Amazon lowered prices on hundreds of items inside its Whole Foods stores on Wednesday in its latest move to battle the grocery chain’s “Whole Paycheck” stigma. The discounts show Amazon’s willingness to trim profit margins to better compete with more affordable grocery giants.
Inside one New York City Whole Foods location on Wednesday morning, orange “new lower price” signs dominated the produce section, with an average price drop of 20 percent, according to Amazon. The company also said it was doubling the number of weekly deals inside Whole Foods specifically for Amazon Prime members, who pay $119 a year for a bevy of perks, including free two-day delivery on millions of Amazon items, free two-hour delivery from Whole Foods in a growing number of US cities, and now exclusive deals inside Whole Foods store.
Caitlyn Austin, a college student and part-time urban farmer, said she noticed the lower prices instantly upon entering Whole Foods in Lower Manhattan on Wednesday morning.
“When I saw the price drop on organic carrots in there, I was kind of thinking: How? How?” she said. “$3.99 to $1.99 — that’s a big price drop.”
Austin said she wondered whether the discounts were coming out of the pockets of farmers or whether the company was doing well enough itself to subsidize the pared-back prices. A company spokesperson did not immediately respond to a question about how Whole Foods was funding the lower prices.
Austin ended up opting for a different carrot variety, but took advantage of special deals on tortillas and peanut butter. She also earned 10 percent off on some sale items, which is another perk for Prime members. While Austin currently qualifies for Prime through a free trial offering for college students, she said she will likely cancel before she has to become a paid member because she is not comfortable with her growing dependence on the online retail giant.
For Amazon, this week’s price cuts are the company’s latest attempt to bring new shoppers into Whole Foods, including Amazon’s best customers: Prime members. Just 11 percent of Prime members shop at Whole Foods several times a month, according to a recent survey by Wolfe Research. Part of Amazon’s goal for buying Whole Foods in 2017 was to get more Prime members buying fresh groceries from the company, since it is one of the retail categories that Amazon has failed to successfully crack despite a decade of attempts.
In recent years, mass-market grocers like Kroger have expanded their selection of organic and “natural” foods, putting pressure on Whole Foods to lower prices. Amazon will also face a challenge from a partnership between Walmart and Google if ordering groceries through voice assistants like Alexa and Google Assistant takes off. The duo announced this week that shoppers can now add grocery items to their online shopping cart by talking to Google Assistant; Walmart offers grocery pickup and delivery services in a growing list of US cities.
Amazon first dropped prices on popular items when it completed its acquisition of Whole Foods in late 2017 and continued to lower prices through 2018. But some crept back up earlier this year, as suppliers to Whole Foods and other grocers struggled with increased costs. Whole Foods revenue grew 6 percent in the fourth quarter of 2018, when counting pickup and delivery orders through Amazon’s Prime Now service.
Bianca Peachey, a Manhattan resident and executive at a retail conglomerate who shopped at Whole Foods on Wednesday morning, said she noticed some of the lower-priced goods but did not seek them out. “In TriBeCa ... no one really wants reduced stuff,” she said with a laugh. “[We] don’t really search out the discounted stuff.”
But Amazon’s acquisition of Whole Foods did get her to make one change: She now gets her grocery deliveries through Whole Foods and Amazon, which is a free service for Prime members. She had previously been a customer of the online grocer FreshDirect for five years.
“It was a no-brainer,” she said of the switch.