Amazon Is Going To Wipe Out The Supermarkets?

It cut prices by as much as 43% on its first day of owning Whole Foods. Amazon generated hundreds of millions of dollars of free publicity by doing this.

“Price was the largest barrier to Whole Foods’ customers,” according to Mark Baum. Baum is a senior vice president at the Food Marketing Institute, a trade group. “Amazon has demonstrated that it is willing to invest to dominate the categories that it decides to compete in.”

And it worked. CNBC reported yesterday that foot traffic at Whole Foods is up by 25%.

That’s why I believe Amazon is going to dominate the food industry. And when it does, supermarket companies like Kroger will get crushed.

Even companies like Costco and Wal-Mart might be roadkill in Amazon’s wake. That’s because Whole Foods’ products are selling like gangbusters on Amazon’s platform.

According to One Click Retail, an e-commerce research firm, Amazon saw $500,000 worth of sales from Whole Foods items in Week 1.

That’s just in Week 1, with no real backing or support from Amazon. Imagine what will happen once Amazon integrates its Prime membership platform with Whole Foods.

Or when it implements its Amazon Go store concept of cashless, cashierless shopping using sensors and cameras into Whole Foods.

The Old Ways Are Doomed

Bottom line: No supermarket company is prepared for Amazon’s entry into the supermarket industry.

No wonder supermarket stocks like The Kroger Co. (NYSE: KR) and SuperValu Inc. (NYSE: SVU ) are down 36% each this year. Even heavyweight Wal-Mart Stores Inc. (NYSE: WMT) dropped 5% on the day the Whole Foods deal was announced.

For me, there are two things you need to understand from this deal.

First, you can’t trust the financial media or rating agencies, or even Wall Street. That’s because they don’t have your interests at heart. They have their own priorities. And huge conflicts of interest.

Second, look to the future when you invest. Stocks like Kroger and SuperValu that are based on the old ways will tempt you. They are going to look cheap. And they’ll keep looking cheap.

View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.