Digital Gabe
Cutting Edge Commentary On All Things Media

The Grocery Wars Are About To Get Real

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You knew it was just a matter of when and not if Amazon would begin cutting prices on products sold at its Whole Foods stores.  Yesterday the eCommerce juggernaut announced it would begin rotating discounts on staple items for its Amazon Prime subscribers.  The program has been tested in Florida and is now ready for a nationwide rollout.

Turning Whole Foods into a price leader is basically the sum of all fears for traditional grocers like Kroger, Publix, and Albertsons.  As with other categories like TV and Music, Amazon can afford to make WF a loss leader as a way to drive new Prime subscriptions.  In addition to lower prices Amazon has the ability to deliver groceries to Prime members’ doorsteps for less than it would cost to drive to another grocery store and make the same purchase. . . which is a powerful competitive advantage, to say the least.

Whole Foods still has a long ways to go before its truly the least expensive grocer.  After all we’re still talking about the chain whose premium prices have earned it the nickname “Whole Paycheck”.   But sooner or later Amazon’s ability to weaponize Whole Foods’ pricing model will lead to disruption (maybe even devastation?) of the traditional grocery model in the US.

 

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