Amazon.com Inc. spent its first day as the owner of a brick-and-mortar grocery chain cutting costs at Whole Foods Market as much as 43 percent.
In an indication of how the retailer is changing, the Amazon Echo, a voice-activated electronic assistant, was also for sale, for $99.99 – a sharp pivot into electronics for a company famous for kale and quinoa. The Echo Dot, a more compact version, was advertised for $44.99.
The tech giant’s $13.7 billion buy of Whole Foods has sent shock waves through the currently changing $800 billion supermarket industry. The wedding between Amazon and the grocery promises to upend the way customers shop for groceries. Cutting prices at the chain with such an entrenched reputation for high cost that its nickname is Whole Paycheck is a sign that Amazon is serious about taking on competitors such as Wal-Mart Stores Inc.. , Kroger Co.. and Costco Wholesale Corp..
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At the shop on East 57th Street in Manhattan, organic fuji apples have been marked down to $1.99 a pound from $3.49 a pound; organic avocados went to $1.99 each from $2.79; organic rotisserie chicken fell to $9.99 each from $13.99, and the cost of some bananas was shrunk to 49 cents per pound from 79 cents. The things had signs reading “Whole Foods + Amazon. ” The signs listed the price, the new cost and “More to come. ”
Discounts were comparable at Whole Foods stores in San Francisco and Seattle. Amazon declined to comment.
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In the Pacific Heights neighborhood of San Francisco, Catherine Oshiro, a 33-year-old product designer, said costs may make her shopping routine changes.
“I usually buy my staples like paper towels and toilet paper at Target and Safeway,” Oshiro said. “If I see the lower prices at Whole Foods, I would start buying those principles here. ”
Katie Bennett, 24, was one of several customers who said she hoped Amazon would offer delivery of Whole Foods items. She picked out a rotisserie-cooked half chicken for lunch at the New York shop.
“Last time I came in, I had been considering getting the chicken, but it was too costly,”.
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Rivals Adjust
Some rivals have already reacted to the kickoff of what could become a new era of selling food in the U.S.
Wal-Mart, the planet’s biggest retailer, has already invested billions into lowering prices across the board over the last year or so, and has revived the produce section at its U.S stores, improving sight lines, including more fresh-cut fruits and even producing a sweeter bespoke cantaloupe. That, along with an aggressive rollout of curbside grocery order pickup, helped the company record its very best food revenue growth in five years in its most recent quarter.
Costco, meanwhile, has a complete slate of organic items that are priced about 30 percent cheaper than the same products at Whole Foods, according to Sanford Bernstein. #x 2019 & it;s able to cost lower thanks to a business model that focuses on promoting a limited assortment of goods that are bulk-sized, charges membership fees and comes with a treasure-hunt knowledge in the stores.
Maarten van Tartwijk, a spokesman for Ahold Delhaize, the Dutch retailer that owns the Stop & Shop chain in the U.S., said the company has invested heavily in its online performance. And Germany-based retailers Aldi Stores Ltd.. And Lidl, touting lower costs, continue to expand in the U.S.
Investors React
“We have the human connection, assets, scale and expertise to win with customers and we are leveraging our deep expertise in data to offer value and build loyalty — so we could continue to serve customers anything, anytime and anyplace,” Kroger spokeswoman Kristal Howard said by email Friday.
After dropping 37 percent this year on disappointing earnings and investor concern over the Amazon-Whole Foods union, Kroger remained essentially unchanged on Monday in New York.
Sprouts Farmers Market Inc.. , an upscale grocer that competes with Whole Foods and is mentioned by analysts as a possible consolidation target, decreased about 10 percent. Shares of Wal-Mart fell 0.8 percent and Target Corp.. was down about 1 percent. Costco increased less than one percent. Amazon shares climbed 0.08 percent.
“Goodbye, Whole Foods as we understand it,” Karen Short, an analyst at Barclays Capital Inc. in New York, said in a note. “The traditional supermarket hasn’t evolved much in decades. But Amazon will drive drastically different shopping behaviour in grocery. The survival of the fittest has begun. ”
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