Amazon cut prices at Whole Foods Market on Monday as it completed its acquisition of the high-end grocer. That’s just the first chapter in its playbook as it doubles down on groceries, analysts say.
Amazon.com sells refrigerators, socks, power drills and books from its perch at the top of online commerce. But it doesn’t sell much produce.
The Seattle company’s expensive effort to change that started Monday.
Amazon reintroduced itself to the grocery-shopping public with 69-cent organic bananas among other price cuts at Whole Foods Market on the day it completed the $13.7 billion takeover of the high-end grocer.
Slashing prices on popular items is nothing new for the grocery industry. Supermarket chains have long kept prices of select staples low to draw people into their stores, banking that the discounts would pay off as increased foot traffic sends other items flying off shelves.
That’s a playbook Amazon itself has used in the digital realm as it expanded from book sales to clothing, appliances and electronics. Amazon, which says it aims to match in its online store the lowest price offered by competitors, has long put a priority on gaining new customers over immediate profits.
Analysts expect much of the same as Amazon doubles down on groceries.
Monday’s lower prices on some items at Whole Foods were “just the opening salvo,” said Neil Stern, an analyst with retail consultancy McMillanDoolittle. “It’s the thing they could do right away to create a little impact.”
There’s plenty of cutting to be done at Whole Foods. The chain, sometimes called “Whole Paycheck” for its high prices, has profit margins higher than the average grocer. Before the acquisition, Whole Foods had projected that it was on track to post a profit of $409 million this year and $470 million in 2018.
Analysts with Morgan Stanley estimate that Amazon could cut Whole Foods prices by 4 percent to 8 percent and still break even.
An Amazon spokeswoman declined to comment on the company’s plans for Whole Foods pricing.
The company has spent more than a decade experimenting with the delivery of food items ordered online — with AmazonFresh and, more recently, drive-through pickup locations — with little to show for it. Those efforts account for less than 1 percent of U.S. grocery-store sales.
Just 25 percent of U.S. adults have ever shopped for foodstuffs on Amazon, according to a survey…