Amazon bought Whole Foods for $13.7 billion.
Whole Foods has been trying to shake off its expensive reputation for years. Now it has a real chance to do so.
On Friday, Amazon announced it will acquire the high-end grocery store chain for $13.7 billion.
The move could make Whole Foods a lot more competitive when it comes to prices.
Amazon has the "financial capacity to price aggressively," Moody’s vice president Mickey Chadha wrote in an email.
According to a UBS research note, the store will not be subject to the same near-term profitability expectations as its competitors given that it has the backing of a much larger corporation. This means it will be able to drop prices with less of an impact on investors which, according to UBS, is a necessary measure for the store to take in order to bring back same-store sales growth.
Whole Foods was once the largest organic supermarket chain in the US and was considered to be the pioneer of the organic food movement. But in the past four years, sales have decelerated.
The downturn isn't because demand has fallen. In fact, sales of organic food have more than tripled from 2005 to 2015, from $13.8 billion to $43.3 billion, according to the Organic Trade Association.
Increased competition in the grocery space has put a strain on Whole Foods as competitors sell similar goods at lower prices.
Whole Foods has been desperately trying to shed its "Whole Paycheck" reputation which has cost it millions of customers who now shop at rivals like Kroger and Trader Joe's. To do so, it launched a new chain of stores called 365 by Whole Foods Market to compete with these lower-priced rivals.
Business Insider compared 28 similar items sold at Whole Foods and rival store Trader Joe's in April. The results showed that Whole Foods was still considerably more expensive overall.
But with Amazon now behind them, Whole Foods finally has the chance to fight back and become competitive on price.
"Dominant players like Walmart, Kroger, Costco, and Target now have to look over their shoulders at the Amazon train coming down the tracks," Moody’s lead retail analyst Charlie O’Shea said.
This will be more crucial now more than ever as low-cost retailers from overseas, like Lidl and Aldi, begin expanding their presence in the US.