Why Whole Foods’ avocado prices should be a warning sign to grocers

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Amazon rang in their first official day as the owner of Whole Foods in dramatic fashion: price cuts.

Whole Foods, the upscale grocery outlet acquired by Amazon in April, has always been known for their assortment of organic, independently sourced foods—and infamous for their steep prices. The chain of choice for affluent millennials has managed to offset the costs of its expensive metropolitan locations by maintaining equally high prices.

So you can imagine the internet’s delight when Amazon comes in and slashes the prices on some of America’s favorite organic treats by up to 43%. Avocados, the omega-3-rich Mexican side dish that’s become a staple in many diets, were the most notable of the price drops, cut from 3 dollars apiece to 2.

The news quickly trended on Twitter, making Amazon’s foray into brick & mortar retail an all out PR success.

What does this mean for grocers?

News of the price cuts shouldn’t be taken lightly. While consumers can rejoice over saving cash while enjoying healthier grocery options, Whole Foods’ dramatic price cuts are another sign that Amazon is willing to run on slim margins to capture market share.

The Bezos-led company has been notoriously difficult to compete with, as they can afford to do things like lose 7 billion dollars on shipping costs last year—or spare an extra dollar on every avocado.

We’ve discussed how Amazon’s foray into brick & mortar wasn’t just another a competitor entering the grocery industry: Amazon doesn’t have to act like a typical grocer at all.

How can grocers compete

Amazon is upping the ante on what it means to offer choice and convenience, and grocers need to be following suit. So how can supermarkets compete with a grocery chain that can afford to operate at a loss? With a differentiated customer experience.

Kroger, for instance, has begun testing a meal kit service called Prep + Pared. With the increasing competition, the supermarket chain has had to diversify its traditional business to keep pace with changing shopper preferences.

When it comes to convenience, consumers are increasingly interested in same day delivery—and you can only expect this trend to continue as Amazon and Whole Foods further integrate themselves. Deliv powers the deliveries of thousands of grocery runs every day, helping independent and enterprise grocers affordably offer same day delivery for their customers.

What this means for Amazon

The online retailer is no longer simply an online retailer. Their 13 billion dollar acquisition of Whole Foods allowed them to quickly adopt a well-rounded omnichannel experience—and Amazon seems poised to leverage that in every way.

Aside from the price cuts, there was a notable difference in Whole Foods as of Monday morning: the presence of Amazon Echos. Lots of them.

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The clearest sign that Amazon was now running Whole Food was the introduction of their flagship product—with their prices equally slashed. Purchasing Whole Foods allowed Amazon to have brick & mortar locations within a few miles of hundreds of millions more people, using those locations to sell the Echo gives them an opportunity to have a presence directly in consumers in homes.

You can see the pieces coming together quickly: From competing on razor thin margins to selling branded-products to a new audience, Amazon is fully leveraging their largest acquisition to date. So while consumers might be ecstatic over affordable avocados, retailers and grocers alike should be preparing for a new level of competition.

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