Amazon + Whole Foods? It’s Not Working

In other words, forget the exclusive (and expensive) focus on organic. Sell the same food and beverage goods you can buy elsewhere (and which Amazon can buy cheaply in huge, bulk quantities).

The Barclays analysts made another interesting insight. Innovation — new foods, new packaging, unique products you can’t find elsewhere — is a big reason behind the rapid growth of chains like Trader Joe’s, and Whole Foods.

But what about now with the post-Amazon-Whole Foods merger version of the grocery chain, where low costs matter most?

“If Whole Foods pulls back on food innovation,” writes Barclays, “we believe it would represent an opportunity for the rest of the industry because innovation remains a traffic driver.”

Amazon vs. Wal-Mart

There’s a final point I want to make. Where’s the incredibly low prices Amazon promised?

According to the Gordon Haskett research firm, a basket of 110 items at a Whole Foods store in New Jersey was just 1.1% lower than when Amazon completed the merger with the grocery chain in August. All the PR stories about new low prices at Whole Foods don’t jibe with the new pricing data.

Amazon will have to do a lot better. And the pressure is on if it hopes to truly compete on the bricks-and-mortar front with Wal-Mart, which — as I pointed out in June as well — “has finally figured out how to sell stuff through the internet with Amazon-style numbers.”

In fact, the prices of the two companies’ stocks make that statement quite well.

I took plenty of heat back in June when I said the Amazon-Whole Foods merger “would be a surprising setback for the internet giant.” Looks like I was right.

(Source: TradingView.com)

Since June 16 (when the Amazon/Whole Foods deal was announced), Amazon.com Inc.’s stock (Nasdaq: AMZN) is up about 18% — while Wal-Mart Stores Inc.’s stock (NYSE: WMT) is up 30%.

The point being that…

  • Without “food innovation”…
  • Without reliably eye-catching displays of fresh fruit and veggies…
  • Without sharply lower prices…
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