Amazon continues to show success on its recent acquisitions, on August 28 Amazon finalised a deal to acquire Whole Foods.
Almost immediately, it has implemented price reduction on Whole Foods products, which has put pressure on its competitors.
Thasos has followed the effect Amazon’s policy has on its competitors. So far data has shown that most results are in Amazon’s favor. For instance, food traffic has increased by 17 percent year-by-year since the implementation of lower prices on its products.
The Amazon effect on Whole Foods
Another effect on this is that customers from its competitors have shifted over to Whole Foods. Around 24 percent of new customers come from Walmart, while from Kroger it got 16 percent.
This means that customers are preferring the lower prices that Whole Foods is offering as opposed to its competitors.
As for the percentage of defection, the hardest hit is Trader Joe’s with 10% of its customers switching over to Whole Foods. Sprouts lost 8% of its customers, while Target lost 3%.
Perhaps the most surprising outcome out of this is that the new customers that Whole Foods has acquired have been the wealthiest customers from its competitors. This would naturally go against the notion that those who aren’t so much well off would be the first to defect to a lower priced competitor.
In the same token then, the price reduction did not attract those from the lower income bracket, as normally it should have.
The study has shown that new customers come when there’s a price reduction from a retailer.
This also puts much pressure on other retailers to keep up with Amazon and its subsidiaries. Whether this strategy could be sustained though is the question.
As the study shows, lower income demographics have not switched over for the large part, as it should be expected. It has just been over a month since the acquisition, so there might still be changes and adjustments that would be made in the coming months.
By then it would be clearer if this strategy would work out, and if other demographics would switch over to Whole Foods as well.
So, what do you think? Would this be a sustainable strategy by Amazon and should their competitors be worried? Leave your comments for discussion below.