Categories: Media Moves

Coverage: Amazon to lower Whole Foods prices beginning Monday

Amazon.com Inc. said it will cut prices on a range of popular goods as it completes its acquisition of Whole Foods Market Inc., sending shares of rival grocers tumbling on fears that brutal market share battles will intensify.

David Shepardson and Lisa Baertlein of Reuters had the news:

Amazon’s $13.7 billion purchase of Whole Foods, which will be completed on Monday, has been hanging over a brick-and-mortar retail sector unsure of how to respond to the world’s biggest online retailer.

Shares of Kroger Co, the biggest U.S. supermarket operator, closed down 8 percent, while Wal-Mart Stores Inc, the biggest U.S. food seller, closed down 2 percent.

Amazon also said it will start selling Whole Foods brand products on its website, a move that sent down shares of packaged food sellers including Kellogg Co.

The S&P 500 Food Retail index closed down almost 5 percent as more than $10 billion was wiped off the market value of big food sellers.

Amazon said members of its $99-per-year Prime shopping club would eventually be rolled into Whole Foods’ customer rewards program and be eligible for special offers and discounts.

Eugene Kim of CNBC.com reported that the lower prices may help Amazon Prime:

Despite its massive success, Amazon Prime hasn’t been able to solve one nagging problem: its heavy concentration in high-income households.

But Amazon’s decision to lower prices at Whole Foods could help draw more lower and middle income people to its Prime program, as they will feel more compelled to check out the grocery store — and ultimately find out about the many benefits of the Prime program.

“Amazon’s trying to cast as wide a net as possible,” R.W Baird’s analyst Colin Sebastian told CNBC. “They’re going to try to make more store shoppers Prime members, and then bring more Prime members into stores.”

Amazon Prime is estimated to have signed up more than 50 million US households so far. But a big chunk of it comes from people in the higher income bracket, a segment that is slowly getting saturated.

A recent survey by Piper Jaffray showed that 82 percent of the households making $112,000 or more a year are already Prime members, while just 67 percent of the households with income in the range of $68,000 to $112,000 a year have signed up. Those making less than $68,000 a year hovered around 50 percent penetration.

Maura Judkis of The Washington Post reported that Amazon Lockers may start appearing in Whole Foods locations:

And eventually, mirroring another prediction of Amazon-watchers, Whole Foods will offer Amazon Lockers in stores for customers to stop by and pick up Amazon purchases — and probably buy some groceries while they’re at it. As online grocery shopping grows, it’s an immediate answer to Amazon’s “last mile” delivery problem — shorthand for the idea that, the closer you get to a product’s final destination, the more challenges you have in delivering it. Whole Foods stores give Amazon refrigerated distribution centers close to where people live, which “adds to Amazon’s cachet and eases concerns of customers that their perishable food comes from two to three miles from their homes where a Whole Foods is located, instead of an Amazon distribution center that could be farther afield,” wrote Michelle Lodge for the Street. “Freshness counts.”

The Amazon news release teased at other changes to come, once the companies “integrate logistics and point-of-sale and merchandising systems.” Future changes could include eliminating checkout lines, which Amazon has already done at its cashless Amazon Go store in Seattle (going cashless, while convenient for middle class customers, would also inhibit access to fresh groceries for unbanked households, which would affect more than 15 million American adults). At that store, a combination of technology including sensors, machine learning and computer vision can detect what customers are purchasing. As long as they have the Amazon Go app, they can just walk out of the store, and their Amazon account will automatically be charged. Other Amazon innovations, such as the Amazon Dash Wand, a home bar code scanner, are likely to make their way into Whole Foods stores somehow, too.

Chris Roush

Chris Roush was the dean of the School of Communications at Quinnipiac University in Hamden, Connecticut. He was previously Walter E. Hussman Sr. Distinguished Professor in business journalism at UNC-Chapel Hill. He is a former business journalist for Bloomberg News, Businessweek, The Atlanta Journal-Constitution, The Tampa Tribune and the Sarasota Herald-Tribune. He is the author of the leading business reporting textbook "Show me the Money: Writing Business and Economics Stories for Mass Communication" and "Thinking Things Over," a biography of former Wall Street Journal editor Vermont Royster.

Recent Posts

Indianapolis Biz Journal seeks a news editor

The Indianapolis Business Journal is looking for our next news editor, a role that focuses…

6 hours ago

Axios hires Berkowitz as ME for media and markets coverage

Axios has chosen Ben Berkowitz to be its next managing editor of business and markets.…

11 hours ago

Business Insider hires Ortega as director of newsroom operations

Business Insider editor in chief Jamie Heller sent out the following on Monday: I'm thrilled…

11 hours ago

Rest of World promotes Chandran to deputy editor

Rest of World editor in chief Anup Kaphle sent out the following on Monday: We are excited…

12 hours ago

FT hires Venugopal as India newsletter editor

The Financial Times has hired Veena Venugopal as its India newsletter editor. She has been working at…

12 hours ago

FT taps Parkin to be Middle East and Africa news editor

Benjamin Parkin has been named Middle East and Africa news editor at the Financial Times, based…

15 hours ago