Amazon + Whole Foods One Year Later
It’s been a year since ever-expanding Amazon marked its foray into the $800 billion grocery industry with the acquisition of Whole Foods. The $13.7 billion deal not only holds implications for the future of groceries and the food industry but also for the future of shopping for just about anything.
Amazon + Whole Foods: What We Know
Since the merger, the purchase of Whole Foods has accelerated existing trends in the industry while changing consumer expectations around the integration of digital and traditional shopping methods.
Amazon’s presence was immediately felt through lower prices, deeper discounts for Amazon Prime members, and the addition of Amazon delivery lockers. Digitally, Amazon continues to streamline consumer convenience via expansion of their AmazonFresh service and the 365 Everyday Value label.
Ultimately, Amazon bought much more than Whole Foods grocery stores: it acquired 431 upper-income, prime-location distribution nodes that will help bridge the gap between being an online megalith and a physical retail powerhouse.
Amazon’s quest to build an online grocery empire has injected palpable urgency into the market. Walmart’s purchase of Flipkart and Kroger’s acquisition of Ocado are just two instances of recent e-commerce expansion by prominent retailers.
A desire to keep pace with Amazon’s integration of traditional retail and e-commerce fueled consolidation, as did huge pressure for improved data-collection capabilities.
However, in order to compete, retailers must aim to make data actionable in ways that help them to better understand their customers’ needs, predict shopping behavior, and generate longevity with a loyal customer base.
This focus on e-commerce investment also led to a number of retailers striking deals with Google to compete with Amazon through its Shopping Actions Program. Pursued in hopes of increasing visibility and consumer convenience, the shopping service allows retailers to list their products on Google Search, Google Express, as well as Google Assistant on mobile phones and voice devices.
For Google, this service is critical in helping win back product searches from Amazon and staying relevant in the voice-powered future of e-commerce.
Looking to the Future
Despite initial skepticism, the marriage of Amazon and Whole Foods has already signaled a tidal change in grocery retail. Although it’s hard to predict how Amazon will continue to redefine the industry, consumers and brands will likely see the following changes.
Consumers
Amazon is already chipping away at Whole Foods’ “Whole Paycheck” moniker, and there is likely more to come. As Amazon invests more in private label goods and experiments with technologies like Amazon Go and drone delivery, they will be able to continue to optimize operations resulting in lower prices and streamlined user experiences.
Amazon ultimately wants to sell consumers virtually everything they could ever want to buy, and to do so it needs to offer convenience, value, and compelling products and services at every turn—including Whole Foods stores.
Brands
The combination of Amazon’s masterful use of information and the data-rich potential of Whole Foods’ affluent shopper-base points to a future of individually-tailored grocery shopping experiences.
This data-driven approach will force brands to better understand buying habits, preferences, and correlations between purchases of different products or even different categories. Additionally, brands will seek to integrate more vertically by increasing private label development efforts which will help produce higher margins and differentiate themselves from their competition.
Retailers will likely feel pressure to funnel more money into marketing and developing their online shopping platforms, as well as seek scale and efficiencies in the increasingly-crowded grocery industry through consolidation. The likelihood of a natural and organic chain being bought up by one of the big players will become increasingly likely as a need to diversify grows.
Finally, as Amazon rolls out new technology, it will increase consumer expectations and pressure other retailers to step up their in-store tech game.
Not only is this acquisition a key entry point into the grocery business, it offers a collection of stores from which Amazon can continue to evolve its e-commerce footprint and gather invaluable shopper data that will be crucial in reinvigorating the traditional grocery industry.
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