Amazon Slashes Whole Foods Prices -- should you do the same?


Monday was Amazon’s first official day of ownership of Whole Foods.

And they wasted no time in putting their imprint on the high-end grocer, reducing prices on popular items by as much as 43%. 

Why are they reducing prices so much? And should your business do the same?

Well, to answer this question, let’s first look at how the market reacted for the traditional players in the supermarket and grocery store industry, who saw more than $12 billion erased from their market values.

Or that of Walmart, who immediately announced price cuts of their own.

Or that of politicians, who since the announcement of the acquisition in June have been almost uniformly against it. 

Then there are the reactions of actual Whole Foods’ customers. 

They reacted, of course, with excitement over the price cuts at a store derisively known as “Whole Paycheck” for its sometimes absurdly high prices.

And with excitement for the potential of some of Amazon’s famously consumer friendly benefits - like easy returns and free delivery - being ported over to the grocery store.

Now for we as business people, it is these customer feelings of strong excitement and desire for Amazon’s “Price Plus” value proposition - as in low price PLUS a branded, high quality and consistent customer experience....

...that make all the difference. 

YES, this is arguably the hardest thing to accomplish in business, but since its founding 20 years ago Amazon perhaps more than any other company in history, has proven that it is possible.

And Amazon is proving its corollary too, namely that to the degree a business cannot do both - as shown with the demise of Whole Foods as an independent entity - its almost certain fate is decline and failure.

Now the thought that most worries the chattering classes is that we are all just doomed.

They gripe who has the resources, the technology prowess, the maniacal customer centric culture and the willingness and ability to operate on thin margins seemingly forever like Amazon does to realistically compete?

To that I say humbug.  

Throughout business history, in any technology and market shift there are winners and losers.

The winners are those that embrace the technology and market conditions and challenges of their time and commit themselves to prevail in them. 

And the losers are those who cling stubbornly to the way things were as the world, and customers, just pass them by. 

So this should be our first point of solace - that the significant majority of our competitors, through some depressing combination of stubbornness, laziness, and bureaucracy, have already taken themselves out of the innovation game. 

Our next solace should come from both the example and inspiration of those like Amazon that are trying to innovate and disrupt things, along with the myriad of business wisdoms readily available online from their successes and setbacks.

And our most important solace should come from the blessed fact that, unlike the vast majority of businesses that are and have ever been, we have both the opportunity and strong probability to actually pull “Price Plus” off.

It simply starts with the excited acceptance of it as an over-riding business goal.

Then comes the long, hard but straightforward work of breaking the goal down into its component parts, first the outward facing ones - Brand Accretion, Customer Utility (real and perceived) and Competitive Pricing.

And then onto strengthening and leaning out the “bones” of our businesses - internal costs, operational efficiencies, and a mission and customer-centric culture. 

Put it all together and we truly have it all.

Brand. Profits. Growth. Enterprise Value. Impact.

Amazon is not the only one that can play that game.

What about your company? Do you feel your company can compete and win in the “Price Plus” game?  If so, great and great luck to you.

But if you need help in identifying the areas of your business that are falling down and holding you back, then complete this short questionnaire and tell us about 1 -2 areas in your business that need a revitalization. 

And we’ll reach out to you with our thoughts to help you.

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