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Amazon Impact On Arizona Food Prices Not As Great As Other Parts Of U.S.

Arizona’s latest quarterly survey of food prices are falling, increasing pressure in what is already one of the nation’s most competitive markets. The drop comes at the same time as new competition arrives on scene with Amazon’s buyout of Whole Foods.

Tim Richards of the Morrison Chair of Agribusiness at Arizona State University said the impact of Amazon on Arizona’s already low prices should not be as great as other parts of the country because grocers in the state are used to the competition.

“In general, they’ve lived through Walmart.  Walmart was the big bully that supposedly drove the prices down. Farmers now are sophisticated and they are large and they know how businesses operate, so they like those contracts with the most distribution," he said.

Richards believes the Amazon purchase is actually a win for farmers, despite increasing price pressures. He says this deal gives growers a larger network to distribute to.

He said Arizona’s grocery competition changed dramatically about 15 years ago, when megaretailers Costco and Walmart added fresh food and drove prices down.

“It is very competitive. There’s lots of people in the space. But there’s also lots of money to be made," he said.

Richards cautioned adding another grocer is not cause for worry.

He said the grocery business model is misunderstood — that most supermarkets don’t make their money on center-of-store products, like cereals and packaged goods.

“They make most of their money on the perishables, the things that ring the store: the deli, the meat, the fresh produce, things like that. And what does Amazon do?  But they buy the one that is most known for the best perishables," Richards said.

At the state level, he said it’s a win for consumers because competition adds options. Richards says the percentage of people who use online grocery nationally is between 0.5 and 1.0 percent and that has room to grow.

Heather van Blokland was a host at KJZZ from 2016 to 2021.