A lot of people thought, when Amazon acquired Whole Foods, they had just witnessed Jeff Bezos' first big business misstep. Coming in at a cool $13.7 billion, this particular acquisition is one for the record books. Now, that they've just passed their one-year anniversary, I thought it would be interesting to look through the lenses of experts plus some amazing data, and see how the year really went, whether or not it's working, and what we can expect for year two. Is Amazon + Whole Foods a match made in heaven, or are they destined for divorce?
To pull off this kind of review, the expert panel needs to be top notch (which they are) so the opinions expressed in this article were influenced by the following retail, data, and business heavyweights: Sterling Hawkins, Head of Venture & Innovation at CART (Center for Advancing Retail and Technology), Gary Hawkins, Co-Founder of CART & Career Retailer, Anne Marie Stephens, CEO & Founder of Retail Innovation Lounge & kwolia, and Eli Portnoy, CEO & Co-Founder of Sense360. With that, let's dig into the goods.
Why Did He Do It?
The million billion dollar question everyone is dying to ask Bezos, and with a year's worth of data, we can begin to see why he pulled the trigger on such a massive acquisition.
- The grocery market is ripe for innovation, and unchanged for decades.
- Great opportunity to learn a new business with a small footprint, as Whole Foods is only 450 stores to date - which also means 450 new distribution points to expand.
- A lot of demographic overlap, fifty percent of Whole Foods shoppers were already Prime members, and eighty-one percent of Whole Foods customers also shop on Amazon.
- A great opportunity to create a deeper relationship with consumers by multiple touch points and interactions across multiple markets.
- A new avenue to lock people into the Amazon ecosystem.
The Intersection of Whole Foods Customers + Amazon
- Folks who frequently consider Whole Foods were twenty-five percent more likely to use Amazon
- Folks who frequently consider Whole Foods were fifty percent more likely to be Prime members.
- Forty percent of Prime non-members who frequently consider Whole Foods said the potential benefits of this partnership increases their likelihood of joining Prime.
- Fifty-six percent of Prime members who frequently consider Whole Foods said this partnership increases their likelihood of retaining Prime membership.
What we can see from this data is a self-serving cycle where Whole Foods is driving traffic to Amazon while Amazon is driving traffic to Whole Foods.
"I want to make it fiscally irresponsible to not be a Prime member." - Jeff Bezos ?
What About the Competition?
Sense 360's Exclusive Report on this acquisition and their first-year progress, also shows us some interesting insights about what this partnership is doing to the competition. Using Trader Joe's as an example, their data showed that over the past year, Whole Foods has taken an astounding four percent of market traffic from Trader Joe's. And it isn't only Trader Joe's. When there is another competitor within a one-mile radius, the gains are not limited to Trader Joe's. Whole Foods is showing head-to-heads gains with every single market competitor.
"Amazon is a company that spent $23 billion dollars on research and development last year. To give you some perspective, that sum is larger than Dollar General's entire market cap." - Sterling Hawkins, Head of Venture and Innovation at CART & 5th generation retailer
Data Is Now A Necessity
This is so true, and I really feel for the giant chains who, up to this point, have collected no data on their consumers, have built no profiles, and really cannot personalize the shopping experience per individual person. All businesses need data because it helps them to make smarter decisions, removing much of the guesswork. Without data, these businesses are trying to do exactly what their competitors are doing but without insights, and without a "behind the scenes" view of buyer behavior.
Into the Future: Beyond Transactional
Amazon is forcing their competitors to wake up, to think about the future of retail and grocery, and to recognize their own weaknesses with the hopes of staying in the game. Amazon makes for a fierce competitor because they are thorough, they aren't afraid to take risks, and they execute very, very well. The ecosystem they are building is one that goes beyond the transaction to meet their consumers across multiple platforms, in many different forms, and to do it all in a way that is catered directly to that individual. With Prime memberships sitting at over 100 million across the globe, that sounds like an almost impossible feat, yet Bezos and his teams are making it look fairly easy.
One Last Point
When we talk about a buyer profile, I want you to consider how many touch points Amazon has created just in your life. The amount of data and insights Amazon is amassing will only help them learn more, faster because they are basically building an entire user profile through choices made in entertainment, grocery, video, shopping, and app preference. With this data, Amazon is already showing us, in the first year, that they can monitor their market, react quickly, pivot, innovate, and disrupt, while everyone else just watches.