Seattle and Austin, Texas — Amazon (NASDAQ: AMZN) has officially closed its $13.7 billion acquisition of Whole Foods Market. The first order of business for the e-commerce giant is making the Austin-based grocer’s high-quality and organic food more affordable for its shoppers.
Beginning yesterday, Whole Foods Market now offers lower prices on selected grocery staples across its stores, with more to come. These include fair-trade bananas, organic avocados, organic large brown eggs, organic salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85 percent lean ground beef, creamy and crunchy almond butter, organic Gala and Fuji apples, organic rotisserie chicken and organic butter.
“We’re determined to make healthy and organic food affordable for everyone,” said Jeff Wilke, CEO of AmazonWorldwide Consumer, in a statement. “We will lower prices without compromising Whole Foods Market’s long-held commitment to the highest standards.”
Due to Amazon’s reputation and ability to deliver on its promises, other grocers are watching closely as Whole Foods transitions to the new model, according to Rick Scardino, principal of Lee & Associates’ Chicago office.
“Most grocers will be concerned for obvious reasons as to Amazon’s plan to lower pricing because that will shrink already tight margins in the grocery segment,” says Scardino.
Pricing has become a key weapon in the ongoing grocery wars across the country. Reuters reported on the pricing adjustment that Walmart Neighborhood Market is making to compete with expanding discount grocers like Aldi and Lidl.
“Lower prices always have the potential to disrupt mature sales channels such as the domestic grocery business,” says Jeff Rinkov, CEO of Lee & Associates. “Existing grocery chains are paying close attention [to Whole Foods], and we will see enhancements in their models and shopping experiences to keep pace.”
High-Tech Makeover
Amazon and Whole Foods Market’s technology teams will begin to integrate Amazon Prime into the Whole Foods point-of-sale system, whereby Prime members will receive special savings and in-store benefits. The two companies will invest in additional areas over time, including in merchandising and logistics, to enable lower prices for customers.
“It’s been our mission for 39 years at Whole Foods Market to bring the highest quality food to our customers,” said John Mackey, co-founder and CEO of Whole Foods Market, in a statement. “By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people.”
Whole Foods’ private-label products — including 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch — will be available through Amazon.com, AmazonFresh, Prime Pantry and Prime Now.
Amazon Lockers will also be available in select Whole Foods Market stores. Customers can have products shipped from Amazon.com to their local Whole Foods store for pick up or send returns back to Amazon during a trip to the store.
In fiscal year 2016, Whole Foods had sales of approximately $16 billion and has more than 460 stores in the United States, Canada and the United Kingdom. The grocer employs approximately 87,000 team members.
— Matt Valley and John Nelson