Since news broke on Friday that Amazon plans to acquire Whole Foods talk has turned to what this might mean for the natural food chain, the online behemoth and retail in general. The media flew into full speculation mode with stories that ranged from the predictable to the paranoid, many of them envisioning how technology would evolve the grocery aisle while others read like obituaries for all other supermarkets. From all of the chatter a few interesting ideas emerged. Here, some of the top predictions for how the Amazon effect might be felt across brick-and-mortar, plus a look at the humor dominating the Twitterverse.
On news of the $13.7 billion purchase, Amazon’s value shot up by more than $11 billion on Friday. Meanwhile, competitors’ stock prices wilted with Walmart falling 4.7% to $75.24, marking its worst day in more than a year. Costco dropped by 7.2% to $167.11, a low not seen in about six years, and Target slid by 5.1%.
Cowen analysts reported to CNBC that should the deal close, Amazon will skyrocket from the ninth largest grocery store to the No. 3 spot after Walmart and Kroger.
2. Price cuts
The Los Angeles Times reports shoppers will finally see some relief at what’s affectionately been named Whole Paycheck for the chain’s eye popping prices. “Amazon will take a virtual sledgehammer to Whole Foods’ pricing structure,” Bankrate.com senior economic analyst Mark Hamrick told the paper. “This is an earthquake rattling through the grocery sector.”
But while cheaper peaches and pears sound good, the Huffington Post offers a warning to Whole Foods suppliers.
“Amazon’s takeover of Whole Foods means that it can target and eliminate regional competitors one by one as it did with its online competitors. When Diapers.com emerged as a competitor to Amazon, Amazon simply sold diapers below cost until the company capitulated and sold itself to Bezos. There’s no reason to assume Amazon wouldn’t bring the same predatory pricing strategy to bear in every city in America. Why wouldn’t it? Even though predatory pricing is illegal, the government hasn’t enforced those laws for decades. Whole Foods tends to source from local farms as part of a commitment to localism; these farms will now be negotiating with a much bigger entity that is committed to a ruthless model of efficiency.”
Ultimately, the threat, if there is one, is Amazon’s disregard for profitability, according to ABC News. “Amazon is a unique threat to many retailers because it doesn’t mind losing money for long stretches. The company might be able to sell inexpensive groceries as it makes its money from its cloud computing business and its gigantic online marketplace,” Neil Saunders, managing director of the research firm Global Data Retail told the news outlet.
3. New suppliers
Along those same lines, Bloomberg Technology has gathered insider information from an unnamed source that suggests the shelves will soon look different at Whole Foods. “Amazon would also look to change Whole Foods’ inventory, introducing its own private-label products to replace items deemed too expensive to have mass appeal…That fits with Whole Foods private-label push to compete on price, and gives Amazon a bigger foundation on which to develop its own food brands.”
4. Greater collaboration between brands and stores
If these changes in suppliers and pricing come to pass, some say it will affect how all grocers and brands work together. “I think this will push traditional grocers closer to working with major packaged-goods companies” to share data and marketing plans around what consumers want, said Mike Sands, CEO of Signal, a marketing technology firm, to the Los Angeles Times. “If I’m a Kraft Foods or a Kroger, I’m asking, ‘What can I do to collaborate in a marketplace that includes Amazon?’”
5. Food delivery
NPR focused on what many others have speculated on as well: how Whole Foods will help Amazon quickly scale its Amazon Fresh grocery delivery service. “The deal now gives Amazon control of those 431 stores, nearly all of which are in neighborhoods that are more affluent and younger than America as a whole. Those stores solve much of Amazon’s “last mile” delivery challenge for fresh groceries,” said David Portalatin of the NPD Group, a market research company.
6. Online/Offline connection
As brick-and-mortar stores scramble to retrofit their stores for an e-commerce world, Forbes says Amazon—as usual—may be able to beat them at their own game. “Imagine a world in which you could “purchase” all the canned goods, dry goods, paper products, and household products you need online and at Amazon’s low prices. Then you proceed to your local Whole Foods where those purchases are ready for pick up. You pick out your produce, meat, fish—all the things you want to see in person—at the store, then pay for everything at once and leave with a full set of groceries.”
7. One-stop shopping
This concept of all-under-one-roof has long been the purview of stores like Target, where mom goes in for laundry detergent and leaves with new shoes for the kids and coffeemaker—except even the bull’s eye has failed to score with groceries. “Everyone has to manage their money, everyone has to buy toilet paper and these days everyone wants to eat organic,” said Colin Walsh, CEO of Varo Money, a mobile-banking service, told the Los Angeles Times. “Whole Foods and Amazon together will make all that seamless, which is what millennials expect.”
8. A Monopoly on a Demographic
With half of U.S. households reportedly already using Amazon’s Prime delivery and streaming bundle, the Atlantic says it’s easy to see that adding perks at Whole Foods could further Amazon’s ambition of being the store of choice—especially for one key demographic. “With Whole Foods, where wealthy families regularly spend $500 a month, Amazon could expect its richest customers to spend thousands of dollars a year through Amazon. As Whole Foods customers are urged to sign up for Prime—and as Prime customers get enticing deals at Whole Foods—Amazon’s penetration of the affluent yuppie market should grow (even as it offers discounts to lower-income Americans).”
For The New York Times, the question isn’t about the produce, it’s about the people. Given Amazon’s Go stores, which feature cashier-less shopping, the paper asks what becomes of the employees? “Amazon didn’t go put a robot into the bookstores and help you check out books faster. It completely reinvented bookstores. The idea of a cashier won’t be so much automated as just made irrelevant—you’ll just tell your Echo what you need, or perhaps it will anticipate what you need, and stuff will get delivered to you,” Erik Brynjolfsson, director of the M.I.T. Initiative on the Digital Economy, told the paper.
10. Amazon device monopoly
The Huffington Post offers a darker look at how Amazon could coerce shoppers into the Amazon-sphere. “Amazon is excluding Amazon Prime video from Apple TV so that Prime members will buy its streaming device instead of Apple’s. As the smartphone market commodifies and transforms, Bezos could simply use his combined physical and online footprint to keep you from even seeing prices at his stores unless you are using Amazon-approved electronic devices. If Amazon were just one of many stores that would be one thing. But Amazon is quickly becoming the dominant way to buy and sell.”
Retailers are clamoring to redesign their loyalty programs in an effort to boost revenues as well as amass a cache of valuable consumer data.Read more
Public hearings on what’s to become of the North American Free Trade Agreement once negotiations kick off began Tuesday, and those speaking on behalf of retail held little back.Read more
Though it’s teetering somewhere between dead and alive, it seems there’s more than one way to skin a BAT.Read more
In today’s competitive sourcing arena, Peru is an ideal destination for producing high-quality apparel, given its 5,000-year history in textiles and ability to adapt to current market needs.Read more
The European Commission has fined the tech giant for promoting paid results over others in its shopping comparison service Google Shopping.Read more
Debt is making it difficult for longstanding apparel brand Eddie Bauer to transform and improve performance in the current retail environment.Read more
Womenswear is changing it up and taking a more one-style-doesn’t-fit-all approach for S/S’18.Read more