Whole Foods Market has struggled over the past few years as supermarkets such as Kroger and Safeway have added organic products and upgraded their produce departments. Walmart, the nation’s largest grocer, faces new competition from European competitors like Aldi and Lidl.
Analysts say the Amazon-Whole Foods deal will add to those tensions. Some grocery store chains, they said, may need to buy up other competitors or to simply throw in the towel, recognizing they cannot compete in a grocery-store pricing war.
“The bottom-tier operators are either going to have to close stores or they’re going to get sold to the next bigger guy in order to stay alive,” said Mickey Chadha, an analyst at Moody’s Corporation.
Morton Williams, a chain of upscale grocery stores in New York, has already adjusted to newer digital delivery services like Fresh Direct and Instacart, which offer a more limited selection of items than brick-and-mortar stores including Whole Foods. But now, executives fear how Amazon could use its digital expertise to expand Whole Foods in Manhattan.
“Fresh Direct and Instacart are already factored into our numbers,” said Avi Kaner, the co-owner of Morton Williams. “The thing that could result in greater risk to us is if Amazon invested in the Whole Foods locations in Manhattan to make them more delivery-centric.”
Retailers across the country are also bracing for more competition from European grocery stores including Lidl, the low-cost German chain that just opened a handful of domestic locations and may operate as many as 100 by the middle of next year.
Amazon’s strategy could be “as much defensive as it is offensive,” said Burt P. Flickinger III, managing director of Strategic Resource Group, a global consulting firm. Mr. Flickinger recently returned from a research trip to the United Kingdom, where he said Lidl had significantly “slowed down” Amazon’s growth.
“Shoppers, vendors, people with whom we talked across the country said that Lidl literally transformed everybody’s standard of living, whether they shopped at Lidl or not,” he said. “They either stopped shopping at Amazon, or they shopped a lot less.”
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