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Amazon Deal Could Help Soften Whole Foods’ Pricey Image

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Amazon’s deal to purchase Whole Foods might imply decrease costs and larger entry to premium natural meals and different high-end groceries.

But it might take some time.

“There is so much fat in the way Whole Foods runs its business that Amazon will need a few years before it can drop most of its prices,” says Burt Flickinger III, managing director at Strategic Resource Group, a shopper business consulting agency based mostly in New York City.

The grocery business continues to be in a state of shock since Amazon introduced an settlement on Friday to purchase the Whole Foods chain for $13.7 billion. The deal would shut later this yr, however others might put in bids for the corporate.

Industry specialists consider Amazon and Whole Foods might assist one another immensely. Whole Foods presents greater than 460 bodily retailer places the place clients might decide up on-line orders positioned via AmazonRecent, Amazon’s grocery supply service.  

Amazon has been experimenting with cashless know-how which may assist brick-and-mortar consumers keep away from checkout strains.  

By becoming a member of the Amazon household, Whole Foods would have higher shopping for clout within the merchandise that each corporations promote, Flickinger says.

For Whole Foods, decrease costs couldn’t come at a greater time.

In CR’s 2016 supermarket survey of 58,000 readers, 45 % of buyers stated low costs was their prime cause for selecting a specific retailer. Variety of products (30 %) and high quality of produce (23 %) additionally drive clients, the survey discovered. Meanwhile, our survey respondents’ largest grievance about Whole Foods was worth. The retailer’s costs for natural choices additionally was a unfavourable. 

Amazon won’t have a variety of time to get its costs proper.

No-frills grocers that tempt with rock-bottom costs, such because the German chains Aldi and Lidl, are already making inroads within the U.S. Aldi has greater than 900 shops, and Lidl, which opened its first seven shops in North Carolina final week, has introduced plans to open a further 1,500 by 2023. 

Though that places extra strain on Amazon, all of the exercise on the grocery store entrance is sweet information for shoppers. According to Flickinger, a household of 5 who switches from a standard U.S. grocery store, reminiscent of Winn-Dixie, to Lidl might save as much as $5,500 per yr on grocery payments.

Greater use of know-how might additionally assist to decrease prices at Whole Foods. Those financial savings might probably result in decrease meals costs. Customer-service know-how is a singular arrow in Amazon’s price-cutting quiver, says Greg McBride, chief monetary analyst at Bankrate.

Amazon hasn’t divulged how it might use new know-how in its walk-in grocery shops, however it’s not arduous to think about a future with no cashiers or checkout strains, says Seifer, the analyst from NPD Group. Fewer staff on the payroll presumably means higher costs for patrons.

Amazon already has such a retailer within the prototype part in Seattle. Instead of paying at a cashier or going by way of a self-checkout line, clients by no means interact with an worker—they merely seize what they need, put within the cart and depart. Thanks to a smartphone app—and sensors positioned all through the shop—what they take will get observed and routinely totted up.

Payment is made mechanically when the app is linked to the client’s mobile-payment service. Amazon stated final week that it has no plans to make use of this know-how at Whole Foods.

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Copyright © 2006-2017 Consumer Reports, Inc.


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