Amazon cuts food prices 43%
This is looking good depending on where the price cuts are coming from. This does make Amazon much more competitive as well as make Whole Foods more competitive. At the same time the price cuts come at what cost? Do we lose quality in exchange for lower prices?
I often times think cutting quality for cost savings is a bad idea, but it seems like Whole Foods was overpriced compared to Fresh Market. Personally, I prefer to shop at Trader Joe's! Whole Foods had a niche market and i don't think ever intended on becoming the low cost leader. By slashing prices so much I still don't think they will be a low cost leader.
I do think you lose quality.
Amazon is trying to capture market share. They operate in a loss leading way to gain more customers. They did this for over a decade online. They want to take share away from the Krogers of the world.
I don't think this is good. Quality will definitely take a hit, unless they cut costs in other places like staff. Whole Foods has always been perceived as a snobby place for some reason, but I always enjoyed shopping there as all their products were top notch.
When Amazon took over Whole Foods, there was speculation that many jobs would be lost as a result of automated checkout kiosks, so maybe that's how Amazon plans on maintaining quality.
I think the speculation is accurate. As I just stated, I dont believe Amazon acquired WF to compete in the traditional grocery space. They are going to apply technology (read cut jobs) anywhere they can. Amazon is already an expert at the logistical chain which will only enhance the delivery of produces both to the consumer and stores. The same is true for their warehouses...they are an engineering marvel.
At the end of the day, Amazon is looking to get people locked into their ecosystem. WF is an entry point. So yes I think they will keep quality up while cutting costs elsewhere.
Another thing to keep in mind, Amazon, if they chose to, could cut the margins on WF by the annual profit of that company. Now it is mixed into AMZN as a whole, they can operate without profit while using it for other purposes i.e. prime membership, drop off point, Amazon Fresh. etc...
For market share the strategy makes total sense because they can afford to operate Whole Foods in the red. They might even be able to do it without sacrificing quality because they have AmazonFresh and AmazonNow.
My view is that they are looking to increase all aspects of their brands. Whole Foods provides them with retail drop off points. Secondly, Amazon has some healthy food under private label which will go into Whole Foods. Thirdly, they will use the prime membership to discount prices in WF thus giving incentive for more prime membership. And finally, they will automate the heck out of WF.
Amazon did not spend $13B to get into the traditional grocery business.
buy low sell high...
organic food from china is invading the market
Clever strategy and curious to see where Amazon is going with Whole Foods in the future. Also they added Echo devices to their offering in all stores on day one...
did you know that Echo devices are spying on everything in the household?