- Whole Foods says it’s launching new discounts for Amazon Prime members.
- They include 10% off sale items and heavier discounts on a weekly rotating selection of goods.
- The new discounts could be a way for Whole Foods to go after both low- and high-income customers while the middle class continues to shrink.
Amazon’s new discounts at Whole Foods are about more than getting $10 off halibut steaks.
They mean Amazon is continuing to infiltrate the grocery space like never before – and that’s just the tip of the iceberg.
While Amazon immediately lowered prices at Whole Foods after its $13.7 billion purchase of the grocery chain closed, that was just a hint of what was to come. It recently announced new perks for Amazon Prime members, including 10% off sale items and deep discounts on a weekly rotating selection of goods.
Now that Amazon has firmly entrenched itself in Whole Foods, it can more wholly start the process of converting Whole Foods into what it ultimately wants it to be.
The discounts may bring in shoppers from across the income spectrum – something Whole Foods must do to compete with the entrance of low-cost competitors to the grocery market, according to Sylvain Perrier, the president and CEO of Mercatus.
“It’s no coincidence that the market dynamics we’re witnessing are happening at the same time as the hollowing out of the middle class,” Perrier told Business Insider in an email.
“Now with Amazon and new entrants on the low end like the Aldis and Lidls, along with Dollar General investing in grocery, the pressure for a share of a shrinking middle-class pie will get much tougher,” Perrier continued. “What options do traditional grocers have but to reinvent where they play and how they do business?”
It’s no accident that the discounts are tied to Prime, Amazon’s major growth vehicle, the GBH Insights analyst Daniel Ives said in a note to investors. Doing so gives another benefit to paying Prime members, and it could persuade Whole Foods shoppers to spring for a membership.
“Prime growth remains the key jewel for Amazon going forward as cross-selling around Whole Foods customers and putting up more walls/barriers around its growing Prime competitive moat is a major ingredient in Amazon’s ability to fend off competition in our opinion,” Ives wrote.
Though Prime members tend to have higher incomes, the new Whole Foods discounts are likely to benefit those with lower incomes, a category Amazon has been looking to grow. Amazon has also rolled out new options for shopping on its site without a debit or credit card and introduced membership discounts for people who have an Electronic Benefits Transfer card or a Medicaid card.