When Amazon completed the acquisition of Whole Foods for $13.7 billion back in June, there were widespread concerns among competitors in the grocery industry that the company would engage in a Price War. Whole Foods' first day under Amazon confirmed those fears as prices of numerous goods were cut sharply, and, according to a Bloomberg report, some prices were slashed by as much as 43 percent.
Price war
Whole Foods had always been known as a rather expensive destination for grocery shopping and in fact, the chain often goes by the moniker "Whole Paycheck" among consumers due to such steep pricing.
As a result, Amazon's decision to give such deep discounts on the very first day has come as a huge boost for consumers, while on the other hand, it is certainly going to cause panic among its competitors like Walmart and Costco among others.
Food Marketing Institute vice president Mark Baum stated, “Price was the largest barrier to Whole Foods’ customers. Amazon has demonstrated that it is willing to invest to dominate the categories that it decides to compete in. 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.” Amazon has other lucrative businesses and a considerable 'war chest' that will allow them to engage in a price war for a long time.
Deep discounts
Bloomberg studied some of the discounts that had been offered by Whole Foods today and according to their report, prices have been slashed considerably for a variety of items. For instance, organic avocados were retailing for $1.99 each instead of the usual price of $2.79 while organic rotisserie chicken went for $9.99 instead of $13.99.
These prices were seen at the East 57th Street store in New York and according to the report, similar prices were seen at stores located in Seattle and San Francisco. When Bloomberg contacted them, Amazon refused to comment on the developments.
However, it is also important to point out that competitors like Walmart are equally cash rich and they are already working on ways to combat the threat posed by Amazon.
Walmart, for instance, has teamed up with Google to offer customers a voice enabled service and in addition to that, the company has spent billions in order to bring down the prices of their products considerably. Costco, on the other hand, is offering a range of organic products at a much lower (30% lower) price than that of Whole Foods'.
