Tech & Business

Price Drop: The Amazon Effect

It’s amazing what can happen when a technology company overtakes a synergistic grocery chain. Amazon is rewriting the rules for how and where mid-to-lower income families can now shop for their groceries. That place is now Whole Foods.

Today, Amazon significantly dropped the prices on many of its items that, for a majority of shoppers, were simply overpriced. In the blink of a weekend (from Friday to Monday morning), here are some of the more significant price changes that were found at first glance by Whole Foods shoppers:

Fresh Atlantic Salmon went from $14.99 per pound to $7.99 per pound ($7 savings).

Hass Avocados: $2.50 each to $1.49 each ($1.01 savings).

85% Lean Ground Beef: $6.99 per pound to 4.99 per pound ($2 savings).

Grass Fed 85% Lean Ground Beef: $10.99 per pound to 6.99 per pound ($4 savings).

Organic Fuji Apples: $3.49 per pound to $1.99 per pound ($1.50 savings).

Whole Trade Bananas: $0.99 per pound to $0.49 per pound ($0.50 savings).

All in all, the new prices are enough to keep the current Whole Foods shopper from market jumping to find cheaper prices, and enticing enough to persuade the average Safeway or Albertson’s shopper to take a gander in the more upscale grocery chain.

The new price drop falls in line with Amazon’s core strategy in aiming to achieve volume first, and then figure out the hook later. In this case, an Amazon Prime membership may already be the not-so-hidden strategy that could help Whole Foods to gain Costco-like stickiness.

The less talked about piece in this interesting business strategy is the ideal that Whole Foods could actually set itself up to expand into mid-to-lower income neighborhoods as a new tier of shoppers would now be able to afford its product offerings. For those less familiar with urban grocery options, say in Detroit or Oakland, it’s not uncommon to find limited places to shop that carry fresh fruits, vegetables and meats. Atop of that, the fresh goods that can be found in urban areas often carry a higher price tag. Thus, for these in-between communities, the Amazon Whole Foods deal has the makings of a dream deal.

It will be interesting to see where Amazon goes next with its current strategy.  For now, the first move has certainly sent an alarming shockwave throughout the grocery retail sector at a shareholder level, and just as many equal smiles to customers on the receiving end. The Amazon effect may leave many non-bidders wishing they had sought to acquire Whole Foods themselves. Not so much so that another acquirer could invoke the same game changing spirit as Amazon CEO Jeff Bezos, but more so to prevent such a game changing move in itself.

Starting today, Amazon may have just began to do for groceries what Tesla has done for electric vehicles. It’s now up to every other company to try to play catch up.