Thanksgiving and Christmas is right around the corner and Amazon (AMZN) is wasting no time looking to capitalize on its Prime strategy for its Whole Foods acquisition.
The e-commerce giant plans to drop Whole Foods prices on several traditional holiday menu items, including organic turkeys for all customers and “an even deeper discount on organic and no antibiotic turkeys for Prime members,” read the company’s press release. Whole Foods will sell organic turkeys for $3.49 per pound, while non-antibiotic turkeys will fetch for $2.49 per pound.
Upon the closing of its $13.7 billion deal for the upscale supermarket retailer, which sent shockwaves throughout the market, Amazon promised that Prime members would receive "special savings and in-store benefits” at Whole Foods. It would seem Amazon is ready to honor that promise.
“These are the latest new lower prices in our ongoing integration and innovation with Amazon, and we’re just getting started,” said Whole Foods CEO John Mackey in a statement. “In the few months we’ve been working together, our partnership has proven to be a great fit. We’ll continue to work closely together to ensure we’re consistently surprising and delighting our customers while moving toward our goal of reaching more people with Whole Foods Market’s high-quality, natural, and organic food.”
Amazon added that these recent price discounts Amazon are just a sample of the savings Prime customers can expect on a regular basis once Prime is fully entrenched as Whole Foods’ official rewards program. This means that Whole Foods, once referred to as “Whole Paycheck” for its higher-end and often more-expensive grocery products, is poised to shake that moniker given that consumers will soon enjoy shopping at more affordable prices.
While there’s the risk of reducing prices too much, which can hurt Whole Foods margins, Amazon is betting that the reduced prices might be enticing enough to compel shoppers to drive a few extra miles, presumably bypassing grocers such as Costco (COST), Sprouts Farmers Market (SFM), which saw their shares tumble more than 2.5% on the news.
On Wednesday shares of Wal-Mart (WMT), Target (TGT) and Kroger (KR) also declined. Kroger and Wal-Mart were down by as much as 2%, while Target, which offered downbeat outlook for the holiday quarter, lost more than 9% of its value. The extent to which Amazon and Whole Foods can now compete on price is a scary proposition for traditional grocers, who may soon find their shares trading in discount bins.
For Amazon, Whole Foods is an attractive way to not only broaden its Prime shopper base, it’s also a nice entry into the $800 billion grocery business in the United States. And the fact that Amazon can now use these 470 Whole Foods stores (located in North American and the United Kingdom) to enhance its fulfillment initiatives will make it that much tougher for competitors to effectively respond.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
