Alaskan halibut provides a glimpse of Amazon’s strategy with Whole Foods(seattletimes.com)
seattletimes.com
Alaskan halibut provides a glimpse of Amazon’s strategy with Whole Foods
https://www.seattletimes.com/business/amazon/alaskan-halibut-caught-by-a-century-old-seattle-boat-provides-a-glimpse-of-amazons-strategy-with-whole-foods/
42 comments
https://en.wikipedia.org/wiki/Loss_leader
Certainly not a new thing.
Certainly not a new thing.
5/$10 is probably not “below cost” for the product. But maybe it’s Costco subsidizing part of Coke’s profit.
What is the difference between what they're doing & every other grocery store?
I'm not sure I understand the difference after skimming through the article except that they have a reputation for more expensive, organic foods.
I'm not sure I understand the difference after skimming through the article except that they have a reputation for more expensive, organic foods.
MSC ensures sustainable fishing practices, and this is costly.
https://fisheries.msc.org/en/fisheries/us-north-pacific-hali...
After Amazon acquired Whole Foods, many speculated that they would lower prices by reducing quality.
This is an example of lowering prices while maintaining standards.
https://fisheries.msc.org/en/fisheries/us-north-pacific-hali...
After Amazon acquired Whole Foods, many speculated that they would lower prices by reducing quality.
This is an example of lowering prices while maintaining standards.
> This is an example of lowering prices while maintaining standards.
Nah. It's an example of a "loss leader." The zero-margin price on some items isn't sustainable on all items and just serves to get people in the door. It's a shade of the same spectrum as "predatory pricing," which can be illegal but is not always.
https://en.wikipedia.org/wiki/Loss_leader
https://en.wikipedia.org/wiki/Predatory_pricing
Nah. It's an example of a "loss leader." The zero-margin price on some items isn't sustainable on all items and just serves to get people in the door. It's a shade of the same spectrum as "predatory pricing," which can be illegal but is not always.
https://en.wikipedia.org/wiki/Loss_leader
https://en.wikipedia.org/wiki/Predatory_pricing
Amazon can in fact take their grocery business to zero profit safely, trivially. That includes taking Whole Foods down to near zero operating profit levels.
It's the ideal approach and classic Bezos. Their competitors can't afford to match it in the hyper low margin grocery business. Walmart can try, however their profits have already been badly squeezed downward for the last five or six years in a row now, in competition with Amazon.
Kroger, a $121 billion sales giant, has a mere 2% operating income margin. Amazon can tip them over and kill them very easily by eliminating that small remaining margin. Kroger effectively has zero margin of safety in their business, they can't afford even the smallest of drawn out price wars with Amazon. Kroger also has little safety buffer in their balance sheet, barely positive in assets and a small sliver of cash; while Amazon has $37 billion in cash. Bet on a Kroger bankruptcy or forced sale in the coming decade, pinned between Amazon and Walmart.
AWS is set to be a ~$15 billion per year profit juggernaut five years out. Their ad business is going to generate a minimum of $8 billion in profit at that point.
They can very easily bury the entire US grocery industry at zero margin to pursue aggressive market consolidation (the grocery market is extremely fractured). There is no other means for them to compete in groceries other than for Amazon to take the margin down to a level where they drown everyone else in their path, while not having to worry because of their profit offsets in the rest of the business.
Predatory pricing is not a concern in this scenario. Walmart has always done exactly the same thing in subsidizing one part of their business with another depending on where they're looking to expand market share. They've rarely had a problem with regulators over it.
It's the ideal approach and classic Bezos. Their competitors can't afford to match it in the hyper low margin grocery business. Walmart can try, however their profits have already been badly squeezed downward for the last five or six years in a row now, in competition with Amazon.
Kroger, a $121 billion sales giant, has a mere 2% operating income margin. Amazon can tip them over and kill them very easily by eliminating that small remaining margin. Kroger effectively has zero margin of safety in their business, they can't afford even the smallest of drawn out price wars with Amazon. Kroger also has little safety buffer in their balance sheet, barely positive in assets and a small sliver of cash; while Amazon has $37 billion in cash. Bet on a Kroger bankruptcy or forced sale in the coming decade, pinned between Amazon and Walmart.
AWS is set to be a ~$15 billion per year profit juggernaut five years out. Their ad business is going to generate a minimum of $8 billion in profit at that point.
They can very easily bury the entire US grocery industry at zero margin to pursue aggressive market consolidation (the grocery market is extremely fractured). There is no other means for them to compete in groceries other than for Amazon to take the margin down to a level where they drown everyone else in their path, while not having to worry because of their profit offsets in the rest of the business.
Predatory pricing is not a concern in this scenario. Walmart has always done exactly the same thing in subsidizing one part of their business with another depending on where they're looking to expand market share. They've rarely had a problem with regulators over it.
From article
“They might be selling those at cost or as loss leaders just to get people into the stores,” Besecker said.
Which grocery stores have been doing for years.
does krogers have equivalent of aws to eat its losses?
Quality, sustainable food should be subsidized. I'm not understanding why this is not a win.
Because if Amazon can beat out the competition, if they become a monopoly they might not keep the prices low.
Durable, nationwide discounts on low-margin, premium products aren't a norm in the grocery industry. It would be similarly noteworthy if Kroger started selling dry-aged prime ribeyes at $8/#. (Less so if Costco did it, but Costco isn't a normal grocer).
Two minutes of searching tells me differently. Grocery stores have used loss leaders for decades to get people in the store. Why do you say the opposite?
