In the first week after its acquisition by Amazon, Whole Foods’ branded product web sales reached $500,000, after Amazon placed about 2,000 items from Whole Foods’ 365 Everyday Value brand on its site.
On June 16, 2017 Amazon rocked the grocery world by announcing plans to acquire Whole Foods Market in an all-cash transaction valued at $13.7 billion. The acquisition, the largest in Amazon’s history, closed in August 2017.
Following the acquisition, Amazon immediately implemented high-profile changes, including:
- Lowering prices on certain produce and refrigerated fresh food staples by 10% to 43%
- Tying in Whole Foods to the Amazon Prime rewards program, including Amazon Visa cards and Amazon ACH debit rewards
- Adding hundreds of Whole Foods items through a new Whole Foods category to Amazon Fresh
- Merchandising Echo + Echo Dot in Whole Foods stores, providing physical touch-points for all things Amazon
Whole Foods’ and Amazon’s shares rose 30% and 2%, respectively, following the unexpected acquisition. Rival grocery retailers saw their shares plummet following the move, with Kroger lowering by 15%, Supervalu 14%, Sprout 13%, Target 8%, Costco 7%, Walmart 7%, and Ahold by 5%.
Amazon + Whole Foods as Grocer
Amazon’s Whole Foods acquisition marks a tipping point in an industry shift already underway. Packaged Facts’ new report on natural channel grocery shopping covers these three key grocery retail trends:
- E-commerce: Amazon is easily the largest online grocer, fielding its Amazon Prime and Amazon pantry for packaged goods, and Amazon fresh for fresh/non-perishables. Amazon’s online shoppers seem happy: Amazon Fresh is No.1 in satisfaction. While e-commerce grocery currently accounts for less than 3% of grocery and consumable sales, Amazon is surging into brick-and-click groceries because shopping for fresh foods is an essential daily activity.
- Home Delivery: Instacart or Not?: The alternative to in-store pickup – and Amazon’s claim to logistics fame – is home delivery, which an increasing number of brick-and-mortar grocers are exploring. To date, most brick-and-mortar grocers have opted to work with a third-party home delivery service. Enter Instacart: Founded in 2012, the grocery delivery service has clients including Whole Foods, Costco, and CVS. According to Whole Foods management, Instacart accounts for sale shares in the mid to high single digits in participating stores. Amazon’s Whole Foods acquisition, may, however, change this relationship.
- >Self-Checkout/Frictionless Shopping:In-store pickup gets shoppers in and out of the store quickly, as does self-checkout. Since its Whole Foods acquisition, Amazon has repeatedly stated it does not plan to automate cashier jobs. But Amazon has demonstrated that it possesses advanced checkout technology: Amazon Go, a new and completely “frictionless” service that Amazon is testing in its small grocery store in Seattle, allows Amazon employees to walk in, shop, and walk out without going through checkout. It is possible that Amazon will roll out Amazon Go locations or technology nationwide, including in Whole Foods stores. Amazon's acquisition will result in increased automation, but it will not spell the end of human employment: Amazon will redeploy human capital in such a way that enhances higher-touch involvement between staff and customer and between customers and Amazon products and services.
Although Amazon’s grocery penetration is minor compared to food retail giants such as Walmart and Kroger, the e-commerce giant has seemingly overnight topped the brick-and-mortar natural and organic foods channel in the U.S., covered in Packaged Facts’ new report, Whole Foods, Trader Joe’s, and Natural Channel Grocery Shopping: The Future of Food Retailing.
For further coverage of Amazon's consumer usage and engagement trends and related consumer usage and engagement strategies, visit Packaged Facts' Amazon Strategies and the Amazon Shopper.
Discover more about the market for online food shopping in Packaged Facts' report, Online Food Shopping and Grocery Delivery in the U.S.: Future of Food Retailing