Retail recently marked the one-year anniversary of marketplace giant Amazon acquiring Whole Foods and setting a new standard for omnichannel grocery sales. While some significant changes have taken place since the merger, it seems Whole Foods' business has not changed as drastically as some analysts originally predicted.
FierceRetail spoke with JoAnn Martin, VP of retail industry strategy at JDA Software, to learn more about what changes are visible to the retail community and what plans Amazon has for grocery in the near future.
FierceRetail (FR): What are some of the significant changes we've seen at Amazon and Whole Foods since the acquisition?
JoAnn Martin (JM): Since the acquisition, Whole Foods has gone through a transformation:
- Amazon lockers are now prominently standing at the front of Whole Foods.
- Price reductions and emphasis on the private brand have been a major push within the stores in marketing and signage.
- Prime member discounts are being applied to rewards customers at 10%.
- Delivery options have been added to or extended for Whole Foods.
- Amazon is carrying Whole Foods private label product and delivering it through Prime.
FR: How do you think consumers have reacted to the partnership thus far?
JM: Customers responded favorably to the price drops at acquisition and the accessibility of the private brands online. In addition, the discount for loyalty members is also a strong draw.
FR: Have there been any negative drawbacks to the acquisition?
JM: There have been a couple of negative drawbacks:
- Following the acquisition, Amazon’s decision to move to a centralized inventory model—no longer leveraging Whole Foods iconic “locally sourced” produce—was met with resistance. It opened the door for other grocers to steal market share, like Kroger, who strongly increased and recognized the importance of the locally sourced message to consumers.
- In addition to the pull back on locally sourced, there were many documented instances of empty shelves within the product and meat departments within Whole Foods locations throughout the transition. This provided a less-than-optimal experience for customers due to the inventory out of stocks this created.
FR: What changes do you expect to see in the next year or so?
JM: I believe we will continue to see the integration between Amazon and Whole Foods. Amazon will continue to expand its online offering of whole foods products and it will drive traffic and acquisition of new customers to the physical locations as a result. I would also expect Amazon to further develop the direct-to-consumer piece through their vast fulfillment network.
FR: Will the typical Whole Foods shopper change at all, or is the primary loyalty group still the same?
JM: I believe the coupling of Amazon and Whole Foods will help to acquire new customers to Whole Foods through leveraging the already loyal customer base at Amazon. It is too soon to tell though, in my opinion, whether the loyal customer groups prior to acquisition will continue to remain loyal or seek other grocers to purchase things that Whole Foods was originally known for, like locally sourced products.
FR: What does this one-year anniversary mean for other competing retailers?
JM: I believe this one-year anniversary will serve as a reminder for competing retailers the necessity to expand their online business and develop a more robust delivery and pick-up strategy in this inherently under-penetrated dissection of the retail industry. Retailers needs to examine their supply chains and ensure they have the inventory visibility they need to satisfy the demands of consumers. They need to continue to focus on developing their service level and transforming the experience within their store to offer consumers a differentiated experience in their stores.
FR: What else can you tell us about the changes over the past year?
JM: I believe this acquisition served as the catalyst for the industry to focus on changing the customer experience through additional services such as in-store pickup and delivery. This was the wakeup call that many grocers needed to begin the digital transformation journey, to try out new technologies such as shelf sensors to help with stocking and redefine the footprint of the store.
Many grocers are faced with changing customer needs toward fresher ready-to-go products and are being forced to transform their in-store experiences all the way to the services they offer. Though not all is attributable to the acquisition, it certainly was the catalyst that awoke the industry to drive toward more agile and responsive supply chain management while offering the customer the experiences they desired.