June 16, 2017
by Carla Hay
When online retail giant Amazon announced on June 16, 2017, that it was buying health-oriented grocery chain Whole Foods for $13.7 billion, the effects were immediately seen in company stocks: Amazon’s shares were up 3 percent at $993.40, adding more than $14 billion to its market capitalization, according to Reuters.
Whole Foods customers are mostly upscale consumers, and the company has been openly courting millennials (people ages 18 to 34), who tend to be more conscious about how and where their food is sourced. Here are five ways that an Amazon-owned Whole Foods could change the grocery industry and how people buy groceries.
Whole Foods will improve online orders and home delivery. Amazon has long been an industry leader in online retail and product delivery, and the company has been investing heavily in drones and drop-off centers. Amazon’s purchase of Whole Foods is an obvious move for Amazon to become the world’s top online grocery service. That means online food delivery services such as GrubHub, UberEats and FreshDirect will be hit hard by this competition from an Amazon-owned Whole Foods.
Whole Foods will become available in more countries. Whole Foods currently has 444 stores in the U.S., 12 stores in Canada and 9 stores in the U.K., according to the company. Expect more Whole Foods stores (and the company’s spinoff chain of stores 365 by Whole Foods Market) to open in several other countries over the years.
Competitors will lower their prices. Trader Joe’s and Sprouts are direct competitors to Whole Foods because they have been targeting similar upscale consumers. Expect them to lower their prices in order to better compete with Whole Foods, which offers extra amenities (such as in-store dining) that most of their grocery competitors do not. Meanwhile, other competitors such as Walmart, Target, Walgreens and Rite-Aid, which sell numerous other products besides groceries, will also have to reconsider their pricing and inventory strategies.
Whole Foods will become more of a lifestyle destination. Just like Starbucks is repositioning itself as more than just a place that sells coffee, Whole Foods will expand its offerings beyond groceries in order to take advantage of Amazon’s massive inventory. Whole Foods already sells health products and clothes, but expect Whole Foods to revamp spaces into lifestyle destinations that do things such as sell books and offer wellness courses. Over the next several years, Whole Foods’ cafeteria-like spaces might start to look more like lounges, which is how Starbucks is already planning to reinvent its business.
Whole Foods will offer more customization for buyers, based on their “customer profiles.” Just like Amazon has become adept at recommending products and giving promotional discounts based on consumers’ past purchases, Whole Foods will likely adopt the same marketing strategy for its customers by creating profiles that will involve things such as rewards/member club points that may or may not be tied to Amazon purchases.