Amazon is said to have “sent a shockwave” through the grocery industry when it announced its plan to take over Whole Foods Market, the high end grocery chain. The immediate speculation surrounds the potential losers—mostly the dominant grocers like Walmart.
The biggest winners are the people who could not, in the past, afford Whole Foods, but now will. And they far outnumber the existing Whole Foods customers. Despite its hype, Whole Foods is still a small niche grocer, capturing only 1.7 percent share of the grocery store market. It has been trying to reach broader sectors of less affluent shoppers, but with diminishing success. With the steady expansion of leading supermarkets like Walmart and Krogers into the “corporate organics” arena, Whole Foods’ sluggishness was perhaps the ultimate cause for the Amazon sale.
Amazon has long been aiming to harness its efficient inventory and delivery systems into becoming a major player in the grocery business. Now, its grocery line will no longer be generic, but would instead carry the pizzazz of perhaps the most prestigious grocery brand in the country. With low-cost warehouse and distribution network and less labor-intensive in-store service (maybe replacing friendly bakers and baristas with robots), costs could decline significantly. Amazon might eventually shed Whole Foods’ overpriced reputation, commonly nicknamed by those unable to afford its price tags as “whole paycheck.” Amazon has a consistent track record of pricing goods so close to their cost, operating on slim, almost invisible, profit margins. This might be the opportunity for mainstream consumers—especially those in the Amazon Prime network—to venture into the grazing fields of select foods.
Read more at Forbes