My colleague Ashley Nickle at The Packer talked with analysts about changes we’ll see at Whole Foods following its purchase by Amazon.
A dramatic price cut was the first thing most noticed, and for good reason. Amazon had to do something to shed the “Whole Paycheck” albatross Whole Foods has been carrying around for years, despite its efforts to shed that image. Price incentives, loyalty clubs, coupons and nationwide marketing campaigns … just didn’t do the trick.
I’ve seen ridiculously low prices at Whole Foods over the past four or five years since the company launched these price incentives, like 99 cents a pound for sweet onions, 88 cents for a clamshell of raspberries and 99 cents a pound for gala apples.
Consumers just wouldn’t give Whole Foods a try, despite all of these efforts.
One day being owned by Amazon, sweeping announcements, mainstream media coverage, BuzzFeed articles and twitter memes and BAM! People are talking about shopping Whole Foods now.
me after Amazon lowers Whole Food's prices pic.twitter.com/fTHbiNN9jP— camboochie (@tamboochie) August 26, 2017
I suspect after a few trips, and analyzing their grocery receipts, they’ll find only a small percentage of prices were actually lowered, and even then they’re not lower than your regular grocer.
I’ll use Austin, for an example. H.E. Butt Co. sells organic bananas for 55 cents a pound, compared to Whole Foods’ new lower 69 cents per pound price. H-E-B used to sell them for 68 cents a pound, but they’ve been lowered, very recently.
Amazon/Whole Foods will not win a price war against H-E-B.
The digital gorilla in the room
Ashley’s chat with analysts focused on pricing and digital promotions, but I think the true potential to dramatically affect retail operations nationwide comes with online grocery.
Amazon’s got the digital capability to dramatically scale up its fresh grocery. It just didn’t have the people and the physical capacity, and now it does – overnight.
I keep going back to it, but any retailer who isn’t doing at least grocery pick-up is going to have a hard time keeping up with the pace of Amazon’s expansion over the next year.
Online FRESH grocery will be a more accessible option thanks to Amazon Prime’s 50% household penetration and low-income monthly option, and it will be a more appealing option thanks to the Whole Foods name attached to it.
Consumers reluctant to trust a Faceless Amazon Bot to pick their produce will implicitly trust a Hipster Whole Foods Artisan Produce Clerk to do it.
And all of this is before we even approach the prepared foods and meal kit angle. That’s a whole new business, too.