(Bloomberg)—Amazon.com Inc. spent its first day as the owner of a bricks-and-mortar grocery chain cutting prices at Whole Foods Market.
At the Whole Foods on 57th Street in Manhattan, organic fuji apples were marked down to $1.99 a pound from $3.49 a pound (43.0%); organic avocados went to $1.99 each from $2.79 (28.7%); organic rotisserie chicken fell to $9.99 each from $13.99 (28.6%) and the price of some bananas was slashed to 49 cents per pound from 79 cents (38.0%). The items marked down had orange signs reading “Whole Foods + Amazon.” The signs listed the old price, the new price and “More to come…”
Lori McNichol, a resident of Manhattan’s Upper East Side, said she was doing her regular grocery shopping Monday morning and wasn’t lured by lower prices. Still, she has high hopes for the supermarket’s new owner.
“I thought I could probably get things delivered, which would be exciting,” she said.
In the Pacific Heights neighborhood of San Francisco, Catherine Oshiro, a 33-year-old product designer, said lower prices may make her change her shopping routine. “I usually buy my staples like toilet paper and paper towels at Target and Safeway,” Oshiro said. “If I see the lower prices at Whole Foods, I would start buying those basics here.”
Katie Bennett, 24, was one of many customers who said she hoped Amazon would offer delivery of Whole Foods items. She picked out a rotisserie-cooked half chicken for lunch at the New York store. “Last time I came in, I was thinking about getting the rotisserie chicken, but it was too expensive,” she said.
On Monday, Amazon topped its home page with a banner touting its Whole Foods arrangement. It also says that “after certain technical integration work is complete, Amazon Prime will become Whole Foods Market’s customer rewards program, providing Prime members with special savings and other in-store benefits.”
In some Whole Foods stores, Amazon Echo devices were on display and offered at a discount.
— Jason Del Rey (@DelRey) August 28, 2017
Amazon, No. 1 in the Internet Retailer 2017 Top 500, acquired the upscale supermarket chain for $13.7 billion, sending competitors such as Kroger Co. (No. 88), Costco Wholesale Corp. (No. 8) and Wal-Mart Stores Inc. (No. 3) reeling. Whole Foods earned a reputation for high prices, getting the nickname Whole Paycheck.
Walmart, the world’s biggest retailer, has already invested billions into lowering prices across the board over the past year or so, and has revamped the produce section at its U.S stores, improving sight lines, adding more fresh-cut fruits and even creating a sweeter bespoke cantaloupe. That, along with an aggressive rollout of curbside grocery order pickup, helped the company record its best food sales growth in five years in its most recent quarter.
Costco, meanwhile, has a full slate of organic items that are priced about 30% cheaper than the same products at Whole Foods, according to Sanford Bernstein. It’s able to price lower thanks to a business model that charges membership fees, focuses on selling a limited assortment of bulk-sized goods and features a treasure-hunt experience in the stores.
Maarten van Tartwijk, a spokesman for Ahold Delhaize, the Dutch retailer that owns the Stop & Shop chain in the U.S., said the company has invested heavily in its online operation. And Germany-based retailers Aldi Stores Ltd. and Lidl, touting lower prices, continue to expand in the U.S., with Aldi offering home delivery via delivery service Instacart.
The cuts add another front to a price war that’s already raging across the supermarket sector. Retailers from Walmart to European-based discounters look to grab shoppers’ attention. The battle has shaved profit margins and prompted companies to look at new selling strategies, like Walmart’s decision last week to sell its goods on Google’s online marketplace.