and users of Amazon Fresh, the internet giant’s growing groceries service. Amazon has amassed a gigantic database on subscriber preferences and is known to offer preferential deals on everything from books to its Echo smart speakers for those who shell out upwards of $99 a year to be members. Coincidentally, Whole Foods is slated to roll out a loyalty program of its own later this year and those enrolled will likely get direct discounts on select products. “They will push pretty heavily to integrate Whole Foods with Amazon, I’m sure there’ll be Prime rewards for shopping at Whole Foods,” Barnett says.
Still, some Fresh consumers have previously complained that the quality of produce was bad and that Amazon’s delivery— so effective in its warehouses— faltered when it comes to fresh fruits and meats. Indeed, this pushed Amazon to introduce two grocery pickup points— where customers can see produce before bringing it home— in Seattle earlier this year.
By contrast, Whole Foods is known for its high quality goods and the addition of the grocer, which currently had 465 stores in North America and Britain combined, suddenly gives Amazon access to a huge number of delivery starting points. “They’ll have access to suppliers and distribution they didn’t have before in the grocery field,” Barrett says. “If they together can figure out how to deliver organics in a cheaper way, that’s going to be the biggest game changer.”
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