Amazon generates a lot of buzz around deals on a wide range of products for its giant Prime Day promotion. Even for "The Everything Store" though, this year's sale includes some unlikely ones: Icelandic cod fillets, for example, and boneless, air-chilled chicken breasts.

The fourth annual Prime Day--a 36-hour frenzy of sales from July 16-17--will for the first time include deals at Whole Foods stores. On Tuesday, Amazon announced Prime users who spend $10 at Whole Foods will receive a $10 credit to use during Prime Day. Amazon credit card holders will receive 10 percent back, instead of the standard 5 percent, when they shop at Whole Foods.

Amazon acquired Whole Foods last August for $13.7 billion. By including the chain in its much-hyped Prime Day event, the e-commerce giant is seizing an opportunity to become a more credible force in the grocery business.

"That's a really clear indication they're certainly involving the stores quite a bit and driving traffic to the physical stores and back through the Amazon online ecosystem," says Christina Anderson, associate director of e-commerce at Kantar Consulting.

Breaking into the $800 billion grocery industry is no easy feat. According to GlobalData Retail, Amazon controls less than 1 percent of the U.S. food and grocery market, while Whole Foods holds an additional 2 percent. (Walmart has the biggest share, with 14 percent, while Kroger is second, with 7 percent.) Amazon has struggled with grocery-delivery services, shutting down its Amazon Fresh program in several cities last year.

Amazon is, however, the market leader in online grocery sales, which are expected to grow to $100 billion by 2022,  according to the Food Marketing Institute and Nielsen. Anderson says that by selling more consumable products--including a recent expansion of private labels--Amazon is paving the way to becoming a more well-rounded grocery seller. More broadly, it helps Amazon build trust with online grocery shoppers when it comes to food quality.

On the brick-and-mortar side, earlier this year Amazon installed lockers at Whole Foods stores to allow shoppers to pick up their online purchases. The move towards creating an online-offline shopping experience puts Amazon in a competitive position with other grocery retailers, Anderson says. 

Amazon has rolled out several other changes to Whole Foods since acquiring the nearly 500-store chain: slashing prices of certain products as much as 43 percent and offering Prime members an additional 10 percent off most sale items at select locations. It has also installed displays offering deals on Kindle and Echo smart speakers, and pushed into private labels for products such as sparkling water.

Amazon could use Prime Day as a springboard for prioritizing its 70 private brands, Anderson says, which might make it difficult for smaller food suppliers to compete for visibility on Whole Foods shelves. The emphasis on private labels will help drive membership to Amazon's $119-a-year Prime service, as some of the deals for those goods are Prime-exclusive.

Amazon "is still a smaller player in the grocery space," Anderson says. "But because of the reach of the Amazon platform, one certainly not to be ignored."

Published on: Jul 12, 2018