When Amazon purchased Whole Foods, much of the buzz centered on its announced plans to lower prices throughout the store. Well-publicized price drops on avocados and organic yogurt garnered a lot of press, as well as increasing waves of customers visiting the stores to see for themselves. But now that the buzz has died down, a recent study indicates that the prices really are not very different from where they were before the merger.
Specifically, whereas the price drops were notable right after the purchase, today the same shopping basket costs only about .8 percent less (that’s less than 1 percent) than it did before Amazon took over the operations. Members of Amazon Prime, who earn additional price benefits from shopping at Whole Foods, got slightly more of a price break—but even that was just a difference of $1.54 less when they purchased at least $400.
Yet despite the lack of price differences, consumers express widespread satisfaction with Whole Foods these days, including their perceptions of improved prices. In a survey of 500 shoppers, nearly half indicated that they thought the prices were lower, even though the actual change was so small.
The explanation for this perceptual gap seems to stem from the value that the acquisition created for existing Amazon Prime members. By adding Whole Foods as another element of the Prime membership offer, without changing the price for Prime, Amazon was able to convince consumers that they were getting more value, even if they were paying largely the same prices. Accordingly, half of Prime members surveyed predicted they would increase their purchases at Whole Foods, and more than half of them said they were more likely to renew their Prime membership because of the Whole Foods addition.

Discussion Questions:

1. How is Amazon creating value for customers who also shop at Whole Foods?

 

 

Source: George Anderso n, “Analyst: Whole Foods’ Lower Price Claims Are Mostly ‘Noise’,” Retail Wire, September 13, 2018