Several months ago Amazon jumped feet first into the grocery industry with a $13.7 billion acquisition of Whole Foods. Since then the U.S. grocery industry has been speculating on what the online retail giant will do with a supermarket known for catering to shoppers who eat vegan cookies and drink kombucha.
Here are a few items that could be especially important for grocers.
#1: More Warehouse Access
Amazon now has access to 1 million square feet of warehouse space for food distribution. Whole Foods has over 460 brick and mortar retail stores, and even before the acquisition, Amazon had already started same-day online grocery service with AmazonFresh in a limited number of markets in the U.S. Nonetheless, if Amazon wants to become a dominant grocery industry, this is merely a stepping stone. They will need to acquire more food distribution space and a rather large investment would be required. This is something to watch, but it is not a game-changer—yet.
#2: High-Quality Reputation
Although online shopping is growing strongly, it’s still a small percentage of the total shopping dollars since consumers have still shown some reluctance to shopping for food online. Many shoppers want to see their food selections for themselves to make sure their avocados are just ripe enough for that guacamole they’re serving at their taco party. Whole Foods, however, has a reputation for high-quality fruits and vegetables that could help more shoppers who were previously hesitant take an online ordering leap of faith.
#3: Industry Knowledge
Amazon now has an inside perspective and is acquiring more knowledge very quickly about the grocery marketplace. This insider information could be the start of a major transformation in the industry.
#4: Data Driven
Amazon is all about mining data. They know everything about their customers and they know how to capitalize on the information. Now that Amazon has entered the grocery business, food stores that haven’t been gathering information on customers are immediately behind. One of Amazon’s strengths in retail is the way it captures purchases and makes suggestions for new ones. This one IS a game-changer.
#5: List Subscription
Taking data to the next level, Amazon’s larger ambition is likely to turn grocery shopping into a subscription business. Amazon is excellent at creating repeat purchases, and there’s nothing people need more regularly than food. Amazon wants customers to think of them when their fridge is empty. That’s why Amazon Prime subscriptions could eventually include your typical grocery list. Not only would it save customers a weekly trip to your store, it could spare them the meal planning, too. All the recipes and planning options are found right in the online store, allowing groceries to go directly into the cart.
It’s been said, “The more you can create a consumer that doesn’t have to think, the better.” That’s why Amazon will likely work hard to make grocery purchases as seamless as possible. Grocers that want to win must keep up with this type of innovation.
What it Means for You
The environment keeps changing. That means you must keep changing, too. There will always be room for in store shopping, but if you aren’t offering online shopping you are putting yourself at a disadvantage.
You don’t have to jump in feet first. If you’re just starting, focus on learning and beginning to explore. Try new things. And don’t feel like you need to tackle it alone. Rely on those who have experience and know what does and doesn’t work. We’ve been doing digital marketing for grocers since before digital was even “a thing.” We know your industry and we can help guide you, even in the smallest steps forward.
We will also continue to keep watching Amazon and Whole Foods and report on the things we see changing.
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