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Pricer’s Points: The Power of Corporate Strategy: Amazon and Whole Foods | Mark Stiving

Amazon’s corporate strategy is to be the one-stop shop for retail, and a key part of that is to make sure everyone perceives Amazon’s prices as low. Whole Foods, often nicknamed “Whole Paycheck,” is the opposite of that perception.

The winner? Amazon’s corporate strategy. The company has announced it is lowering prices at Whole Foods on the day the deal closes.

As a pricing guy, I often say that the only good reason for lowering prices is to match competitors’ price decreases. This is an exception. Because Amazon is integrating Whole Foods into its normal business, using the brick and mortar stores to help with delivery and returns and beefing up the grocery business, Whole Foods must conform to the Amazon price brand, and its corporate strategy.

An alternative could have been if Amazon wanted to leave Whole Foods as a wholly-owned subsidiary, it could have left prices high and reaped the profits. There were likely some synergies between the two that would have grown both businesses. This is essentially what Amazon did with Zappos. It let Zappos keep its own brand.

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The Power of Corporate Strategy: Amazon and Whole Foods | Pragmatic Pricing.