Consumers the big winners of Amazon-Whole Foods merger

Consumers the big winners of Amazon-Whole Foods merger
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When Amazon announced its merger with Whole Foods, it didn’t take long for skeptics to proclaim the death of competition in the grocery industry.

When the Federal Trade Commission (FTC) was (relatively) quick to approve the deal, disapproving noises were made by Sen. Amy KlobucharAmy Jean KlobucharFranken resignation could upend Minnesota races Avalanche of Democratic senators say Franken should resign Trump-free Kennedy Center Honors avoids politics MORE (D-Minn.), again citing concerns about the impact on industry competitiveness and the effect on consumers.

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Yet, the early evidence is that the Amazon-Whole Foods deal is encouraging innovation, and consumers have been the winners.

 

Almost immediately following the merger, Whole Foods locations slashed prices by as much as 43 percent. In the first two days following the price cuts, customer traffic jumped about 25 percent, according to one study. Not all of these customers will be retained, but Amazon’s foray into the grocery industry has nevertheless shaken things up.

Yet, grocery chains have reacted by innovating. Soon after the completion of the Whole Foods-Amazon deal, Walmart, the nation’s largest grocery corporation, announced a partnership with Google on e-commerce.

The partnership will aim to challenge Amazon’s Echo device by allowing customers to use Google Home to voice-order Walmart products. Walmart also recently acquired Jet.com, an e-commerce startup that aims to provide lower prices, in an attempt to compete with Amazon’s online ordering efficiency.

Walmart is not the only company aiming to improve the products it can offer consumers. Kroger, another top grocery corporation, began testing a new grocery-delivery service that would involve hiring Uber drivers. Kroger has also lowered prices and invested heavily into online ordering over the past year.

Target, another retail and food giant, has likewise promised lower prices in the wake of the Amazon-Whole Foods merger. Target has also invested in online sales, and back in May, it announced that it plans to roll out a next-day delivery option for online orders.

A familiar theme begins to emerge: In response to Whole Foods lowering prices and gaining access to Amazon’s online platform and fast delivery infrastructure, grocery stores across the country have lowered prices, invested in online ordering and increased delivery options.

Consumers are reaping the benefits of Amazon’s entry into the grocery industry whether or not they shop at Amazon or Whole Foods. Lower prices, more efficient grocery ordering and more varied delivery options are becoming available for all grocery businesses as they attempt to keep up with Amazon.

Those who called on FTC to shut the Amazon-Whole Foods deal were applying old trust-busting logic to an entirely different kind of merger.

Amazon and Whole Foods merging were not two corporations from the same industry combining to create a monopoly; they were two corporations from different industries that, combined, could offer services and products that they never could have separately.

Whole Foods or Amazon alone would struggle to enter into the meal-kit delivery industry, as Whole Foods lacked the delivery infrastructure and Amazon lacked access to food products. Put Whole Foods and Amazon together, and you have Amazon-Whole Foods entering the meal-kit business, with the potential to offer a much lower-priced version of what is currently an expensive product to buy.

It is true that Amazon and Whole Foods are far from a guarantee to be a successful marriage, as promising as the early signs look. Innovative mergers are not always successful mergers. However, risk is a crucial aspect of growing a business, and without it the economy cannot progress.

Whether the merger ends up being successful or not, it is necessary that corporations not be held back from attempting to provide better products to consumers.

Mergers such as this one require other corporations to innovate, or else go out of business. As technology and innovation become ever more important in the economy, it is important that FTC stays out of the way of these kind of mergers. After all, the early lessons from the Amazon-Whole Foods deal are that they are good for consumers.

Andrew Wilford is an associate policy analyst at National Taxpayers Union Foundation. Follow him on Twitter @PolicyWilford.


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