Amazon-Whole Foods: ’The war for retail will be won in groceries’ - Aug. 25, 2017
So why is the retail giant spending $13.7 billion to acquire 460 brick-and-mortar Whole Foods stores and lower prices on “organic bananas” and “responsibly-farmed salmon?”
Answer: To dominate the grocery business like it has many others by increasing the number of customers while undercutting the competition.
Amazon will make Whole Foods more accessible to more consumers. And it will turn them into Amazon customers and advance its bid to become the dominant player in all of retail — the so-called everything store.
“The pot of gold at the end of the road for Amazon is groceries,” said Cooper Smith, an Amazon analyst at L2 Inc. “The war for retail will be won in groceries. It’s the largest category of consumer retail, and the largest untapped opportunity for Amazon.”
There is room for expansion, as well. By lowering its prices, Amazon can open new Whole Foods locations in markets that traditionally could not afford high-priced organic bananas and responsibly farmed salmon, making a run at companies like supermarket leaders like WalMart and Kroger.
“Generally Whole Foods goes into markets with six-figure incomes and college-educated residents. But with Amazon lowering Whole Foods’ prices, you could get Whole Foods in towns where you don’t traditionally see them,” supermarket analyst David J. Livingston said. “It could open the doors for any medium-size city in the country.”