We’ve all heard it by now: Amazon will acquire Whole Foods Market for an estimated $13.7 billion, disrupting and creating a number of potential opportunities for grocery and CPG brands. Amazon’s model for new growth sectors is to come in cheaper than the competition, even at the expense of taking a short-term loss. With Whole Foods, Amazon now has the footprint to bring its model to the high-end grocery category. Traditional grocery stores, online grocers such as Jet.com/Walmart, and even the meal subscription business will feel the impact.
Amazon also will have at its disposal a large volume of prime real estate for distribution centers—delivery times can become even more precise—high-income customers, and a big path to growth for Amazon Prime Fresh. While changes won’t happen overnight, the acquisition will inevitably enable Amazon to change consumers’ lifestyles once again. More people will order perishables, such as fish, poultry, and steak, over the Internet for home delivery. This means more time will be spent on “at home” devices (mobile, voice assistants, smart appliances) and in “at home” online purchasing behaviors. Commuters will be able to order dinner, or ingredients for dinner, to be delivered fresh upon their return home from; no more last-minute grocery store visits.
The Power Of User Intent Data
What else is Amazon gaining? For one, all of Whole Foods’ customer data. This acquisition will continue to increase the imperative for user data and targeting for right place, right time messages—from consumers to delivery agents.
Amazon’s customer base likely has high overlap with Whole Foods’ base, enabling Amazon to match online and offline behaviors for these customer segments. Amazon and Whole Foods will create synergies over time to drive higher revenue per customer on an ongoing basis. For grocery and CPG brands, this will increase the opportunity for highly personalized targeting and product marketing opportunities on Amazon. Amazon completely owns what products display on the Amazon search pages—in paid and organic results—and, with the help of more data, will be able to significantly increase personalization on a user-by-user basis. This includes greater targeting and relevancy for customized Product Display Ads, which showcase related products that align with a person’s segment or previous purchase behavior—both at Amazon or offline at Whole Foods. These capabilities will also extend to Alexa, which is now in tens of millions of homes and cars.
As Amazon/Alexa power more homes, Alexa will start to predict what we need, when we need it (e.g., when your fridge is running low on milk), based on previous purchase cycles. With Amazon selling Whole Foods brands, such as 365, expect more consumers to start letting Alexa and their Internet-connected things order for them—trusting Amazon’s products and delivery. Expect the new Echo Look (which has a visual interface) to garner more consumer trust in making the shift to buying food online when consumers can see exactly what Amazon will send them.
Where might Amazon go next to flesh out this dominant move into grocery? Recently, Whole Foods has been investing in Instacart for delivery, which Amazon could change—or even acquire. Uber is also doing billions of dollars in food delivery. Might Amazon tap into Lyft? As evident in this acquisition, nothing seems to be off limits for Amazon.