Starting Monday, Amazon will cut the prices of bananas, butter, organic eggs, and other staples at Whole Foods’ stores, aiming to lure customers with lower costs and undo the grocer’s reputation as a elite grocery destination (as indicated by its popular nickname, “Whole Paycheck”). The online giant also announced that Amazon Prime members will have access to special prices and perks.
The new prices go into effect on Monday — the same day Amazon’s $13.7 billion acquisition of Whole Foods becomes official. The online marketplace, known for transforming the book industry and other retail sectors, also rolled out a strategy for combining its business model with an established brick-and-mortar grocery chain.
Amazon customers will be able to pick up packages — and return items purchased online — at Whole Foods locations that feature the Amazon Lockers service. Combining the two companies will also allow customers to buy Whole Foods’ private label products on the Amazon website and through local grocery delivery services. Another change would extend the Amazon Prime loyalty rewards program to Whole Foods shoppers.
Amazon seemed to create a shock wave in the grocery industry when it announced its purchase of Whole Foods back in June. But business experts have also pointed out that the combined company would only control about 2% of the larger U.S. grocery market. The biggest share goes to Walmart, with a whopping 15% percent, followed by Kroger with 7.2%, according to a CNBC report.
With the new details, Amazon has disclosed some of its goals for this acquisition — including gathering customer data from Whole Foods’ clientele.
A number of popular grocery items will be cheaper at Whole Foods markets starting this week, including bananas, apples and organic avocados, ground beef, salmon and tilapia, along with organic rotisserie chicken and other products.
Calling the combined venture “the first of a new breed of cyber-physical retailers,” professor Lee McKnight of Syracuse University’s noted that Amazon’s biggest aim isn’t to boost Whole Foods’ sales; rather, it’s to boost the amount of information on American shoppers.
Citing a robust overlap of upper-income consumers who simultaneously use Amazon Prime and shop at Whole Foods, McKnight says that the company wants to “tie those two databases or datasets together, which makes it more valuable, because now you have this more rounded picture of what the person is doing online and offline.”
Explaining that a significant part of Amazon’s profits come from its cloud services and data businesses rather than online sales, McKnight notes the new strategy could benefit both elements of Amazon’s business.
In the meantime, it could also threaten other grocers and retailers. The recent deal between Google and Walmart is a case-in-point: as McKnight explains, “If you’re not Walmart, if you’re not Amazon and Whole Foods, who’s your cyber partner to make you stand out in this evolution?”
If he were another retailer who was locked out of deals with Amazon or Google, McKnight said, “I’d be wetting my pants now.”
The two companies have promised even more price cuts and changes in the future, after the logistics and retail systems have been integrated.
Once the takeover is complete, Whole Foods will retain its own brand and keep its headquarters in Austin, Texas, Amazon says. Co-founder John Mackey plans to remain in his position as CEO.