Amazon wastes no time in trying to destroy the supermarket retailers — FreightWaves

Amazon is repeating a strategy that has worked for them in the past to pummel their competition and the customer always wins. According to a report in the Wall Street Journal, former Amazon executive in charge of performance evaluation and policy enforcement, Chris McCabe stated, “Amazon’s using the same playbook they always have when competing with booksellers and other retailers.”

From the looks of things, Amazon wasted no time to send a message to the market about their intentions. Whole Food’s best sellers- ground beef, eggs and bananas – saw prices drop this week as Amazon took over. The online retailing behemoth dropped prices on the highest volume products at Whole Foods to generate sales away from the supermarket retailers. Amazon is expected to lose a lot of money in this strategy, but based on how they have attacked other markets, this is intentional. The point of lowering prices for consumers is to drive traffic and activity into their properties.

Whole Foods currently has 470 brick-and-mortar locations around the country and Amazon is expected to use those locations as a beach-head to expand into categories beyond groceries. The company is using the high-volume product categories to drive traffic into stores, to place pressure on Kroger and Wal-Mart, and to develop a greater level of loyalty among its Prime users that have been slow and reluctant to see Amazon as a viable grocery option.

For an industry with low margins, the food retail business requires high capital investments. Stores are expensive to maintain, staff, and keep up with changing consumer tastes and preferences. Plus, the very nature of grocery retail is that you must turn products very quickly to maintain freshness and food safety. Any volume of consumers that flock to Whole Foods to take advantage of the lower prices on highly desired meats and produce will certainly be felt. Additionally, the types of consumers that have occasionally shopped at Whole Foods for special selections are among the most profitable for the legacy stores. If those shoppers discontinue their loyalty to the other supermarkets and buy substantially all of their grocery products through Amazon, it will mean a large impact on the profits of the other supermarket brands.

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Amazon wastes no time in trying to destroy the supermarket retailers — FreightWaves.