Amazon takes over *special souvenir edition*
6 September 2017
COMING UP
Now: Amazon Special
Next: Brands in discounters
Later: What about Wilko?
Last week saw the formal takeover of Whole Foods by Amazon, given the news only broke earlier this year, it all seemed to be conducted rather quickly given the lack of any real competition concerns.
Amazon then announced a raft of price cuts Friday and these went live last Monday, naturally this makes sense, Whole Foods are effectively land locked by their 'whole paycheck' image which means they're so expensive that a whole shop in there is out of the question.....
So the price cuts come and there are some elements to consider around the store with the comms and what the future may hold.
Any surprise that Amazon have cut prices is ridiculous, they're renowned for their strength on value within online so why would the physical store be different?! Especially one that struggles with value like Whole Foods do.
The key message is the one above, almost chillingly it reads 'this is just the beginning'....
Note the prices are in dollars(!) I made two visits last week whilst in the States to see what the reality would be at the shelf edge.
The key highlight of the signage and other comms around the store was the usage of the Amazon logo across the store, leaving customers in no doubt who was reducing the prices...
Shelf labels featured a flash which noted a 'new lower price', no sign of these being deals. There was a message of 'growing something good' which ties in with the Whole Foods messaging and ethos, close to growers, no artificial elements in food etc.
Alongside the growth which will end up with global domination, by Amazon. (allegedly).
Produce was a key battleground and there was a fair amount of signage around the category, large A4 signs showed the price cuts alongside the usage of Amazon and Whole Foods logos.
A whole $1 off Gala apple (organic) per kg was a very impactful cut, huge savings and setting the value barometer to 'stun' for customers.
The Chicken counter had been relocated to near the checkouts for the pick up based sale. Another strong price cut here too, with $2 off each Chicken.
Note that like the Apples, the Organic / welfare standards remain in situ on Poultry - there is no downgrade to a lesser product.
It's highly unlikely that Amazon will look to change the ethos of the chain, Whole Foods are renowned for their health/organic credentials so Amazon will look to retain this whilst sharpening value and enhancing Prime in store etc.
Further cuts here; core staples - high volume lines that will be notable, customers will feel the impact across Milk, Butter, Bananas etc.
All volume indicators and this will aid Whole Foods in the interim, meaning any 'top up' shoppers would be impressed with a lower initial basket price.. Perhaps tempting them to spend more?
Baby steps, but the intention is to drive better value through the key value lines then step on with added extra - like Prime.
Instacart won't be sticking around one suspects, with Amazon utilising lockers and then the final yard of delivery, alongside pickup no doubt as well for online customers.
Will Amazon persevere with the abundance of fresh foods that Whole Foods offer? One would hope so given the differential they provide in the marketplace, however this remains to be seen.
Amazon will work very hard at Whole Foods, bringing prices down and generally doing what they've done online. However it's then hard to see how cutting costs and streamlining can not then become part of their wider strategy......
Initially, a week in and the press was certainly positive enough about the price cuts, Amazon got decent press from around the marketplace for their work initially.
The interesting element was the usage of their logo alongside Whole Foods, clearly it's a partnership and using Amazon as part of that value push is smart, Amazon are synonymous with value after all.
Going forward, it's clear to see that Amazon will work their offer into the Whole Foods estate relatively quickly and some will be light touch but decent impact work.
Amazon lockers are an example of where they can drive traffic to stores via pickup and then hopefully entice them to spend with Whole Foods via lower prices, or even coupons inside the parcels they collect from the store itself.
Prime linkage will be important and expect Amazon to utilise vouchers and incentives here too.
In terms of wider cost saving, it will be interesting to see how Amazon utilise scale around logistics, delivering to supermarkets is infinitely harder than a DC and then delivering to homes... Especially when you factor in temperature controlled trucks too, but Amazon via Fresh do have experience in this arena.
The front end / checkouts / registers look like the obvious target for efficiencies, especially given their work with their test store in Seattle - no registers and just walk out of the store seemingly....
That concept will need further work, but Amazon are blessed in a way. They're not bound by conventions around food retail and what will / will not work....
That message of 'more to come' from the enlarged Amazon/Whole Foods operation will frighten many in the industry in the months/years to come.......
From the Grocery Insight newsletter archive, first sent to subscribers on 6 September 2017. Steve now writes at read.groceryinsight.com. See also the blog archive and briefings.