When Amazon announced its merger with Whole Foods, many were concerned about the long-term effects, and now we finally have some insight on how the deal has impacted local markets.
It has been a little over one year since the merger between Amazon and Whole Foods was announced, and the overall impact it has had on grocery stores nationwide may not be what you would expect…
Amazon first announced that it was buying Whole Foods for $13.7 Billion in June 2017. When Amazon started slashing prices at the organic grocery giant two months later, the effects were apparent.
Shares were down for Sprouts Farmers Market, SUPERVALU, Kroger, Costco, Target, and Walmart, with the six stores initially losing nearly $12 billion in combined market capitalization.
Amazon launched a round of price cuts at Whole Foods that targeted produce such as organic apples, bananas and avocados and in recent months, Amazon has added discounts and delivery options for Prime members who shop at Whole Foods.
Recent reports indicate that not only is Whole Foods thriving in 2018, but local grocery stores have also seen an increase in revenue. Retail data shows that Amazon’s physical store sells have increased significantly, and shares are up by as much as 20 percent at stores like Sprouts, Kroger, and Natural Grocers.
Analysts noted that Sprouts Farmers Market has seen very little share loss in markets where it overlaps with Whole Foods because the majority of its stores are located in middle-income suburbs, whereas Whole foods stores tend to target areas where consumers are less price conscious.
Amazon has faced criticism for centralizing purchasing and raising supplier fees, which have sent some sellers to local grocery stores to make a profit from their produce. Reports have also noted that Whole Foods rivals have been forced to decrease margins to keep up with pricing, staffing, and convenience, with some relying on federal tax cuts to stay afloat.
One year after the merger it appears that Amazon’s investment has paid off, and while some consumers are enjoying the latest Prime deals at their local Whole Foods, there is still enough business to keep local grocery stores in the game.