Amazon.com Inc. is including Whole Foods Market in its annual Prime Day shopping event this year, a move that will put pressure on grocers along with other retailers.
said Prime Day, which will last 36 hours starting on July 16 at 3 p.m. ET, will include seasonal discounts for members as well as previously announced discounts. Amazon said it was acquiring Whole Foods in June of last year, so the natural and organic grocer wasn’t included in the Prime Day 2017 event.
“With Whole Foods now in the picture, we expect Prime Day promotions to extend deep into the food sector, pressuring food retailers for the first time,” said Charlie O’Shea, Moody’s lead retail analyst.
A survey of adults working in the grocery and food sector conducted by Phononic with help from Regina Corso Consulting in June found that 54% identify Amazon as food retail’s biggest disrupter, and 83% said Amazon’s food offerings are a threat to traditional grocery stores. More than one-third (35%) of food retail executives are preparing for Prime Day discounts.
Pre-acquisition, the biggest complaint about Whole Foods was pricing, with its “Whole Paycheck” reputation persisting despite the company’s efforts to dispel it.
Prime Day discounts will lower the pricing hurdle, according to Ryne Misso, director of marketing at Market Track, a market intelligence company.
“Prime Day is the perfect setting for Amazon to drive more trial and adoption of Whole Foods among their loyal Prime base,” Misso said. “Amazon has already rolled out extremely competitive promotions at Whole Foods—like half-off baby back ribs last week—to drive new shoppers through the door. Add 10% off eligible items with your Prime membership, and Amazon has already removed some of the cost barriers that have kept shoppers away from Whole Foods in the past.”
Prime Day also has a halo effect for other retailers. Mass merchants saw sales jump 124% on Prime Day 2017, according to data provided by ad-tech company Criteo
while retailers who ignored Prime Day only got a 5% sales boost.
“Retailers who anticipate Amazon Prime Day by 24 hours are those who benefit the most,” the Criteo report said. “Minimizing discounting before the big event will maximize your ability to compete with Amazon on Prime Day.”
However, with the extended Prime Day this year, it will be hard not to offer an enticement to drive customers.
“Amazon’s announcement that Prime Day will extend 36 hours beginning at 3 p.m. EST on July 16, ratchets up the pressure on all of retail, with ‘counter measures’ sure to negatively impact margins throughout the sector,” said Moody’s O’Shea. “More so than ever, we expect other retailers to roll out a heavy dose of promotions ahead, during, and after Prime Day in hopes of attracting shoppers and dollars, with some more challenged retailers facing the tough decision of how low to go.”
Amazon shares have rallied 79% for the past year, while the S&P 500 index
is up 12.4% for the period.