One day we might look back at June 16, 2017, as the day the retail and grocery business changed forever. It was, after all, the day Amazon decided to stop dipping its toes in brick and mortar retail and instead dive in head-first with the announced $13.7 billion acquisition of Whole Foods Market. While the news itself made a big splash with the public, the overall ripple effect could send waves of change across the industry for years to come.
The deal gives Amazon a network of 450 Whole Foods stores in the U.S., Canada, and United Kingdom, many of which are located in affluent neighborhoods and come with a loyal customer base willing to pay a premium for high-quality groceries. It also potentially extends the online retailer’s existing grocery service, Amazon Fresh into new markets while also broadening the assortment of products sold. And almost overnight, Amazon goes from a niche player to a national powerhouse in the $1.4 trillion grocery industry. Combined with Amazon’s well-established expertise in logistics, customer data, and pricing, Whole Foods could become a transformational force in brick-and-mortar as we know it.
So what does it all mean everyone else? Retailers and grocers continue to feel the pressure from shifting consumer habits, with many struggling just to stay relevant. Amazon’s new push into the physical world will likely add to the pressure. Here are five things to watch for as Amazon and Whole Foods move forward:
Your local Whole Foods likely won’t change into a massive Amazon warehouse and fulfillment center overnight. But there’s a good chance Amazon’s already thinking about how to leverage these strategically located stores (as well as Whole Foods’ existing network of distribution centers) to get products to customers faster and more efficiently than ever. Especially as the company looks to develop its Amazon Fresh service into a leader in the small, but growing online grocery space. Somewhere between Whole Foods’ in-store experience and Amazon Fresh’s online convenience lies the potential for great synergy – especially when it comes to giving more customers access to the whatever delivery method they prefer.
People don’t just buy products; they choose experiences. And the most successful retailers today understand that experience matters. Whole Foods is a long-time leader in bringing experiences to its stores. Whether it’s through in-store cafes, bakeries, cheese tastings, or coffee roasting, Whole Foods customers have come to expect an opportunity to see, taste, touch, and learn about many products before they buy them. That type of experience remains a tough solve for online-only food retailers. Whole Foods is an opportunity for Amazon to double-down on the ability for customers to experience new products and how to use them. Will it extend these experiences beyond just food products?
Jeff Bezos was one of the first to propose the idea of delivering orders to a physical location other than a customer’s home or office. Today Amazon Lockers are commonplace, giving customers a secure place to receive orders whenever and wherever it’s most convenient for them. Having an additional 450 Amazon-owned locations could extend the service even further, providing new real estate for deliveries, returns or other shipping services that can’t simply be provided in the back of a 7-Eleven. While there’s no public plans for Amazon shipping centers, it’s certainly within the realm of possibility.
An industry wake-up call
Amazon’s big jump into the grocery business splashes water on the faces of just about everyone else in the industry. Now it’s up to grocers to innovate and refresh their business models in order to stay afloat. Will it lead to traditional grocers adopting more online shopping and deliveries? Will they be able to compete on more than just price? Clearly, customers will choose the experience that suits them best. They ultimately vote with their wallets. It’s up to grocers to gain a better understanding of all the data behind customer interactions, to be able to match pricing and promotions to a customer’s preferences, and to create experiences that delight and reward shoppers for their loyalty.
The landscape is changing fast – don’t get left behind
It used to be that Amazon was the leader in online shopping and services and Walmart was the king of physical retail. But now Amazon is building bookstores and could soon have its own massive grocery chain, while Walmart gets more aggressive online. Somewhat lost in all the news about Amazon and Whole Foods was Walmart’s announced acquisition of online fashion brand, Bonobos – not to mention its recent purchase of Amazon competitor Jet.com. In their quest to be the primary destination for consumers of all walks of life, both Amazon and Walmart have begun aggressively stepping on each other’s turf.
It’s further evidence the lines have blurred between physical and online retail and there’s no single path to success. It’s no longer just about stores or about prices, delivery speed or convenience. Those who succeed will do so by finding the right mix of products, prices, and technology to surround the customer with consistent, seamless, personalized experiences.
Will drone-delivered, organic kombucha come next? Maybe not tomorrow. But all signs point to the dawning of a new age of retail. And it’s only just begun to get interesting.