How Does Whole Foods Change With Amazon

Whole Foods shoppers have been watching changes now that Amazon owns it. Does the individuality of smaller and new brands remain? How about autonomy? On Wednesday, Whole Foods debuted a loyalty program that offers special discounts to Amazon Prime customers.

Whole Foods shoppers have been watching changes now that Amazon owns it. Does the individuality of smaller and new brands remain? How about autonomy? On Wednesday, Whole Foods debuted a loyalty program that offers special discounts to Amazon Prime customers.

Amazon Prime Whole Foods Deal

The loyalty program  answers where Whole Foods is going with prices. The card will include 10 percent off hundreds of sale items with rotating weekly specials. What of new and exciting brands such as Beyond Meat, Noosa Yoghurt and Nona Lim who all flourished at Whole Foods, is that still an option? Wholefoods became these brands first national retail partner and helped them reach customers.

Amazon paid $13.7 billion in June, not chump change so autonomy is a tough question and one food entrepreneurs and pioneers will be watching. Amazon has already announced free two-hour delivery from Whole Foods stores for members of Prime, its subscription club with fast shipping and video streaming.

The new loyalty strategy will test whether the deal for Whole Foods brings with it the feared feared disruption by shoppers and competitors alike. An intensified price war in what is estimated as a $800 billion U.S. grocery industry will bring change but not what all shoppers want it and certainly a worry for the major players. Retail apocalypse was the term giving to online shopping decimating brick and mortar retailers. Are we about to see the same in grocery wars?

The U.S.. grocery space is dominated by Walmart and Kroger. Att his time Whole Foods has just  463 U.S. stores and around a 1 percent share of the fragmented U.S. grocery market. Whole Foods co-founder and Chief Executive John Mackey told Reuters that the closely watched basket size, the number of items purchased per transaction.  has grown since the merger.

The new perks through the loyalty program and Prime members is aimed to reinvent the image of an overpriced hipster store.  What the Whole Foods loyalty card is a ready made audience of 8 million or so Amazon Prime members.

Amazon has also just announced they are bringing on another two Amazon Go stores, they are not staying idle in the grocery game and are utilizing technology. Prime members simply scan the Whole Foods app or input their phone numbers at the checkout to receive the discounts.

amazon prime whole foods discount app

There have already been quite a few Whole Foods’ prices come down, but many remain expensive. Will that change? Amazon,has got to where it is by loss leading, using the massive profits from its AWS cloud business to cover loos making areas as it seeks market share. So it has form.

“Given how important it is for Amazon to provide value for their customers, and customers value lower prices, I would think they’d be comfortable operating Whole Foods at a lower margin while experimenting with the operating model,” said Tom Furphy, former vice president of consumables and AmazonFresh, and now chief executive of Consumer Equity Partners.

“Whole Foods is going to become more and more and more competitive,” said Mackey. This brings us back to the smaller food entrepreneurs. How much a haircut  will they have to take, and can they survive?

Hain Celestial Group, one of Whole Foods’ biggest suppliers, says a lower . profit margin may be worth it. “I never mind giving up margin for growth,” Hain CEO Irwin Simon told Reuters.

Small grocers are already under inreasing pressure as German discounters Aldi and Lidl lower prices. Walmart said it will keep offering everyday low prices to all shoppers at its more than 5,000 U.S. stores. Kroger Co is the largest U.S. supermarket operator with about 2,800 stores, uses shopper data to personalize loyalty discounts as does Safeway..

Kroger CEO Rodney McMullen told Reuters earlier this month that the chain’s prices will “absolutely” be lower than Whole Foods on the typical shopper’s basket of about 50 items per week. “It’s easy to beat somebody on four or five items,” McMullen said. Kroger tested an annual grocery delivery subscription but tabled it due to insufficient demand, he added.

Fear lies with the small and as yet undiscovered brands, will that still happen with one central body based out of the Whole Foods headquarters in Austin, Texas doing all the ordering.

“A lot of the novelty, value and competitiveness of Whole Foods was being a launchpad for small, local and undiscovered brands,” says Erica Liu-Williams, founder of gr8nola, which currently only sells through ecommerce.

Liu-Williams is an example of where we maybe going here. She thought of Whole Foods as her ideal first retail partner but says “These decisions may turn [Whole Foods] into a conventional store.”

With razor thin margins the centralization of decision-making could mean the difference between staying small through pop up stores, ecommerce ot farmers markets. The additional fee of 3 to 5 percent of sales to cover the costs of restocking shelves and running promotions maybe too bigger burden. Also there is the added requirement for food companies to use a third-party service for in-store demos, a critical means of promoting a new brand. Anyone walked around Costco on a weekend?

To be fair before Amazon, Whole Foods was failing in many ways.. Same store sales were slipping and the store was waning in profitability over the past several years.

There is also competition to the core Whole Foods lines. Kroger, Safeway and Target are increasing organic and healthy foods. Whole Foods is wary of maintaining it’s niche and not losing it’s smaller suppliers with a “ new hybrid structure allows our regional buying team to focus exclusively on smaller, local suppliers,” according to a Whole Foods spokesperson.

“We remain committed to supporting local brands, and working with suppliers of all sizes to create win-win partnerships.” says Whole Foods

It could all turn out fine, to work with price cutting loss making with funding AWS style seems on the cards.  If not it is going to be very tough for an exciting new brand to come forth one would think.

“While I think all vendors that work with Amazon Whole Foods are encouraged by what’s possible, longtime partners of Whole Foods are certainly looking at it with trepidation because of what we don’t know,” says Michael Palmer, who runs the ice cream brand McConnell’s.

“Retailers will be challenged to improve the in-store experience,” says Peter Rahal, co-founder and CEO of RXBar. “You can’t compete with the things going on online. You got to elevate the experience from the smell of fresh coffee to pizza being made.”

For it all to work and satisfy existing Whole Foods shoppers, new shoppers such as Prime members and the suppliers and investors the stores will need to become more efficient BUT not to become more corporate is that will cruel the appeal. The focus for that will be organic and natural foods at more affordable prices with introductions by rotating specials. Tehre are many players in this jigsaw to maintain Whole Foods as a non bland corporate grocer.

Source: Entrepreneur, Reuters

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