Last Friday, Amazon announced that it’s buying grocery store chain Whole Foods for 13.7 billion, the company’s largest acquisition ever. Analysts have called this an “earthquake” in the grocery sector. The purchase could usher in a new phase of retail, affecting the future of groceries, and shopping as a whole.
According to a press release, Amazon will let Whole Food’s keep their CEO and current infrastructure and strategies, at least for now. “Whole Foods Market has been satisfying, delighting and nourishing customers for nearly four decades – they’re doing an amazing job and we want that to continue,” Jeff Bezos said.
Amazon's Grocery and Big Data Ambitions
This is not the first time Amazon has attempted to expand into the grocery sector. Amazon has already built grocery delivery into its fulfillment strategy through Amazon Fresh and Prime Pantry.
The acquisition of Whole Foods will definitely reinforce these programs and build out Amazon’s in-house brands. Further, they could gather customer data from physical stores, the same way they do through its Amazon Books retail locations. This data could be used to analyze shopping behavior and inform Amazon’s grocery strategies.
Showrooms, Hybrid Stores and Distribution Centers
The purchase is a very smart move by Amazon. By acquiring Whole Foods, it also gains a network of at least 430 brick-and-mortar locations, all within highly populated urban and suburban centers. These stores are in prime retail locations among upscale buyers.
Analysts have noted that Whole Food’s urban and suburban locations are so valuable for Amazon’s delivery business that even if the grocer stopped selling food, the deal would still have been worth it.
These stores could turn into Amazon warehouses and multi-fulfillment distribution hubs. Further, by having this physical retail presence, they could give customers the option to buy online and pickup in-store, competing against Walmart’s omnichannel offerings.
Of course, Amazon could do so much more with the real estate. Aside from warehouses, the stores could serve as showrooms for Amazon devices, such as the Fire tablet or Echo. Amazon could also incorporate similar technology used for Amazon Go stores.
The Increasing Allure of Prime Membership
Ultimately, the acquisition will increase the allure of Amazon Prime membership. According to the keynote speakers at IRCE, 64% of households in the US have Amazon Prime. In fact, 4 in 10 dollars spent online is with Amazon, and 80% of online growth comes from Amazon sales.
With the Whole Foods acquisition, Amazon will only grow bigger. These stores could introduce new perks for Prime members, such as an express checkout lane or Prime-member exclusive deals. Similarly, Whole Foods can learn from Amazon’s strategies and boost its loyalty programs.
Overall, Amazon continues to be a force to be reckoned with, and these changes may be able to give third-party sellers more opportunities to reach new customers and provide more customer conveniences and better experiences.