Amazon already has a strong presence in the grocery world with Amazon Now, Amazon Pantry and Amazon Fresh. It is expected to be within the top ten for online grocery shopping in two years’ time. The retail giant is not content with its current offerings and standing, however. It announced in June its plans to purchase Whole Foods with a huge cash payment before the year is out. Whole Foods is a US supermarket chain that pioneered exclusive organic food sales in the country. It currently has around 450 outlets, including those in Canada and the UK.
With the purchase of Whole Foods for about 13.7 billion dollars, Amazon stands to gain a substantial leg up in the online grocery niche. It is a difficult eCommerce category with shoppers wanting to hand-pick their items. Shipping is another problem area for such perishables. The addition of Whole Foods into the Amazon fold means that these challenges are half solved straight away.
What does the addition of hundreds of brick-and-mortar supermarkets mean for the future of grocery shopping?
A Wider Reach
With Whole Foods Market’s “healthiest grocery store” outlets spread across North America and the UK, Amazon gains the ability to serve more shoppers in many ways. Amazon patrons can opt to pick up their orders at many more locations than were previously possible. It also offers better logistics for the retail giant in making deliveries to a substantially larger number of shoppers.
Amazon may not win a whole lot of new customers, but they will gain their grocery business. Many Whole Foods shoppers also buy on Amazon already, about half of them Prime members. This means that Amazon is not getting a huge boost in terms of new customers, but this may not be their primary goal.
A Trusted Name
Whole Foods has a very long history of sourcing and selling organic groceries. Households trust the brand and have been loyal to it for almost four decades now. The name will remain the same and John Mackey will stay on as CEO of Whole Foods. Mackey will bring with him his vast experience and sizeable vendor list. This stands to be a great partnership that will lend Amazon loads of brand value and a stable sourcing system to run with.
A Boost for Amazon Go
Amazon Go is a newer venture of Amazon that allows shoppers to browse in-store before making purchases. Shoppers enter the Amazon Go locations, select their items by swiping them, and leave without having to stand in line or carry heavy bags home. The brick-and-mortar setup of Whole Foods gives Amazon the opportunity to conduct further tests on this idea. The acquisition may also speed up and/or expand their initial plans of adding 19 Go stores by 2018. Amazon doesn’t have a great track record with the brick-and-mortar model, so this partnership will support the eCommerce giant in its more earthly endeavors.
Amazon certainly spotted and grabbed this golden opportunity. Sales analysts and investors have noted a decline in Whole Food’s growth for the past few years. By jumping in at this time, Amazon has made a very smart buy. The timing is even more perfect with more and more shoppers purchasing their groceries online. The retail giant could easily take over online food sales in as little as two years. If they can overcome their ongoing challenge of blending physical stores with their core eCommerce model, they can realistically achieve and maintain this dominance.
Walmart has been a close contender for the number one spot in the eCommerce arena since it launched online. The news of the partnership with Whole Foods has rattled this most trusted retailer’s footing, however. The acquisition has knocked more than a few billion dollars off the market value of traditional grocers like Walmart, Target and Costco. Even some non-grocery retailers are feeling the Amazon shockwave.