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New lower prices in the Whole Foods market may not dispel the "full chain of payment" reputation of the natural grocery chain, but they could also strengthen relationships with key members of the grocery store. Amazon.com, just like Costco Wholesale Corp. .
On Wednesday, Whole Foods lowered the prices of hundreds of items, including organic rainbow chard and mixed cherry tomato.
The grocer, acquired by Amazon
AMZN, -0.10%
In August 2017, Premium members can expect more than 300 exclusive offers over the next few months, in addition to a 10% discount on sale items.
There are more than 100 million Prime members.
"It seems like the strategy is to create a Costco-like relationship by offering another benefit rather than damaging the reputation of" all the salary, "said Kathy Gersch, executive vice president at Kotter, a company with Implementation of strategies and change management.
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Gersch sums up Costco
COST, + 0.79%
strategy as one that builds links with members, which increases purchases.
"Same for Amazon," she says. "There is an ongoing strategy to increase the number of Premium members by creating more benefits, whether in terms of video, shipping, [etc.] The more benefits there are, the bigger the share of the wallet. "
According to 29 analysts surveyed by FactSet, Costco posts an average analyst rating for the overweight and an average price target of $ 243.42.
"Although Costco is not the most whimsical retailer, it is among the most efficient," wrote UBS analysts in a March 8 note. "Its world-class merchandising and transparent pricing structure has allowed it to capture more of its existing members' portfolio and attract new ones. Over time, he will be able to increase his purchasing power and pass on savings to his members. "
In the second quarter, Costco recorded a 90.7% subscription renewal rate in the United States and Canada, up 90.5% from the previous quarter.
"With Costco's workforce renewal rates increasing further in the second quarter, it is clear that our members are embracing our value proposition."
The UBS shares of Costco are purchased with a target price of $ 270.
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Increased competition among the biggest names in the retail trade, which also includes Walmart Inc.
WMT, + 0.95%
and target Corp.
TGT + 2.61%
, pushes all major players to offer exclusives, private labels and benefits to drive traffic and sales.
Amazon's focus is on grocery-serving growth, according to KeyBanc Capital Markets.
"Whole Foods has cut prices by about 20% out of 500 SKUs [stock-keeping units], helping to bridge the competitive gap between Whole Foods and its high-end competitors, "wrote analysts Ed Yruma. "While the grocery store has structurally lower margins than other retail categories, its high purchase frequency and total expenses make it a major focus area for Amazon."
KeyBanc thinks that Amazon will ultimately add a mid-market grocery store to the market share.
KeyBanc upgraded Amazon to overweight a price target of $ 2,100 in a March 14 note.
Amazon shares rose nearly 21% in 2019, Costco shares rose 20% and the S & P 500 index
SPX, + 0.21%
is up 14.7% for the period.
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