By Ryan Velez
If you’re not plugged into the grocery industry or into the business world, chances are that one thought popped into your head when you learned that Amazon was buying Whole Foods Market: “does this mean I can shop there more often?” More and more people are drawn to buying organic and natural products for a perceived impact on their health, but the perception of price has been a roadblock. CNBC reports that the purchase has come with some price drops, but you may not want to ditch your neighborhood supermarket just yet.
On paper, it sounds like a dream, with prices dropping as much as 43% for some items since Amazon took over. However, despite the ripples in the grocery world, discounts may still be more modest than you think. These findings come from Gordon Haskett analyst Charles Grom. Grom noted that the average price of 114 products he tracked from last week declined by only 1.2% week-over-week as of Monday. While the deepest discounts came from the dairy category, 78% of the products tracked saw no price drops at all, calling Amazon’s price cuts into question. Admittedly, his findings come from one Whole Foods, in Princeton, New Jersey, but there is potential that the initial reaction to Amazon’s prices was overblown.
"We will continue to monitor the situation going forward, but our initial checks suggest that Amazon's bark may be greater than its bite," Grom wrote in the note. Along with several dairy items, Grom’s list included popular drinks like Vitamin Water and La Croix sparkling water.
The lower price frenzy started last week when Amazon announced it would start lowering prices on "a selection of best-selling grocery staples." When CNBC visited a New York City Whole Foods store, a staff member said over 300 items were being discounted. It would be interesting to see what exactly those 300 items were, and whether they are hot items or those that you could potentially get for cheaper elsewhere.
In fairness, Amazon has said that the price cuts would be rolled out to more products going forward, so this may not be the final picture that we have. However, Grom gives plenty of reason to be skeptical. He compares Amazon’s strategy to retail giant Wal-Mart: "announcing a plethora of price actions that on the surface look deep, but in reality only reveal modest reductions," he wrote in the note. The more things change, the more they stay the same, it would seem.