Welcome to the jungle
Amazon closed on the acquisition of Whole Foods Market on Aug. 28 and promptly announced price reductions at stores throughout the country. Vitaro of the Berkeley Research Group called the acquisition a “game changer.”
“The combination of Amazon and Whole Foods, with revised pricing, combines a best of breed business model for perishables and non-perishables,” he said. “This model delivers convenience and value for non-perishables and quality and freshness for perishables. Further advances in distribution, subscription and convenience will enable this business model to place greater pressure on traditional grocers.”
Additional plans by Amazon for the incorporation of Whole Foods include making Amazon Prime Whole Foods’ customer rewards program available through such platforms as Amazon.com, AmazonFresh, Prime Pantry and Prime Now. Whole Foods’ private brands also will be available through each of the platforms.
For food companies, the merger between Amazon and Whole Foods may signal additional margin pressures in the future.
With food companies already reengineering their supply chains and packaging to fit into Amazon’s system, the on-line retailer’s leverage with the companies may increase still
further, said Rob Moskow, an analyst with Credit Suisse, New York.
Adding to the pressure may be how other retailers respond to maintain competitiveness in the market.
“Other retailers are not standing still,” Vitaro said. “Wal-Mart and Kroger have introduced/expanded click-and-collect options, which appeal to busy consumers. Additionally, Wal-Mart’s acquisition ofjet.comhas dramatically expanded their omni-channel effectiveness.
“Some regionals have increased their value and store brand offerings, while others have strengthened prepared foods offerings or added in-store cooking events.”