Over the past year, there has been a slow drip of news concerning Amazon’s plans for the grocery space. Amazon Fresh has been expanding to new markets, and Amazon opened its first Amazon Go location in Seattle. It has also dipped its toes into the physical space by opening a string of Amazon Bookstores. But now it is taking the plunge into both the physical retail world and grocery markets with the purchase of Whole Foods for $13.7b.
Amazon has already confirmed that it will keep the Whole Foods brand in place. They did something similar with Zappos, which they acquired for $1.2 billion in 2009. With that acquisition, Amazon kept Zappos going, leveraging its equity and shopper loyalty, while taking learnings into Amazon.com. In some ways, we see this acquisition working the other way around: Amazon will use its vast online and recently developed omni-channel experience to expand the appeal of the Whole Foods offering. To do so, Amazon is certainly going to make changes to the shopping experience. If they are able to integrate their checkout-less vision for retail, then Whole Foods will offer a significantly better shopping experience than its rivals while lowering costs and, in turn, prices. Further, while today Whole Foods is a niche player in the high end grocery space, if Amazon chooses to introduce its large array of private branded goods to bolster Whole Food’s offerings, they will be able to provide both high end and low end items to supplement the chain's current assortments.
Amazon may also potentially be able to use Whole Foods to greatly expand its Amazon Fresh program, using Whole Foods 400+ locations around the country as delivery hubs. This poses a threat not only to grocery chains, but to every online and offline retailer. If Amazon is able to keep users inside “the everything store”, then there is no longer a need for shoppers to price match or compare deals: they are going to exclusively use the Amazon basket.
Amazon is now in a position where they are the leaders of finding products via text search, voice search, and soon to be a leader in the physical space. No matter where shoppers are, be it in their homes, in a store, or on their phones, Amazon has a platform to sell them goods.
If Amazon is looking to become an omni-channel retailer, building out stores to supplement its online offerings, then Wal-Mart, Target, Costco and everyone else has been put on notice. Amazon is showing that it understands the important of the omni-channel space, and that shoppers are not going to move 100% to pure play any time soon. In fact, this was the driving force between the Clavis Insight and IRI partnership announced a partnership at the end of 2016.
This acquisition represents an opportunity for Amazon to fully leverage its powerful ecommerce data, Whole Foods retail estate, and IoT technology to dramatically re-shape the high-end grocery market. This is a major development in the grocery space, but certainly not the last.
To learn more on Amazon’s impact on retail, join one of our June 21st webinars:
How Amazon’s Innovations are Changing Online Retail Internationally
How Amazon’s Innovations are Changing Online Retail in the US
