Amazon Grocery Continues to Grow with Whole Foods Deal

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Amazon has recently upped the shock and awe factor for other retailers by making a $13.7 billion deal to acquire Whole Foods.

This coupling comes on the heels of projects like Amazon Go, which allows grocery store shoppers to select their merchandise and simply walk out the door, and Amazon Fresh, the Amazon grocery delivery service. The retail giant has had its eye on the $606 billion American grocery sector for some time, but that hasn’t stopped anyone who’s anyone from speculating about Amazon’s plans.

We Don’t Know What We Don’t Know

There’s a lot that remains unclear about the Amazon Whole Foods acquisition, or if it will even come to fruition at all.

Amazon retail has long been a thorn in the side of big box companies like Walmart, which may be why the industry is suddenly so jumpy. Walmart recently invested millions of dollars to expand its online presence in order to catch up with Amazon, but if Amazon essentially turns Whole Foods into an Amazon-branded grocery store that also happens to feature Amazon items, this Amazon expansion could literally create Amazon Supercenters.

But no one knows. No one is certain of what’s going on behind the scenes, except that Amazon is trying very hard to buy Whole Foods. The company’s reasoning may have nothing at all to do with becoming the biggest retailer ever in the history of food, and more with using Whole Foods as a type of loss leader in order to promote Amazon technologies.

Or, this could simply be another way Amazon is protecting itself against a downturn in consumer spending by diversifying. For example, about eight percent of Amazon’s fourth quarter revenue, to the tune of $44.68 billion, came from Amazon Web Services. So far, there still seems to be plenty of room in the market for other cloud-computing companies.

Is the Amazon-ocalypse Coming?

Amazon is an amazingly resilient company.

This resilience has resulted from a combination of careful strategic planning and having a knack for being in the right place at the right time, but even the retail giant can make missteps along the way. It’s played house on and off over the years with pop-up stores, mall kiosks and now the two “click and collect” shops in Seattle. However, it hasn’t seemed to really be satisfied by any customer-facing configuration yet.

This might mean that rather than ushering in the end of all grocery stores ever, Amazon is eyeing Whole Foods for a jumpstart on customer-facing infrastructure that it can then put its signature on. No one’s arguing that Amazon hasn’t completely revolutionized retail and continues to do so, but the sudden drops in stock prices for every major grocer in America upon the acquisition news was probably an overreaction.

Amazon makes no secrets about its desire to service shoppers in every aspect of their lives, but those same buyers have pushed back when it came to grocery shopping, because even busy people generally prefer to choose their own produce. The grocery store is sometimes the only escape a parent of an unruly toddler has, so why would Amazon’s prime demographic, the Millennials, all let it go so easily?

Instead of worrying that Amazon is going to usher in the end of competition among grocers, the  more appropriate response would be to view Whole Foods as just one more outlet for Amazon to service its customer base.

Immediate Opportunities for Amazon with Whole Foods

Amazon has some immediate opportunities with Whole Foods, including little things that could help push sales higher.

For example, stocking Amazon devices in these stores makes sense, as does giving Alexa the ability to order specific items from Whole Foods for delivery through Amazon Fresh. Amazon Basics branded items could fill the shelves in place of Whole Food’s house brand. These are small things that might increase sales volumes dramatically.

But, knowing Amazon, these Whole Foods stores will become more than just markets. They’ll likely experiment with changes to the most grueling parts of the shopping experience, like tedious check out lines and locating hard to find items in the shop. Grocery delivery is almost certainly going to be part of it, but the Whole Foods distribution network will likely require some retooling to meet Amazon’s demanding logistics standards.

The Amazon-Whole Foods deal seems to be a first step in what is a much greater plan for the online retailer. Innovation will almost certainly happen within the testing grounds that Whole Foods provides and like with those improvements that have come before, the entire industry may end up adopting the same standards. Amazon has a long track record of turning inefficient processes into marked efficiency, bringing the company into the grocery realm could be a great relief for shoppers and grocers alike.

 

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