Amazon-Whole Foods deal could spur industry change

Grocers trying to compete with the threat of a combined Amazon and Whole Foods will have to make their stores more appealing, leverage locations to offer delivery and do a better job of collecting shopper data. They may also need to seek innovative partners.

Amazon’s planned $13.7 billion acquisition of the organic and natural foods grocer signals a massive bet that people will opt more for the convenience of online orders and delivery or in-store pickup, putting more pressure on the competitive industry. Though online orders account for just 1 percent to 2 percent of grocery sales, that figure is expected to grow.

Here’s a look at the changes that are expected to accelerate.

Grocery shopping is likely to get more sensory, as retailers try to make stores a draw beyond just picking up staples.

Kroger Co., has touted the opening of Murray’s cheese shops in some locations. Whole Foods, a leader in redefining the modern grocery experience, offers a “produce butcher” at a recently opened store in New York City.

Prepared foods are another way grocers are increasingly making their stores a destination. Some chains have classical musicians play as shoppers wander from wine sections to sushi stations or meet friends for a bite. And in a nod to the popularity of delivery companies, Kroger and Whole Foods have been testing meal kits.

Major grocery retailers were already stepping up their efforts in delivery and in-store pickup of online orders. And Amazon’s purchase of Whole Foods underscores the value of physical locations in offering such options. Many also say they will always want to do some of their grocery shopping in person to see what they’re buying.

Maintaining the right balance will be critical. Walmart has about 4,700 U.S. locations, with plans to offer curbside grocery pickup at 1,100 by the end of this year. Kroger has nearly 2,800 stores that operate under a variety of names.

Whole Foods’ footprint is far smaller with about 440 locations, though those are mostly in urban and affluent neighborhoods where delivery might be more in demand.

As sales declined at established locations, Whole Foods said it was hitting the brakes on expansion.