AP/Elaine Thompson
Whole Foods has announced it will be adding discounts for Prime members to all of its stores this summer.
- Whole Foods has announced it is launching new discounts for Amazon Prime members.
- The new discounts include 10% off sale items and heavier discounts on a rotating selection of weekly goods.
- The new discounts could be a way for Whole Foods to go after both low- and high-income customers at the same time as the middle class continues to shrink.
Amazon's new discounts at Whole Foods are about more than getting $10 off halibut steaks.
It means Amazon is continuing to infiltrate the grocery space like never before - and it's just the tip of the iceberg.
While Amazon immediately lowered prices at Whole Foods after the deal to buy the grocery chain closed at $13.7 billion, that was just a hint of what was to come. Now that Amazon has firmly entrenched itself in Whole Foods, it can more wholly start the process of converting Whole Foods into what it ultimately aims for it to be.
The discounts may bring in shoppers from across the income spectrum, which Perrier notes Whole Foods must do to compete with the entrance of low-cost competitors to the grocery market.
"It's no coincidence that the market dynamics we're witnessing are happening at the same time as the hollowing out of the middle-class," Sylvain Perrier, president and CEO of Mercatus, told Business Insider in an email.
Perrier continued: "Now with Amazon, and new entrants on the low-end like the Aldi's and Lidl's, along with Dollar General investing in grocery, the pressure for a share [of] a shrinking middle-class pie will get much tougher. What options do traditional grocers have but to reinvent where they play and how they do business?"
At the same time, the fact that the discounts are being tied to Prime is no accident. Prime is Amazon's major growth vehicle, GBH Insights analyst Daniel Ives wrote in an note to investors. Linking the benefits to Prime gives another benefit to paying members, and it could convince Whole Foods shoppers to finally spring for a Prime membership.
"Prime growth remains the key jewel for Amazon going forward as cross-selling around Whole Foods customers and putting up more walls/barriers around its growing Prime competitive moat is a major ingredient in Amazon's ability to fend off competition in our opinion," Ives wrote.
Prime members tend to be higher-income individuals. Still, the new Whole Foods discounts may have a specific benefit for lower-income Prime members, a category Amazon has been looking to grow. Amazon has rolled out new options for shopping on its site without a debit or credit card and introduced membership discounts for holders of EBT or Medicaid cards.