On its first official day as owner of the grocery chain, Amazon cut Whole Foods prices by as much as 43% on Monday. In North American stores, Amazon also added its logo to in-store signage and placed Amazon Echo devices (home to Alexa, a voice-activated personal assistant) near store entrances.
Amazon has slashed Whole Foods prices on products including organic avocados, organic large brown eggs, organic fish, different types of almond butter, organic baby kale and lettuce, and 85% lean ground beef—and it has also begun to reduce prices on grocery staples and essentials, such as milk and cheese.
How will this affect competitors?
This does not bode well for smaller grocery retailers, especially those who specialize in organic produce. With Amazon’s backing and an established, loyal consumer base, Whole Foods can now afford to drastically drop prices even in major cities, something that isn’t feasible for many other grocery chains.
This price drop is also threatening larger grocery retailers—Walmart in particular. Many Whole Foods prices are now on par or lower than those at Walmart. Organic milk, for example, is now considerably less expensive at American Whole Foods locations than it is at American Walmarts: Whole Foods now retails a half-gallon of 2% organic milk for USD 3.49; at Walmart, the same product goes for USD 3.88. While Walmart does still offer a better deal than Whole Foods on a number of food products, Whole Foods’ focus on organic, fair-trade, and free-range food combined with their dropping prices will undoubtedly offer Walmart some fierce competition.
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What do lower Whole Foods prices mean for consumers?
Essentially, lowered Whole Foods prices mean that Whole Foods products are becoming more affordable and accessible. The chain has often jokingly been referred to as “Whole Paycheck” due to its formerly steep grocery costs, but this move is expected to change consumer perception of the brand and encourage both existing and new consumers to purchase products from its locations.
Major competitors—Walmart included—will also have to make changes in order to compete with the effects of this acquisition. This likely means that consumers should watch out for an increase in price drops on food and beverage products at major grocery retail locations throughout North America.
How low Whole Foods prices will go determines how much Amazon is willing to risk. Cutting prices too low means destroying Whole Foods profitability, and could result from price wars with other large grocery retailers. However, for now, Amazon’s newest venture has a significant leg-up on its competitors.