Whole Foods’ reputation as an upscale, organic grocer that no one can afford might soon change. Thanks to Amazon’s blockbuster acquisition of the Austin-based supermarket chain for $13.7 billion, Whole Foods is primed to chart a course similar to big-box retailers like Walmart, offering cheaper prices in an attempt to lure low- and middle-income customers into its superstores, according to a new Bloomberg report.
Citing an anonymous source from Amazon, the online retail giant’s technology will be paramount in its efforts to slash prices at Whole Foods. Part of this could hinge on a model similar to Amazon Go, the company’s futuristic grocery store prototype in Seattle, which eschews checkout lines in favor of smartphone scanning. While news of Whole Foods potentially adopting an automated checkout line was delivered to Bloomberg by an anonymous source, Amazon spokesman Drew Herdener offered a different line of information, saying in a statement that there are “no plans to use no-checkout technology to automate the jobs of cashiers at Whole Foods and no job reductions are planned.”
A change in Whole Foods’ inventory would be key in lowering prices, and Amazon plans to incorporate more private-label goods to combat the chain’s reputation as an exclusive market. That move would make Whole Foods more on par with a company like Trader Joe’s, which offers a bevy of its own private-label goods for a relative pittance compared to Whole Foods.
Whole Foods CEO John Mackey lauded the partnership in a company town hall meeting on June 16, saying: "This is also gonna permit us -- it's gonna be such a good thing for our customers. And although I can't tell you all the amazing things that's gonna happen over time -- one thing I absolutely love, love so much about Amazon is they think long term."
In a transcript of his remarks, Mackey noted that global business consulting firm Boston Consulting Group would be crucial in streamlining whatever changes Whole Foods hoped to achieve: "We’ve hired Boston Consulting Group, who’s come up with some amazing analysis of things that we can do to reduce our cost while improving our service to our customers. So this evolution’s gonna continue. We do think our partnership with Amazon is gonna help us do that more skillfully and, hopefully, faster."
Amazon’s plans to conquer the world and take the grocery store along for the ride can definitely be seen as a scheme to ward off competition from a perennial foe: Walmart. The world’s largest brick and mortar retailer -- known for being cost-friendly for lower-income families -- is ramping up efforts to take its business into Amazon’s online domain, unveiling an online grocery kiosk service, available 24/7. And as Amazon is clearly encroaching upon Walmart’s domain -- groceries make up 56% of the company’s total revenue, according to Reuters -- don’t be surprised if a grocery price war breaks out in the second half of this year.