In a surprise event, the online retail giant announced it would buy the supermarket for $13.7 billion on Friday. The transaction must first be approved by Whole Foods’ shareholders and regulators, though it is expected to close during the second half of 2017. Whole Foods WFM, +29.10% stores will continue to operate as they are, but the deal has analysts and shoppers wondering — and hoping — for lower prices.
“Amazon will take a sledgehammer to pricing strategies that Whole Foods has had in the past,” said Mark Hamrick, a senior economic analyst at personal-finance site Bankrate.com. Amazon will bring along with it competitive prices to lure shoppers who may have otherwise strayed away from Whole Foods because of how expensive it could be.
Online shopping will make up 20% of all grocery shopping by 2025 according to the Food Marketing Institute and Nielsen. And this deal is only likely to accelerate that percentage, experts say. People took to Twitter, not only to make jokes of how much certain items cost at the supermarket, but to push for better deals:
Whole Foods has already been making attempts to increase its price competitiveness. Earlier this year, it announced a new chain of stores, called 365, that sold produce priced per item, or prepared food priced per container (compared to pricing food per pound at Whole Foods).
With Amazon in charge, that may change, Hamrick said — the online retailer will likely come up with its own pricing strategies, implement technology in its business for faster check-out lines and welcome using smartphones for a more efficient shopping experience.
Others say it’s too early to tell what Amazon will do with Whole Foods. “It’s unlikely even Amazon has thought that much about it yet,” said James Brumley, analyst and feature writer at InvestorPlace.com. “Odds are good its customers won’t see a price hike.” More important than building a grocery business, Amazon will probably use Whole Foods as a way to extract more data about its customers, he said.
Amazon doesn’t always have the best deals, particularly in fresh produce. Big-box stores like Wal-Mart WMT, -4.65% and wholesale stores like Costco COST, -7.19% have undercut Amazon’s prices in in-house brand items like a three-pound bag of walnuts.
But Amazon can offer more than lower prices at the grocery store. The online retail giant could add perks similar to Prime, such as short delivery windows, said Darren Seifer, food and beverage industry analyst at market research firm NPD Group. “It’s not exactly cutting prices, but providing convenience for you or providing more value for you,” he said.