Monday, 28 August 2017 09:37

Amazon is About to Redefine the Grocery Business

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Amazon taking over Whole Foods (the deal is now finally closed) has put an unprecedented level of fear into grocers. The reason why can be encapsulated in one sentence: because Amazon does not need to make money on groceries. The company is set to try to grab traffic from rivals by lowering prices at Whole Foods, but at the same time it can afford to do it by using loss-leaders extensively. Since Kroger and Target make the bulk of their money from groceries, they do not have that same luxury. Once insightful commentator says “Amazon’s using the same playbook they always have when competing with booksellers and other retailers … They take out their revenue stream by killing them slowly on price”.

FINSUM: This is really scary if you are a pure grocer because it means Amazon has pockets deep enough to go way lower on price and still come out on top. It is sort of like an investor betting against the Fed.

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