Amazon said it will cut prices on a range of popular goods as it completes its acquisition of Whole Foods, sending shares of rival grocers tumbling on fears that brutal market share battles will intensify.
Amazon’s $13.7bn (£10.7bn) purchase of Whole Foods, which will be completed on Monday, has been hanging over a brick-and-mortar retail sector unsure of how to respond to the world’s biggest online retailer.
Amazon also said it will start selling Whole Foods brand products on its website, a move that sent down shares of packaged food sellers including Kellogg.
The S&P 500 Food Retail index closed down almost 5 per cent as more than $10bn was wiped off the market value of big food sellers.
Amazon said members of its $99-per-year Prime shopping club would eventually be rolled into Whole Foods’ customer rewards program and be eligible for special offers and discounts.
“There was never any doubt that Amazon would lower prices, and even offer further discounts in-store to Prime members,” said Baird Equity Research analyst Colin Sebastian.
Amazon said that starting on Monday it will cut prices on organic grocery staples such as bananas, avocados, brown eggs, farmed salmon and tilapia, baby kale and lettuce, some apples, butter and other products.
“It does not look like they will go kamikaze on pricing,” said Roger Davidson, president of consulting firm Oakton Advisory Group and a former retail executive. “They will lower prices on consequential items to drive traffic and sales but not do a whole store price reduction which could really damage gross margin and potentially wipe out operating margin.”
Reuters
