AMAZILLA DEVOURS WHOLE FOODS
The tech beast that ate the book business is chowing down on Whole Foods, a grocer known for organic foods. The combination makes ethereal social sense, but what of the strategy. Here’s my guess.
Amazon Fresh, the online grocery business, could not overcome the notion that shoppers want to inspect the food. Like thumping the melon, squeezing the lemon and smelling the pears. That limited their growth in the grocery category. Hey, if I decided to buy my vegetables online, would I buy my meat and milk the same way? Fat chance.
The acquisition of Whole Foods gives Amazon a chance to mitigate that problem and at the same time, give WF’s loyal shoppers another path to purchase. Plus, some non-perishables can be droned from a WF parking lot or roof right to your door. Plus you can place your order on Echo or the newer personal assistant. Nice.
Whole Foods needed this acquisition. It ‘s like the definition of sailing. They were slowly going nowhere. At great expense.
The acquisition gives Amazon an established supply chain that they won’t have to build themselves. I guarantee Amazon, the Merlin of logistics, will improve it.
Amazon will get 400+ locations many close to upscale areas. WF had to locate where they do because they are full price sellers. That strategy of course gave rise to the endearing sobriquet “Whole Paycheck”. This portion of the perception of the WF brand (and the prices that drive it) will impede its growth into moderate/lower income areas. I’ll bet Amazon will work to lower prices to attract a greater share of all grocery shoppers who want health conscious food but don’t believe food grown by The Peoples Vegetable Commune in Pricey Valley, California is worth the difference. Besides you can go to Costco or Sam’s whose groceries are cheaper and besides, you can’t taste the organic premium. Such a brand repositioning can be done…Target did it in the reverse with cheap chic.
The real lesson is one of the significant costs of brand building. Online brands can build their brand awareness far more cheaply than brick and mortar retailers. It has always been just a matter of time until online retailers tried their hand at physical reality.
One thing to watch: It will be interesting to see how Amazon reacts to face-to-face customer service. Can they add value or will they leave that part alone. They will surely establish metrics if none exist.