With Whole Foods, Amazon promises a price war to the great distribution

Break the price without losing a minute. The number one of the e-commerce will finalize Monday the purchase of the brand organic Whole Foods, announced last June. He puts the hand on 460 stores across the United States, Canada and the United Kingdom. Spending $ 13.7 billion dollars (11.6 billion euros), Amazon signs its largest operation ever conducted, but also its offensive the more important in the physical distribution. And for the highlight, Amazon and Whole Foods promise of price reductions on the same day.

“We are determined to make affordable, healthy food and organic. Everyone should be able to consume Whole Foods and we baisserons the price without calling into question the historical commitment to Whole Foods for quality products”, wrote in a joint statement Jeff Wilke, one of the leaders of Amazon.

“Attract more customers”

The price cuts will in a first time bananas, avocado, salmon or cabbage kale, to list to the press release. No order of magnitude has been clarified by the two companies. “I think we’re going to see a decline of the aggressive pricing at Amazon and Whole Foods”, in advance from the New York Times Brittain Ladd, a strategy consultant who previously worked at Amazon on the food sector. “I will not be surprised if some prices are lowered from 15% to 25% on some shelves.” Teaches bio, created in 1978, Whole Foods is considered to be expensive – and this has led to a drop in sales for the past two years. This price drop is therefore to “attract more customers”, according to John Mackey, the boss of Whole Foods, quoted in the press release.

Amazon is therefore preparing to duplicate its traditional method : lower margins in order to build customer loyalty. “Amazon has done this with all its activities to create a customer loyalty”, explains to the Wall Street Journal by James Thomson, a former head of Amazon, which advises brands to their online strategies. “Yes, it is small margins, but [Amazon] is for the long term.” Amazon will also be introducing additional discounts at Whole Foods for customers subscribing to the service “Amazon Prime”. Some supermarkets will also be equipped with lockers, to retrieve the orders placed on Amazon. A way for the leader of online trading to reduce its cost of delivery.

Fall of the Stock market price of competitors

The announcement of the price drop has caused a drop in the price of the shares of the competitors of Whole Foods to Wall Street, with -8,10% for Kroger, -2,03% for Wal-Mart and -5,04% for Costco. These historical actors will also have to cope with the arrival of two new competitors, ready to break the price. The German string for Aldi announced in June an investment of $ 5 billion in five years to open 900 supermarkets in the United States. The same month, the chain Lidl was making its entrance on the american market with 10 stores. What to do to respond the competition. The giant Wal-Mart, which controls 22% of the us market, announced on Wednesday an agreement with Google. The retail chain will sell its products on the platform of purchases Google Express.

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