Amazon needs to buckle up Wal-Mart is all set to enter the online shopping competition. If Amazon wants to maintain its supremacy in the business then it will have to reduce its whole grain prices. The reason why Jeff Bezos has been asked to reduce the prices is because Wal-Mart holds a grip on grocery world.
After Amazon officially took control of Whole Foods this week, it announced price deductions on several things such as bananas, kale, organic avocados, baby lettuce, and more. The grocer has marketed the best quality of its foods and maintained an upscale vibe. So for the moment, most of the shoppers are supposed to find better deals somewhere else, including at industry eminent giants Kroger and Wal-Mart. In a recent survey of eighteen items, Bloomberg found that Whole Foods are 50% more expensive than Wal-Mart.
After the announcement of Amazon buying Whole Foods for $13.7 billion, it highlighted the grocery industry in June. And now the Amazon is getting huge attention to see how this e-commerce platform will manage its newly acquired grocery stores as it’s on the line to get more shoppers to purchase food online. Now the fears of a profit-crushing price war have influenced the stocks in the cutthroat grocery industry which is quite famous for its survival on thin margins.
According to Mikey Vu, a grocery expert at Bain & CO., While the Amazon is in the limelight to reduce the prices as it pursues the goal to move beyond Whole Food’s rarefied image but so far the deductions are used to create a buzz than changing the perception that the chain caters to wealthy shoppers. He also adds that unless Amazon cut prices, it won’t dramatically increase the income band of customers they go after. On the very first day, the statement seemed to be very bold, but there weren’t many items included in the move.
The Bloomberg price survey held on Tuesday at food industry giants including Whole Foods and Wal-Mart at different locations in Washington, Bellevue showed Wal-Mart store band with lower prices than Whole Foods in some brands such as Florida Natural orange juice, Blue Diamond almond milk, Nature’s Own whole wheat bread and KIND snack bars. It compared many items such as black beans, canned tomatoes, and corn etc. Only the one exception was there that Kettle Sea Salt chips were availed at Whole Foods costing $2.69 and at Wal-Mart it was of $2.98.
At Wal-Mart the fruit, canned goods, and vegetables were all cheaper than Whole Foods, with an exception of bananas, which cost 56 cents per pound at Wal-Mart compared to 49 cents per pound at Whole Foods. A huge difference was noticed for skinless, boneless chicken breasts that cost $5.19 per pound at Whole Foods while it’s just $1.99 per pound at Wal-Mart.
Whole Foods is well-known for selling only natural products that are utterly compliant with animal-welfare standards, on the other hands, Wal-Mart is prominent in selling a range of groceries that don’t match with Whole Food’s haughty standards. Still, cost-conscious buyers won’t like to spend $1.99 for a can of Whole Foods corn which can be bought at just 68 cents from Wal-Mart.
Two other significant independent surveys revealed that the prices of Whole Foods had hardly budged because the Amazon took over earlier this week only. At Whole Foods in Princeton, New Jersey a price cut was observed by an average of 1.2 percent compared to a week earlier. In a separate review of Whole Foods’ prices at a New York City, Tesley Advisory Group unveiled the fact that the prices of Whole Foods are still higher than those at Kroger and Wal-Mart regardless of price reductions. Amazon has also increased the prices of the salad bar at one location in Manhattan from $8.99 a pound to $9.99 a pound this week.
The Whole Foods acquisition is significant for Amazon as it offers the brick-and-mortar presence to Amazon where it lacks in the grocery market. The company provides Amazon fresh grocery delivery in several cities and is in the process testing out a convenience store concept.
Still, competing with the well-established players is harder than becoming an online levitation in electronics. As the fact is that the most customers still like to shop for groceries in stores and getting delivered fresh food is an expensive and tricky proposition that has made Amazon in a problematic situation for a decade. In addition to it, the Amazon would be a small player only as it’s only controlling 2% of an $800 billion market, conquered by Albertsons Cos., Kroger and Wal-Mart.
And shifting the deep-rooted perceptions of Whole Foods, and achieving the target of gaining huge customers back in a bid to enhance sales, will definitely take time.