Well, that was fast
It was all but a foregone conclusion that I would look at Amazon this week. It has been all over the interwebs like a rash. It became the parent of Whole Foods after clearing its Us$13.7bn acquisition. As is the way of retail gorillas, the first order of business was price cuts.
Most of Whole Foods’ bestselling staples were made cheaper. And by bestselling I mean the virtuous stuff: Responsibly Farmed Atlantic Salmon Fillet, Whole Trade Organic Bananas and Animal-welfare-rated 85% Lean Ground Beef. These are actual names. Whole Foods, if you don’t know, helped create the market for organic, natural and “clean” offerings in the US. In reducing prices on its first day as the owner of Whole Foods (in some cases by up to 43%) Amazon was saying that it has the wherewithal to make Whole Foods affordable. The upscale chain has, over the past few years, gained the derisive tag “Whole Paycheck”, due to its reputation for being unaffordable.
Aggressive pricing (at any cost) is Amazon’s “thing”, so it was an easy win, and a strategy that has in the past made competitors’ lives miserable. This time, rival grocery stocks lost something like $12bn from their combined market capitalisation.
We all know though, that prices don’t only have to go low, but stay low if you’re to be any kind of real threat. Because that’s when price perception sticks. It should be worrying to competitors, however, that the e-com- merce giant is installing lockers in certain Whole Foods locations that will serve as pickup points for online orders. This means shoppers can order dog food and toilet paper on Amazon and then just “top-up” on fancier nosh like baby kale and organic butter at Whole Foods — eliminating the need to visit a rival store.
One of the complaints about Whole Foods was that its products had become too niche, so customers couldn’t complete their “shop” with them.
Essentially, Whole Foods stores now become distribution points — the deal basically gives Amazon more than 400 bricks-and-mortar stores in the US, Canada and the UK.
Customers will also be able to return Amazon items by putting them into said lockers.
For a long time now, Amazon has had designs on the grocery sector and we’re getting to see its hand.
Customer rewards
Three quite obvious moves that it announced were that Whole Foods’ private-label products will be available through the Amazon site, Echo and Echo Dot Alexa-powered speakers will be sold in Whole Foods (this is Amazon leveraging its new retail footprint to boost its consumer-devices business) and that Amazon Prime — the e-commerce group’s perk-driven scheme — will become Whole Foods’ customer rewards programme, allowing shoppers to gain Amazon rewards when they buy Whole Foods products.
I thought this was quite a cool quote from Whole Foods CEO John Mackey: “Amazon’s history of innovation could transform Whole Foods from the class dunce to valedictorian.” He stays on as CEO, but seemingly with less pressure.
Amazon’s plans for Whole Foods extend beyond $5.99 “asparagus water”, to fixing deeper-rooted issues at the organic chain, where profits have languished over recent years.
Mackey, who has quite a way with words, once referred to activist investor Jana Partners as “greedy bastards” that would have to “knock Daddy out” if they wanted to take over the company [Whole Foods].
1. Unilever’s retail experiment
Consumer goods giant Unilever is trialling a new pop-up. The company opened St Ives Mixing Bar in New York’s Soho neighbourhood, targeting millennials. Customers can choose ingredients from Unilever’s St Ives skin care brand to create their own facial scrubs and body lotions. Unilever operates two similar pop-up stores in New York, one for its Magnum icecream brand and another for its Pure Leaf tea brand.
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2. Cough drop Kitkat
Nestlé has launched a cough syrup flavoured Kitkat in Japan. The product was made in collaboration with TV Asahi, a Japanese television network. Former Japanese soccer player and commentator Yasutaro Matsuki appears on the packaging of the chocolate bar. The bars will be sold until the last 2018 Fifa World Cup qualifying game between Japan and Saudi Arabia.
3. Walmart opens organic food joint
Walmart, which is trying to diversify its brand image, has launched a healthy, organic, “farm-to-fork”, restaurant inside an Orlando, Florida store called Grown. The fast-food chain allows customers to choose a protein, grains, greens, and other ingredients that can be served in a bowl, wrap, salad, or sandwich. The menu also includes smoothies, avocado toast, homemade falafel and gluten-free French-toast sticks.
4. Big in Japan
Higher demand in Japan and lower input costs meant Tiffany & Co could report better-than-expected quarterly profit and sales. Net sales rose 3% to $959.7m in the second quarter ended July 31. Net income rose to $115m, or 92c/share, in the reported quarter.