YOUR BUSINESS AUTHORITY

Springfield, MO

Letter to the Editor: Amazon wants to be your online supermarket

Posted online

“No, Sally, your food doesn’t come from Amazon, it’s produced by farmers and ranchers” – someday this may be a mother’s answer to a child’s question about where her food comes from. Amazon, the giant e-retailer, recently announced a deal to purchase Whole Foods Market, the leading organic supermarket chain, for almost $14 billion.

Increasingly groceries will be sold online and delivered to the door or a distribution point for pickup. According to the Food Marketing Institute, online sales of food are expected to reach 20 percent of grocery sales by 2025, amounting to $100 billion. Amazon already has an online grocery presence through AmazonFresh, but a purchase of Whole Foods would greatly raise its profile.

The deal has ramifications for the entire food industry, including farmers. If Amazon’s past is any guide, it may be a bumpy ride. Amazon started as an online bookseller, and it turned the industry on its head for writers, publishers and booksellers.

Amazon’s aggressive approach led to the closing of many independent booksellers, along with Borders, a major bookstore chain. Barnes & Noble has barely survived. It is no wonder that Amazon’s Whole Foods announcement set off sharp declines in grocery store stocks on Wall Street. 

Amazon won’t take over grocery sales as easily as it did book sales, however. Amazon’s food sales are miniscule compared with the overall market, which is quite fractured. Wal-Mart leads the way with 14.5 percent of food and grocery sales, and Kroger is next with 7.2 percent. Whole Foods has a 1.2 percent market share, and Amazon only 0.2 percent of the grocery market.

Amazon’s success is predicated on low prices, quality and wide selection. It’s also known for excellent customer relations. But the same good feeling doesn’t exist with all suppliers and industry trade groups. Whole Foods sources fresh produce from many small and midsize farms across the country. Producers could feel squeezed if Amazon, which would keep the Whole Foods name, pays them less. Amazon also is in a position to try to dictate other terms to suppliers, including production practices.

In time, Amazon could force out some of the smaller supermarket chains that serve small cities and rural areas, as sometimes happened with Wal-Mart. It could even hurt sales at farmers markets. Amazon is keeping Whole Foods supermarkets and may use them as distribution centers for its recently introduced ready-to-cook meal packages.

A century ago, A&P pioneered the supermarket in America, and now it’s Amazon that is trying to make a big change in the way we shop for food.

—Stewart Truelsen, American Farm Bureau Federation contributor

Comments

No comments on this story |
Please log in or register to add your comment
Editors' Pick

It Takes a Team: ‘The Hub,’ WOW selected for design and construction awards

Collaboration was prominent Nov. 9 at the 33rd annual Salute to Design and Construction Awards.

Most Read
SBJ Live logo
MOST-WATCHED VIDEOS
Mobile First World

“For marketers in this day and age, it’s so important to think about how you are engaging with customers and potential consumers on that mobile device,” says Erika Murray, Global Brand Manager …

App-titude - Tracking Projects with Trello “I like to think of it as a big white board where you can put post-it notes and track your progress on the different stages of a process,” says David Brazeal. Trello allows you to make a list, …
Realities of Medical Malpractice Lawsuits “Medical negligence or medical malpractice cases essentially are a platform for families to bring a lawsuit against a healthcare provider,” says Debbie Dodge, Managing Shareholder at Hall Ansley. …
Never Stop Learning “You’ll know that you’re a trusted adviser when your clients come to you before they make a business decision,” says Tom Jensen, with Connell Insurance, one of Springfield Business …
Beyond the Spotlight - Hinode “One big thing we tried to do was to make it more casual — into a fun family dining experience that everyone could enjoy,” says Cosmo Kwon, Co-Owner of Hinode in Nixa, Mo. The change worked. …