Amazon.com Inc. claimed that it will slash costs on a variety of popular products as it finishes its acquirement of Whole Foods Market Inc. Along with this, Amazon sends shares of competitor grocers plummeting on fears that atrocious market share fights will strengthen.
The $13.7 Billion purchase by Amazon for Whole Foods, which will be concluded this week, has been dangling over a brick and mortar retail segment uncertain of how to react to the biggest online retailer of the world.
Stakes of the largest supermarket operator in the U.S., Kroger Co., closed down 8%, while the largest food seller in the U.S., Wal-Mart Stores Inc., closed down 2%.
Amazon also claimed that it will begin trading Whole Foods brand items on its website. This move will send down stakes of packaged food vendors comprising Kellogg Co.
Amazon claimed that members of its “$99 per year” Prime shopping association might ultimately be introduced into customer rewards program of Whole Foods and be entitled for special discounts and offers.
“There was no doubt ever that Amazon might reduce costs, and even offer additional discounts in the store to Prime users,” claimed industry analyst, Colin Sebastian, to the media in an interview.
Amazon claimed that beginning this week, it will slash costs on organic grocery products such as avocados, bananas, farmed salmon, brown eggs, baby kale, farmed and tilapia along with apples, lettuce, and other items including butter.
“It does not seem like they will go kamikaze on costing,” claimed Roger Davidson to the media in an interview. “They will reduce costs on important products to boost sales and traffic but not do a whole store cost decrease. This might potentially wipe out working margin and really harm gross margin.”
Reducing costs might stem defections by cost-sensitive shoppers of Whole Foods, and assist the grocer shell out its “Whole Paycheck” status for high costs that are normally 15% to 25% above competitors. It might also bring in fresh users who can then be push for shopping for other products online including that of food items.