Amazon Price War with Retail Giant Walmart

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This article titled “Whole Foods price cuts are at center of Amazon-Walmart online war” was written by Edward Helmore in New York, for The Guardian on Thursday 24th August 2017 21.38 UTC

Amazon has set the stage for a price war with retail giant Walmart as it signaled a wave of price cuts at Whole Foods, the grocery chain it acquired for $13.7bn in June. The move signals the start of a much wider battle – to see who will be the king of online retail in America.

Related: Amazon to buy Whole Foods Market in $13.7bn deal

Walmart, America’s second largest bricks and mortar retailer, was slow to develop its online retail offer in the face of Amazon’s growing dominance over the last 10 years. However, more recently it has been trying to play catch-up with significant investment in its digital operation. This culminated in Walmart’s purchase of online retailer Jet.com for $3bn.

This set the battle for the country’s biggest online retail war, and it was only a matter of time before Amazon responded. That happened two months ago when they bought Whole Foods.

Today’s announcement is a sign that the battle has taken off in earnest. Items that will see the first price cuts on Monday include Whole Trade bananas, organic avocados, organic large brown eggs, kale and other organic food.

The online retailing behemoth said it hopes to give Amazon Prime members special savings and other in-store benefits, including lockers where they pick up and drop off items. The company also said the 450 new physical locations it acquired in the deal for Whole Foods should help it speed up its grocery delivery capability.

“This is just the beginning – we will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we invent together,” said Jeff Wilke, CEO of Amazon Worldwide Consumer. “There is significant work and opportunity ahead, and we’re thrilled to get started.”

Though Walmart lags way behind Amazon it has begin to make some progress – it now sells 67m items a month, up from 10m early last year. Amazon, however, sells hundreds of millions of items.

Amazon’s move on price is a direct attempt to attract Walmart customers who will have been put off by Whole Foods’ high prices. At stake is an enormous online retail market which Amazon not only want to protect, but grow.

The move also comes a day after Walmart announced a partnership with Google where the search giant will start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. As the New York Times reported: “It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website.”

Amazon’s announcement also comes just one day after Walmart announced it will expand its grocery delivery service with ride-hailing service Uber.

The moves are clearly designed to help begin to remake Whole Foods’ image for being overly expensive – “Whole Paycheck” as it is derisively known – and to position it ahead of an anticipated war with chains like Walmart, the largest US grocer, also looking to expand their reach in the food sector.

The company said Whole Foods Market will continue to operate under its 365 brand name and pledged to “preserve its high standards and commitment to providing the finest natural and organic foods”.

Related: Clash of the retail titans: Amazon goes head to head with Walmart

Also on Wednesday, the Federal Trade Commission said it won’t investigate or try to stop Amazon’s $13.7bn takeover of the food retailer. “We have decided not to pursue this matter further,” the FTC said in a statement.

Whole Foods co-founder John Mackey, who is staying on as CEO, said the company’s core mission – “to bring the highest quality food to our customers” – remained intact.

He anticipated the Amazon-Whole Food hook-up would enable the company to “lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food”.

Mackey added: “As part of our commitment to quality, we’ll continue to expand our efforts to support and promote local products and suppliers. We can’t wait to start showing customers what’s possible when Whole Foods Market and Amazon innovate together.”

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