Loss leaders aren't new, but usually they are either temporary, local, or on low-value products (think oranges, chips or soda instead of salmon)- or all three.
For the entire time I lived in Cincinnati, one of the local hypermarket chains sold gallons of milk for 99¢ as a loss leader.
Lots of different kinds of stores do it. It's not special because it's Amazon Foods.
Lots of different kinds of stores do it. It's not special because it's Amazon Foods.
Even Costco's prime ribeye bulk packages don't turn out to be loss-leaders, despite widespread belief to the contrary. Here, the evidence suggests that Whole Foods halibut is in fact a nationwide loss leader.
Kroger (Ralphs, etc.) sometimes sells grass-finished prime ribeye at $8/lb...as a loss leader to get people to buy the high-margin condiments, etc. they would eat alongside the meat. The sales only usually last a day or until supplies run out, but it does a pretty good job of bringing the keto crowd in.
>grass-finished prime ribeye.
>the high-margin condiments, etc. they would eat alongside the meat.
The horror!
>the high-margin condiments, etc. they would eat alongside the meat.
The horror!
Per the article this is a 40% discount for one week, which is unremarkable as far as grocery store sales go.
This is basically what dollar stores do. You have to lose profit on some items to get traffic and regain that profit in different items.
Traffic is exponentially better than being profitable in every item since you can expose the customer base to other products and start deploying other fidelization channels. You won't get that if you have the same outlier buyers giving you profit on a few expensive items.
Traffic is exponentially better than being profitable in every item since you can expose the customer base to other products and start deploying other fidelization channels. You won't get that if you have the same outlier buyers giving you profit on a few expensive items.
Seems like use the discounts to attract customers and convince them to join Amazon Prime. The Prime promotions and connection are everywhere in WF, and cashiers are always asking, even when the card-reader has a sticker(s) on it.
For an occasional shopper at WF who is just trying to pay and leave the store, whether or not you have prime the correct answer is "no" to get them to shut up so you can pay and leave.
Scanning your app at the scanners is pretty quick and painless, like any other rewards card, and for me at least seems to be worth it more often than not.
(disclaimer: I work for amazon, although not WF/retail)
(disclaimer: I work for amazon, although not WF/retail)
I'm uninterested in having the 'Whole Foods App' on my phone. I'm similarly uninterested in having the 'Amazon App' on my phone.
I offer my phone number to verify my Prime membership. Works fine.
I offer my phone number to verify my Prime membership. Works fine.
I was in line behind someone fumbling around trying to get the app set up and logged in, and I was going to say that in spite of having set it up myself, it rarely saved me more than a couple of percent on my total. I didn't, and due to some combination of stacking discounts I saved ~15% that day. But it's been 2-3% ever since...
If you already have prime, you are saying "no" to free money. It is like charity to Amazon.
"No and no thank you" certainly does speed up the checkout process.
I've used "I'm sorry, but I'm afraid I don't speak English" spoken in perfect English.
If you can't convince 'em, confuse 'em.
If you can't convince 'em, confuse 'em.
Why go out of your way to confuse a low-paid worker just trying to do their job?
I don't reserve it for low-paid workers. I say that to anyone who wants to talk to me with whom I do not wish to speak.
I actually came up with it back when "day trading" was a big thing and self-styled financial geniuses would approach me at Starbucks to pitch their services.
I actually came up with it back when "day trading" was a big thing and self-styled financial geniuses would approach me at Starbucks to pitch their services.
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What does their pay have to do with it?
Low paid people are adults too, and capable of interpreting peoples sarcasm.
Low paid people are adults too, and capable of interpreting peoples sarcasm.
Their pay has to do with it because they're not being paid enough to compensate them for having to additionally deal with people's snide and cynical answers to a simple question which they could answer politely and more straightforwardly.
It's also a form of SEO. Get people to open the Amazon app more often, and (on iOS at least) Siri starts to prioritize it in search / quick launcher.
> "Do they take the profit from their non-retail efforts, which today is primarily cloud computing, and then reinvest those profits to take share in grocery?" Forte said.
Yes. Even better, they can push people to sign up for Prime by jacking up prices for non-Prime members. When faced with these "loyalty" programs elsewhere, I just type in a fake phone number, or an old land line that has probably been reassigned. I suspect you can't do that at Amazon stores.
Yes. Even better, they can push people to sign up for Prime by jacking up prices for non-Prime members. When faced with these "loyalty" programs elsewhere, I just type in a fake phone number, or an old land line that has probably been reassigned. I suspect you can't do that at Amazon stores.
I'm more interested in the fact that someone is fishing for halibut in a 103 year old wooden schooner in 2019. The rest of this article is in my opinion, not news.
This is actually more common than you'd think. There are plenty of older wooden boats still fishing both in the lower 48 and up north. The old halibut schooners are some of the most prized boats out there.
This article had virtually no content. An inexperienced reporter was fed a ton of filler, and wound up acting as an Amazon cheerleader. So Whole Foods used halibut as a loss leader. So what?
Alaskan black cod is da bomb. Way, way better than any other fish. And more sustainable than halibut and most other commercial fish, at present.
12 packs of coke were often sold at a loss at grocery stores. I'm not sure what they cost now, but cost use to be in the $3.50 range in 2007. Costco was usually about a bit more than the cost but they were selling 24 can flats, so probably still turning a profit. In 2007 it wasn't uncommon to do 4/$10 deals and even 5/$10 deals occasionally around the super bowl. 3/$10 was the average sale if they wanted to try to boost sales. Other examples include family packs of NY Strip/Ribeye.