Could Whole Foods Become Cheaper Than Traditional Grocery Store Shopping? | Benzinga

The Thesis
The analysts estimate only 62 percent of Whole Foods shoppers are Prime members, and CNBC reported a 75-percent overlap. As Amazon’s subscription growth begins to slow, capturing the rest of the Whole Foods crowd could prove meaningful.

Incremental price cuts may ultimately make Whole Foods cheaper than traditional grocers, and considering U.S. households spend an average $6,000 per year on groceries, the savings “can go a long way toward justifying Prime membership…even at $120 per year,” the Morgan Stanley analysts wrote in a note.

The pricing strategy has proven effective. Amazon already slashed Whole Foods average prices about 5 percent year-over-year so that, meat excluded, the basket trades at a mere 6-percent premium to conventional rivals.

“These reductions have been important to driving traffic and changing Whole Foods perception,” Morgan Stanley wrote, noting that 70 percent of non-customers cite high prices.

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Could Whole Foods Become Cheaper Than Traditional Grocery Store Shopping? (NASDAQ:AMZN) | Benzinga.