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Amazon will take control of Whole Foods Monday, slash prices

Amazon announced in a press release Thursday that it will take control of Whole Foods beginning Monday, The New York Times reports. When Whole Foods stores open Monday, shoppers will see lower prices on a number of products, including bananas, eggs, salmon, tilapia, Fuji and Gala apples, and almond butter.

“We’re determined to make healthy and organic food affordable for everyone,” Jeff Wilke, the executive who runs Amazon’s consumer businesses, said in the press release. “Everybody should be able to eat Whole Foods Market quality we will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards.”

Wilke said the price cuts to be implemented Monday are “just the beginning” of an effort to “continuously lower prices” at Whole Foods.

In the near future, the release says, Amazon Prime will function as a Whole Foods rewards program, and Prime members will “receive special savings and in-store benefits.”

Competitive pricing is a cornerstone of Amazon’s business model. The company, the Times notes, has made a habit of delighting the consumer even at the expense of its own shareholders, and even its bottom line.

Amazon’s low prices also help appease regulatory agencies like the FTC, which approved Amazon’s acquisition of Whole Foods Wednesday.

“At the end of the day, the FTC is in the business of watching out for the consumer,” said Brendan Witcher, a retail analyst at Forrester Research, per the Times.

Of course, in order to cut prices, Amazon will need to cut costs.

Though Amazon has been developing automation technology meant to reduce the need for human labor, the company has pledged that its acquisition of Whole Foods will not jeopardize the jobs of Whole Foods employees. According to the press release, Whole Foods will “continue to grow its team and create jobs in local communities as it opens new stores, hires new team members, and expands its support of local farmers and artisans.”

Rather than cut labor costs, Amazon and Whole Foods will “invest in additional areas over time, including in merchandising and logistics, to enable lower prices for Whole Foods Market customers,” the release says.

The press release says Amazon values “customer obsession rather than competitor focus,” but the company’s ever-falling prices have historically made things difficult on competitors. In the past, the Times points out, Amazon has started price wars with Barnes & Noble and Walmart. After failed to match Amazon’s prices, parent company Quidsi agreed to a buyout deal.

Meanwhile, Whole Foods’ high prices have been its primary competitive disadvantage to low-cost, high-volume operations like Walmart and Costco. Many experts expect the Whole Foods-Amazon deal to send competitors reeling as Whole Foods quality becomes available at Amazon prices.

“I absolutely think it’s putting the rest of the market on notice,” Bob Hetu, an analyst at Gartner, the technology research firm, said, per the Times, of Amazon’s announcement on pricing.

Walmart stock dropped 2 percent Thursday following the announcement. Kroger’s shares fell 8 percent.

Walmart is making its own push to slash prices. Last year, the Times says, Walmart allocated millions of dollars toward the effort.

Walmart is also taking steps to increase its online presence in the grocery sphere and elsewhere.

Google Express, which fashions itself as an Amazon competitor, now sells a number of Walmart products.

Moreover, Walmart’s market share in the grocery space far exceeds that of Whole Foods. With 4,600 stores, Walmart is the nation’s largest grocer. Whole Foods has just 460 stores.

“We feel great about our position with our network of stores around the country and fast growing e-commerce and online grocery businesses,” said Randy Hargrove, a spokesman for Walmart, per the Times.

Stew Leonard Jr., chief executive of a regional grocery chain that operates six stores throughout New York and Connecticut and, like Whole Foods, aims to provide the freshest available produce, says his business has seen and survived a procession of upheavals in the market.

“I’ve been in retail since I was a kid, and I’m always nervous,” he said. “Costcos were opening, then Walmarts, then Whole Foods. But at the end of the day, you just have to try and get the freshest corn out there on the sidewalk.”

Many expect Amazon to leverage the Whole Foods acquisition to grow its online grocery delivery services like AmazonFresh, which has operated for over a decade with limited success.

Per the press release, Amazon will sell proprietary Whole Foods brands—including 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch—through, AmazonFresh, Prime Pantry and Prime Now. Amazon implies that Whole Foods brands will be available on said sites beginning Monday.

According to the Times though, most consumers still prefer to buy their groceries at brick and mortar stores rather than online.

Amazon will also install its Amazon Lockers in some number of Whole Foods stores so that customers can pick up and return items purchased from Amazon at their local grocery stores.

Featured image via Pixabay

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