Ok, well Target is apparently being forced to respond to the deflationary supernova that is this guy…
Because just a little over a week after Amazon made good on its promise/threat to cut prices at Whole Foods, Target says in a blog post that it’s lowering prices on thousands of items.
- TARGET SAYS IT’S LOWERED PRICE ON THOUSANDS OF ITEMS: BLOG POST
And the reaction was immediate, with shares diving to day lows and Wal-Mart falling in sympathy:
The shares will probably rebound by the end of the day, but the message here is clear.
Notably, this made an already bad day for Kroger worse. The shares were already lower by some 7% after inline results were apparently overshadowed by talk of consolidation and news the company will not be providing longer-term guidance.
Sorry Fed, it looks like structural deflation has become… well… structural.
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People don’t get it. Amazon’s acquisition of WF is a strategy to provide A with access to “fresh” foods and more importantly and outlet to sell those foods before they go bad through WF b&m outlets. This strategy uses their core skill – inventory management algorithms and has limited competitive advantages. Fresh food orders with Amazon will get first priority at Amazon/WF fresh food inventory, and fresh food that doesn’t sell in a given time 24-48? hrs. will go through WF b&m outlets.
Regarding dry goods/can goods they still have to deal with shipping costs of small orders and the weights of high liquid foods/canned goods. In the long run this makes the WF strategy more competitive with other high end grocers like Fresh Market than it does volume discounters like Target and Kroger – though both are going to go eventually from their demonstrably poor/too late management adaptation to the Amazon business model. Probably Walmart/Sams as well. However, that timeline has a number of other variables affecting it like the general economy. Better managed and more cost competitive grocer companies like Aldi will hold their own.
It’s a lot easy to compete against low margin items in a “good” economy with relative high – if not optimum employment level. If that changes – all bets are off for Amazon.
Exactly.
Bezos was overheard saying, “L’etat, C’est Moi” (The State, that’s me.)