Alaskan halibut provides a glimpse of Amazon’s strategy with Whole Foods
seattletimes.com
seattletimes.com
12 packs of coke were often sold at a loss at grocery stores. I'm not sure what they cost now, but cost use to be in the $3.50 range in 2007. Costco was usually about a bit more than the cost but they were selling 24 can flats, so probably still turning a profit. In 2007 it wasn't uncommon to do 4/$10 deals and even 5/$10 deals occasionally around the super bowl. 3/$10 was the average sale if they wanted to try to boost sales. Other examples include family packs of NY Strip/Ribeye.
Certainly not a new thing.
I'm not sure I understand the difference after skimming through the article except that they have a reputation for more expensive, organic foods.
Lots of different kinds of stores do it. It's not special because it's Amazon Foods.
>the high-margin condiments, etc. they would eat alongside the meat.
The horror!
https://fisheries.msc.org/en/fisheries/us-north-pacific-hali...
After Amazon acquired Whole Foods, many speculated that they would lower prices by reducing quality.
This is an example of lowering prices while maintaining standards.
Nah. It's an example of a "loss leader." The zero-margin price on some items isn't sustainable on all items and just serves to get people in the door. It's a shade of the same spectrum as "predatory pricing," which can be illegal but is not always.
It's the ideal approach and classic Bezos. Their competitors can't afford to match it in the hyper low margin grocery business. Walmart can try, however their profits have already been badly squeezed downward for the last five or six years in a row now, in competition with Amazon.
Kroger, a $121 billion sales giant, has a mere 2% operating income margin. Amazon can tip them over and kill them very easily by eliminating that small remaining margin. Kroger effectively has zero margin of safety in their business, they can't afford even the smallest of drawn out price wars with Amazon. Kroger also has little safety buffer in their balance sheet, barely positive in assets and a small sliver of cash; while Amazon has $37 billion in cash. Bet on a Kroger bankruptcy or forced sale in the coming decade, pinned between Amazon and Walmart.
AWS is set to be a ~$15 billion per year profit juggernaut five years out. Their ad business is going to generate a minimum of $8 billion in profit at that point.
They can very easily bury the entire US grocery industry at zero margin to pursue aggressive market consolidation (the grocery market is extremely fractured). There is no other means for them to compete in groceries other than for Amazon to take the margin down to a level where they drown everyone else in their path, while not having to worry because of their profit offsets in the rest of the business.
Predatory pricing is not a concern in this scenario. Walmart has always done exactly the same thing in subsidizing one part of their business with another depending on where they're looking to expand market share. They've rarely had a problem with regulators over it.
Traffic is exponentially better than being profitable in every item since you can expose the customer base to other products and start deploying other fidelization channels. You won't get that if you have the same outlier buyers giving you profit on a few expensive items.
(disclaimer: I work for amazon, although not WF/retail)
I offer my phone number to verify my Prime membership. Works fine.
If you can't convince 'em, confuse 'em.
Low paid people are adults too, and capable of interpreting peoples sarcasm.
I actually came up with it back when "day trading" was a big thing and self-styled financial geniuses would approach me at Starbucks to pitch their services.
Yes. Even better, they can push people to sign up for Prime by jacking up prices for non-Prime members. When faced with these "loyalty" programs elsewhere, I just type in a fake phone number, or an old land line that has probably been reassigned. I suspect you can't do that at Amazon stores.