For months I’ve been outlining my Bezos Law (see here, here, here, and here), which states that any industry Amazon (and more specifically Jeff Bezos) enters, will see prices reduced. Now, as if on cue, Amazon has announced it is lowering prices at Whole Foods. Amazon will formally take control of the grocery chain on Monday.
Once again, my Bezos Law persists. David Shepardson and Lisa Baertlein report for Reuters:
The planned price cuts would have been a tough sell to Whole Foods’ investors, who had grown used to fat profits from the upscale chain, but are more in line with Amazon’s broader strategy of sacrificing short-term profit for long-term market dominance.
“Amazon is more focused on driving volume and improving service at the expense of profit margins,” said Sebastian. “Long-term, this strategy works because the absolute profit dollars can still be significant.”
Amazon’s willingness to take lower profit margins ups the ante in the increasingly costly grocery price war.
“In some cases grocery retailers have had to invest between $500 million to $1 billion in order to reduce prices to a level that retained customers and resulted in a net increase in customers,” said Brittain Ladd, who until earlier this year was a senior manager working to globally roll out AmazonFresh, Amazon’s grocery delivery service.
Read more here.