Amazon Acquisitions

Amazon-Backed Whole Foods Prompts Rivals To Act

Amazon’s acquisition of Whole Foods Market and the success it is having with selling fresh food to consumers has sparked countermoves by food retailers, manufacturers and other suppliers.

The Wall Street Journal reported that food retail players are changing their selling strategies as a result of the increase in sales at Whole Foods — and its delivery service that has been enhanced by Amazon. Citing data from Thasos Group, of the eleven supermarkets analyzed by the research firm, Trader Joe’s and Sprouts customers were among the most willing to try Whole Foods after the acquisition by Amazon, largely due to the lower prices. Thasos found that 8 percent of the Trader Joe’s and Sprouts customers were willing to try out Whole Foods.  A spokeswoman from Trader Joe’s told the paper that sales are strong and that there is demand for its products, while a Sprouts spokeswoman said the brand is resonating with customers.

As a result of the competition from an Amazon-backed Whole Foods grocery store chain, operators have picked up the pace of plans to invest in online delivery services, moving up plans and in some cases shortening the investments to two to three years from five to seven years. Many supermarkets have inked deals with Instacart, a delivery service that is now offered via 200 retailers. It stood at around 30 prior to the Amazon acquisition of Whole Foods, noted the report.  And at the same time that grocery store operators are spending millions of dollars on technology, they are reducing investments in growing store counts.

As for the food manufactures, The Wall Street Journal reported many are overhauling their packaging and formulas to sell better via Amazon and Whole Foods and putting an emphasis on online purchases that are repeated rather than impulse buys. United Natural Foods, the main distributor for Whole Foods, has seen sales surge so far this year — but it has struggled to keep products in stock, which has resulted in millions of dollars in lost sales and more staffing and storage needs.

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