Amazon Undercutting Grocery Retailers, Posing Serious Threats
Amazon.com, Inc. (NASDAQ:AMZN) is leaving no stone unturned in its quest to become a supreme leader in retail. So far this year, we have seen dozens of retailers going out of business and mostly blaming it on Amazon. Even President Donald Trump has pointed fingers at Amazon as being the cause of the retail bloodbath that’s killing jobs in the United States.
The e-commerce giant is primarily held responsible for the job losses by introducing quick-service digital retail that has gradually been replacing America’s traditional brick-and-mortar retail sector. It seems that there’s no stopping Amazon.
Thousands of jobs have been lost, and more job cuts are coming, as hundreds of underperforming retail stores permanently close their doors after seeing declining foot traffic. Most of the retail companies that have announced bankruptcies or store closures in the past year served the fashion apparel, sporting, furniture, electronics, or similar retail markets.
But this time around, Amazon is about to give a major blow to another retail sector. Now it’s the grocery supermarkets that will likely be bracing for lost sales, store closures, and job cuts.
Amazon recently announced that “Amazon Prime” will become the customer rewards program for Whole Foods Market, Inc. (NASDAQ:WFM), Amazon acquired this summer. This means that Prime members will receive “special savings and in-store benefits” at the grocery store chain.
Amazon Prime members will also be able to shop for groceries from Whole Foods online and receive them at their doorsteps within a day or two, depending upon their locations.
At the same time, Amazon will be offering competitive prices to customers by undercutting its competitors. In other words, Amazon, which is known for operating on razor-thin profit margins, will be forcing its competitors to do the same or go out of business.
Amazon’s announcement has once again come as bad news for the rest of the retail industry. Following the announcement, stocks of grocery retail companies like Kroger Co (NYSE:KR), Wal-Mart Stores Inc (NYSE:WMT), and Target Corporation (NYSE:TGT) took a plunge as investors anticipate an inevitable decline in their food sales.
Amazon’s move may force these retailers to close additional stores, causing more American workers to lose their jobs. According to Credit Suisse, the total number of store closures by the end of this year will likely surpass the number recorded during the peak of the Great Recession.
Meanwhile, automation of various job functions at retail stores, via the implementation of systems such as self-serve checkouts and self-order kiosks, are likewise going to kill countless jobs in the years to come.
“What Amazon knows: ‘The war for retail will be won in groceries’,” CNN Tech, August 25, 2017.