When Amazon announced in late August that it would slash prices as soon as it was officially in charge of Whole Foods, some wondered what the legendarily pricey grocery chain would look like as a low-price option.
Turns out it looks like stores filled with customers from other grocery chains.
Consumers flocked to Whole Foods in droves after the organic grocery chain slashed prices by as much as 43 percent after its $13.7 billion sale to Amazon (AMZN), according to an analysis of mobile phone location data by research firm Thasos Group.
Thasos found that foot traffic to Whole Foods, which had been mocked for years as “Whole Paycheck” because of its high prices, rose 17 percent during the week of the price reductions beginning on Aug. 28. As of the week of Sept. 16, growth had decelerated to 4 percent compared with 2016, though it remained elevated compared with the three weeks proceeding the price cuts.
Seattle-based Amazon gained customers at the expense of its rivals in the cutthroat grocery market. According to Thasos, nearly 25 percent of the new Whole Foods customers came from Walmart (WMT), the largest U.S. seller of groceries. Another 16 percent came from Kroger (KR), the No. 1 operator of conventional supermarkets and 15 percent came from warehouse retailer Costco (COST).
The research found that it is the wealthiest customers from the rivals who have made the transition.
I have a good friend who has worked for Kroeger for a very long time. When I spoke to him in August about what Amazon was planning, he said there had been some nervous whispers among management about the takeover.
Even Trader Joe’s, which has almost a cult-like following of shoppers, is feeling the Amazon effect:
For Whole Foods’ smaller rivals such as Trader Joe’s and Sprouts, the news is even worse. During the first week of the price cuts, Tasos found that 10 percent of Trader Joe’s regular customers who shopped at least twice a month defected to Whole Foods compared to the previous week. For the period of Sept. 11 to Sept. 16, the Trader Joe’s defection rate was 6 percent. Target’s (TGT) customer base shrunk by 3 percent.
It’s Amazon’s world, and we’re just paying less for produce in it now.