High-end grocery store Whole Foods, nicknamed “Whole Paycheck” for its lofty prices, is testing a new discount strategy exclusively for Amazon (AMZN) Prime members.
Currently, Whole Foods in Ft. Lauderdale, Florida is offering deals for Prime members on select items that will rotate on a weekly basis plus an additional 10% of sale items.
Analysts at Oppenheimer visited a Fort Lauderdale location and found that the savings on this week’s six weekly specials are “meaningful,” with Prime members saving about 50% on each of the six weekly special items.
This week’s special offers include sustainably-sourced, wild-caught halibut steaks for $9.99 per lb., a discount of $10 per lb.; organic strawberries for $2.99 per 1 lb., a cut of $2; KIND granola 2 for $6 for an 11-ounce bag; buy one, get one free for 365 Every Day Value sparkling water; and 50% off Magic Mushroom Powder.
Of course, there’s speculation about what the broader strategy is for the discounts.
“I think at the end of the day they want their Prime members to shop more at Whole Foods, and there’s also the second element to convert more people to Prime,” Oppenheimer senior equity research analyst Rupesh Parikh told Yahoo Finance.
Last month, CEO Jeff Bezos revealed that Amazon now has 100 million Prime members globally. Currently, the popular subscription service is priced at $99 but will climb to $119 beginning June 16.
While the new discounts could be another way to add more value for Prime subscribers amid those membership price increases, the other risk is that it could turn off Whole Foods regulars who aren’t members of Prime.
“When you see strawberries at $4.99 and $2.99 as a Prime member, if I don’t want to join Prime, if they want to charge me extra, I think that’s the other risk,” Parikh explained.
The analysts at Oppenheimer don’t view the latest price reductions as a threat to the grocery sector.
“We all expected a new Prime benefit from [Amazon] but this narrower form of discounting is less than feared from our perspective (Sprouts Farmers Market (SFM), Natural Grocers by Vitamin Cottage (NGVC), and other names rallied yesterday). We continue to watch AMZN grocery developments closely to see whether the improving value proposition can draw new customers into the AMZN/WFM grocery ecosystem,” the note said.
Following the Amazon acquisition last summer, Whole Foods, which had earned the nickname “Whole Paycheck,” slashed prices on some of its best-selling staple items, including avocados, bananas, organic brown eggs, Fuji and Gala apples, almond butter, and farm-raised salmon and tilapia.
Earlier this year, Amazon launched free two-hour delivery on Whole Foods Market groceries through Prime Now in 10 cities. They also rolled out a program for Prime members to get 5% back on Whole Foods purchases while using the Amazon Prime Rewards Visa Card.
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Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.
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