By: Elina Shahmarova
Amazon’s purchase of Whole Foods is a newsworthy story. The already successful Amazon does not stop at what they already have, they want more. They swept Whole Foods off the ground. Whole Foods was struggling, due to the fact that their competitors were able to offer similar products for a lower price. As Whole Foods stock price went down, their profit did too. Immediately, the company did not want to give away control to the very known tech giant, but as profit decreased and pressure heightened, they had no choice but to sell.
With Amazon’s $13.7-billion-dollar purchase of Whole Foods, came an increase of 19 percent for the high-end grocery store. With Amazon already controlling about half on online sales, people now fear that they will take over the grocery market as well, but Amazon is thriving. They are able to expand their brick-and-mortar platform in order to minimize return costs and help with delivery prices. The popular online store now sells products like the Amazon Echo in some Whole Foods stores. They are also helping themselves by offering prime members discounts at Whole Foods as well as free delivery over thirty-five dollars.
Not only are they improving sales and making it easier for consumers to purchase their products and become prime members for only $119/year, but they are getting valuable data they otherwise might not have in order to expand. From the purchase, they are receiving data on grocery shopping, which can allow Amazon to expand its online grocery business. This data collection gears them to create ads that pleases the online shopper, the in-store shopper, or the one who does both. Since the big purchase, Amazon’s physical stores, mostly made up of Whole Foods, is up $1 billion dollars for the past three years.
With the purchase, many consumers believed that this would be the way that Whole Foods lowered their prices, and Amazon did initially want to do that, but instead hundreds of product prices are being increased. With Amazon being the owner, they have not renewed some contracts with unnamed vendors who sold to Whole Foods and allowed for them to sell some items at lower prices. Instead, they increased prices of products that continue to stay in stock. The company does well due to the facts that it mainly markets to middle-upper class and above, but if Amazon does not help the issue with prices, the excitement of the merger will not last long, and before they know it Whole Foods will once again be in a trap. Some analysts predict that due to Whole Foods luxury reputation, it will not go down since no one expects he grocery store to lower its prices drastically. On the other hand, as the trend and health benefits for organic foods, beauty supplies, and other materials grows, other business will find ways to sell those products for cheaper.
It is too quick to say whether this merge will help either business in the long run, but currently, Amazon did help Whole Foods get off its feet and the purchase helps Amazon with profit, data, and expansion.