Supermarkets be afraid, be very afraid.
With the completion of its $13.7 billion acquisition of US organic food grocery chain Whole Foods Market, Amazon has wasted little time in unveiling a raft of aggressive moves apparently designed to challenge the traditional supermarket sector.
Here in the UK online grocer Ocado has announced it will be the first national supermarket to launch an app for the Amazon Alexa voice UI. Now you can say things like “Alexa, ask Ocado to add tea to my basket,” and it will. Apparently you can also keep track of existing orders and make stock enquiries too, all without so much as having to glance at a keyboard or screen.
This tie-up makes sense as Ocado is online-only and is presumably geared up to fulfil delivery orders in a similar way to Amazon. The way traditional supermarkets go about fulfilling online delivery orders is quite inefficient, with a member of staff having to effectively take on a proxy shopper role. This is primarily a defensive move in response to the likes of Ocado and probably wipes out the margin the supermarket makes on the goods bought.
Meanwhile the Whole Foods acquisition completed at the end of last week and Amazon immediately announced significant price cuts as a clear statement of intent. Bloomberg reports that certain varieties of hippy food have had their prices cut as much as 43% and Whole Foods is already flogging the Amazon Dot, the Alexa-driven device that will presumably offer similar voice tools to those announced at Ocado.
“By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food,” said John Mackey, Whole Foods Market co-founder and CEO. “As part of our commitment to quality, we’ll continue to expand our efforts to support and promote local products and suppliers. We can’t wait to start showing customers what’s possible when Whole Foods Market and Amazon innovate together.”
There are reports coming from both sides of the pond of supermarket shares going down the toilet in response to this fresh threat from t’internet. Walmart recently announced a defensive move in partnership with Google and we can expect to see a lot more of this sort of thing. But the supermarkets seem to be in a weak negotiating position and their margins are likely to be the major casualties in a protracted grocery war with Amazon.