When Amazon announced its $13.7B bid for Whole Foods Market on June 16, 2017, grocers, retailers, Wall Street, and consumers all took notice. Whole Foods Market stock prices jumped 27% overnight, as shares of rival grocers took a nosedive. Financial analysts have since been debating the widespread implications the acquisition will have on major retail giants like Walmart and Target. But what does this mean for consumers here in Frisco, CO? How can we expect our local Whole Foods Market experience to change? While we expect the customer experience to remain consistent in the short-term, we anticipate some major changes in the long-term that appear to benefit the consumer.
Whole Food Market’s efforts to source the highest quality organic ingredients has historically put it at a cost-disadvantage to other grocers, forcing WFM to raise prices in its stores. Amazon’s immense buying power and extensive distribution network will enable WFM to cut costs, allowing them to extend that cost savings to consumers. Additionally, Amazon will be able to streamline WFM’s supply chain processes using its technological expertise, further reducing costs.
According to a Piper Jaffray survey last spring, customers preferred WFM’s more affordable 365 private label brand over all other organic private label brands. Amazon has recently experimented with its own private label brands, and we expect them to catapult the offerings and availability of the 365 brand. The increase in affordable 365 offerings combined with widespread cost reduction will lead to significant savings for local WFM customers.
Increased Delivery Services
Amazon has made a big push in the grocery deliver market in recent years, mainly through its Amazon Pantry and Amazon Fresh services. We expect Amazon to accelerate WFM’s ability to offer grocery delivery around Summit County. Eventually, Amazon is aiming to offer widespread 1-2 hour grocery delivery to local consumers. Since about 20% of WFM sales are ready-to-eat meals, we anticipate grocery delivery will include a variety of prepared meals.
Amazon spends over $16 billion (11.8% of sales) on “technology and content,” which refers primarily to R&D and IT. Meanwhile, most retail and wholesale companies spend about 1.5% of sales on IT. Amazon’s commitment to innovation has been central to its ability to disrupt virtually every industry it has attempted to penetrate. It is currently testing a new concept called Amazon Go, a brick-and-mortar convenience store with no cashiers. You simple scan your Amazon Go app to enter, pick up the groceries you’d like to purchase, and…go. The store automatically determines what you purchased and sends the receipt directly to your phone. Check out this video to understand the full experience. If successful, it seems logical that Amazon would implement this concept in its WFM stores.
Fusion of Online & In-Store Experience
Three out of four consumers say that they want more technology in stores and are more likely to visit stores that use technology effectively. Amazon will bring more technology to WFM stores, thereby merging online and in-store experiences. Customers will likely have the option to order online and pick-up their groceries at the store, potentially through a drive-through. Amazon also just launched the Dash Wand with built-in Alexa technology – a barcode scanner you can use at home to reorder grocery items without leaving your home or searching online. Check out this video to see how it works.
There is still much uncertainty around which initiatives Amazon will choose to implement in our local store, and when they will launch. Amazon’s focus on using technology and process innovation to reduce costs while enhancing the customer experience shows great promise. Overall, it looks like the Amazon acquisition will largely benefit Whole Foods Market shoppers in Summit County.