What Amazon Knows: ‘The war for retail will be won in groceries’ | Money

With lower prices for higher quality goods, Amazon is posing a direct threat to America’s major supermarkets. The six largest food retailers, which had already taken a hit after the Whole Foods acquisition was announced in June, lost roughly $12 billion in value after Thursday’s announcement about the company’s intention to lower prices.

That market disruption is based not on what Whole Foods is today, but on what it can become.

Whole Foods currently represents less than 2% of the overall grocery market. But under Amazon (AMZN, Tech30), those stores will be turned into warehouses that can distribute groceries to homes around the country. Meanwhile, Amazon’s distribution centers can also function as Whole Foods (WFM) distribution centers.

There is room for expansion, as well. By lowering its prices, Amazon can open new Whole Foods locations in markets that traditionally could not afford high-priced organic bananas and responsibly farmed salmon, making a run at companies like supermarket leaders like WalMart and Kroger.

“Generally Whole Foods goes into markets with six-figure incomes and college-educated residents. But with Amazon lowering Whole Foods’ prices, you could get Whole Foods in towns where you don’t traditionally see them,” supermarket analyst David J. Livingston said. “It could open the doors for any medium-size city in the country.”

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Amazon-Whole Foods: ‘The war for retail will be won in groceries’ – Aug. 25, 2017.