Whole Foods Just Became A Lot More Affordable
By Kate Majeskie
In early 2017, some select items were marked down in Whole Foods; bananas were cheaper, alongside pasta sauce and bottled spring water (Thomas). Amazon products, such as the Amazon Echo, became available for purchase in the grocery store (Thomas). This is all because of the evolutionary transaction of Amazon buying Whole Foods for $13.7 billion (Meyer). This new asset to Amazon is not the best thing for the economics of the food market though; profitability seems limited for others, leaving places like Trader Joe’s in the dust, and the lower prices that the “new” Whole Foods is offering is bringing in a whole new consumer base, meaning that the demand and revenue for Amazon will continue to rise. Other companies are minimized the room to thrive because Amazon is now eagerly taking customers under their wing to purchase all of their goods. 
The obvious effect of Amazon buying Whole Foods is how it will impact grocery stores and their sales. Originally, just like all grocers, Whole Foods was a basic grocery store offering high-end, organic products. Now that Amazon has Whole Foods under their belt though, bananas have dropped from $0.79/lb to $0.49/lb and organic avocados have dropped a whole dollar (Thomas). This change in price is actually having a positive impact on the marginal utility, or satisfaction, of their products. Some individuals desired the products sold by Whole Foods, but that price was not loved. Now that Amazon has that price control because they are such a successful company, they now have the ability to just bring in more and more consumers with their low prices - and the products are still of the utmost quality. In fact, Whole Foods may reach their highest optimal consumption, simply because their prices are decreasing by such a large amount.
Aside from actual grocery stores, the convenience of online shopping for food is becoming larger and the effect is colossal because of Amazon. In fact, “[Amazon] has expansive consumer data collection abilities” and it has the technology to affect more than just the grocery store industry, including the restaurant industry (Whitten). That profit that was originally going to restaurants may make a turn for the online Amazon experience, meaning that people will order more food online - via Amazon. Yes, Amazon is doing just what they can to maximize their profit, however, it will have a negative effect on other food-providing places. In addition, Amazon is already testing food delivery through AmazonFresh and selling its own brand of meal kits in select metropolitan areas, but having the largest organic retailer in its pocket could help the tech company spread it footprint quicker” (Whitten). That potential is one of the largest effects that Amazon has on the restaurant industry as a whole; people will be able to order takeout-like food from Whole Foods via Amazon. The consequence is that the amount of people that go out to eat may decrease, thus allowing that revenue to be generated to Amazon instead. Looking at this economically, Amazon’s economic profit should lay out well, since they are such a well-off company; the explicit costs include the food, products, shipping, etc, and the implicit costs may include other items they could be selling or that loss of benefit of decreasing the prices at Whole Foods. However, all in all, they are decreasing those prices to actually increase their revenue, thus allowing their economic and accounting profit to come out looking better. 
This purchase of Amazon buying Whole Foods is huge, simply because it changes the food market and the specific way that the general welfare purchases food. However, how an individual depicts the situation impacts their true opinion on it - whether it is a positive or negative purchase. When it comes down to trends in the 21st century, though, having large companies - like Amazon - expand larger and larger seems quite inevitable, along with their effect on the economy.
Works Cited
Meyer, Zlati. “Get Ready: Amazon-Whole Foods Deal Will Change How You Buy Food Forever.” USA Today, 18 June. 2017, https://www.usatoday.com/story/money/business /2017/06/18/get-ready-amazon-whole-foods-deal-change-how-you-buy-food-forever/102914448/.
Thomas, Lauren. “Amazon Officially Owns Whole Foods.” CNBC, LLC, 28 Aug. 2017, https:// www.cnbc.com/2017/08/28/amazon-officially-owns-whole-foods-here-are-the-products-that-are-getting-marked-down.html.
Whitten, Sarah. “Amazon’s Acquisition of Whole Foods is ‘A Threat to Everyone’, Even Restaurants.” CNBC, LLC, 24 Aug. 2017, https://www.cnbc.com/2017/08/24/amazons- acquisition-of-whole-foods-is-a-threat-to-everyone-even-restaurants.html.
This is a great example to show how businesses have to play around with their prices sometimes in order to reach their maximum marginal utility. I relate to this blog post because my mom and I were having a debate on groceries and if it is better to order groceries online or to physically pick them out yourself in a store. I thought it would be easier and cheaper to order everything online and the downside was just the wait time but it would be a great learning experience to know how to have patience. One negative effect that could occur due to shopping online would be some buyers are tempted to add more and more into their shopping because everything they see they add to the cart. This happens to me with clothes a lot and after I get my clothes in the mail and the receipt at the same time I then realize I could've prioritized my cart. With food, that is a whole other story because you can't live without food and you can never get enough of it. I believe online shopping for groceries is the route to go for people who know how to contain themselves with money.
ReplyDeleteThis blog post is very well written and my family shops at Whole Foods, so it was very interesting to get to know more about Amazon purchasing Whole Foods and what the effects are from that. In the beginning paragraph you state that "this new asset to Amazon is not the best thing for the economics of the food market though" but in fact I think Amazon made Whole Foods have a very good economic market in the food industry. It is bringing in more customers meaning they are making more profit, the demand for Whole Foods is increasing greatly causing the supply to also increase as well. Although, due to the food being organic and healthier, why are the prices becoming so low?
ReplyDeleteGreat job Kate! On a personal level, my family and I use Amazon for almost everything, as it provides a fast and easy online service. It's delivery is quick (especially if you are a prime member) and almost always accurate. Despite Amazon's big success and increased profits due to purchasing Whole Foods, big retailers are hitting Amazon with restrictions on Whole Foods. These retailers such as Target, Bed Bath and Beyond, and Best Buy have legal rights in many lease agreements that allow them to limit what Amazon can do with nearby Whole Foods, and where it can open new ones. In addition to the effects Amazon’s lucrative investment will have on Americans and the U.S. economy, we must continue to analyze its negative externalities on other large retailers, as it may result in an inability to make a profit, or worse—bankruptcy.
ReplyDeleteI found this blog very interesting because both of my parents are pretty much obsessed with Amazon and online shopping. My dad even has fresh organic fruit delivers to our house every couple weeks which is so convenient. I think people will definitely take advantage of having the opportunity of online shopping for food. People in our generation love technology and love convenience, and eating healthy and organic is really emphasized in social media lately. I think especially because the prices decreasing and convenience increasing, there is no reason for people to not consider Whole Foods. I think this is a really positive change in general because people will possibly consider a healthier alternative to other convenient food options, most likely being fast food. Although Whole Foods seems to be doing very well, I wonder how this will affect other natural food stores, such as Good Harvest.
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