Whole Foods Market lowered the prices of countless grocery items which include cherry tomatoes, rainbow chard, and other organic options. While this move by the market does not completely remove the “whole paycheck reputation” of the chain, it can build a strong relationship with Amazon Prime members, comparable to the relationship Costco has with their customers.
The grocery chain, owned by Amazon since August 2017, explained how Prime members would enjoy “around 300 exclusive deals” within the following months, aside from their offer of “10% off of sale items”. There are currently at least 100 million members of Amazon Prime who can enjoy these perks.
The executive vice president of Kotter, Kathy Gersch, stated that Amazon aims to build a “Costco-like relationship” with its consumers by introducing new benefits.
Gersch also explains how Costco bonds with their members, which in turn, increases the purchases from the firm. She tries to relate this to how Amazon drives up the number of Prime members by introducing more perks. She states that the more benefits that members can experience, “the larger the share of the wallet.”
In the March 8 statement written by the analysts in UBS, the high class merchandising and transparent pricing has assisted Costco in securing greater profit from its current members while attracting new ones. Costco may not be the “fanciest retailer” out there, but it surely employs the most efficient method in the market.
Halfway through 2019, Costco gained a 90.7% renewal rate for their subscriptions in Canada and America, not too far from the 90.5% it achieved in the first four months of the year. USB announced that Costco has a $270 price target for their shares.
With more competition among the elites in the retail industry which includes Target and Walmart. These major players are being pushed to introduce exclusives, perks, and private labels to gain more sales and drive traffic.
In a statement released by the analysts who were led by Ed Yruma, the reduced prices presented by Whole Foods is an attempt to close the gap with their top-notch competitors. They also added how grocery is an essential focus for the company due to the dollar spend and purchase frequency it provides despite being structurally lower compared to the other retail categories.
KeyBanc also predicts that Amazon will introduce a midmarket grocery to rake in more sales. KeyBanc also classified Amazon as overweight with their whopping $2,100 price objective.
Amazon shares increased to 22.6% this 2019 while Costco recorded a 20.8%.