Amazon tech may reignite Whole Foods
Proposed union could revamp shopping habits
NEW YORK — Seeing Whole Foods products first in Amazon searches? Breezing through the grocer’s stores with an app that scans affordable fruits and seafood?
Those are among the possible scenarios that unnerved the food industry last week, when Amazon announced a $13.7 billion megadeal to acquire Whole Foods. The two companies have not yet detailed how their proposed union might change the experience for customers. But the deal has the potential to boost the outsized ambitions of Amazon CEO Jeff Bezos and Whole Foods chief John Mackey, each of whom has already radically altered the way Americans shop.
Amazon is a retail juggernaut hunting for ways to dominate groceries. Whole Foods is fighting to broaden its appeal while preserving its reputation on quality.
Here’s how a tie-up could help both companies advance their goals.
Pushing store brands
Like other grocers, Whole Foods is increasingly pushing its store brand products, most notably those under the “365 Everyday Value” name. If the deal goes through, those items could get prime real estate on a massive platform outside the chain’s 440 U.S. stores.
Amazon, in instantly acquiring a stable of its own grocery staples such as pizza sauce and peanut butter, could decide to give them favored placement in its search results. While some 365 products are on the site now, they’re through third-party sellers who charge higher prices than found in stores.
Working in Amazon and Whole Foods’ favor is the growing acceptance of store brands, also known as generic or private-label brands. Consider the expansion of discounters like Trader Joe’s, Costco or Target.
Redefining ‘convenience’ stores
Whole Foods blames its sales declines on the wider availability of
organic foods at mainstream grocers. With Amazon’s help, the chain may be able to set itself apart again with technology.
In Seattle, Amazon is testing a convenience store where sensors scan items so shoppers don’t have to wait in line for a cashier or scan items themselves. Amazon said it does not plan to bring that technology to Whole Foods, but it’s an example of how the checkout might get easier down the road.
Amazon is also expected to help Whole Foods fight its “whole paycheck” image by cutting costs and lowering prices.
That could open up Whole Foods to a much broader customer base.
Personalized offers
Amazon’s expertise with data crunching could benefit both companies, especially as Whole Foods moves to collect more customer information through the rollout of its loyalty program.
Amazon could also use that data for its own purposes, given the overlap in higher-income customers at Amazon Prime and Whole Foods. The company would gain insight on how people shop in stores, in addition to the information it already has on how they shop online. That could all lead to personalized offers that are tailored to get people to spend more online, as well as in stores.