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| [Whole Foods and Amazon]. (n.d.). Retrieved from https://slickdeals.net/blog/ wp-content/uploads/2017/06/wholefoodsamazonfinal.jpg |
On June 16, 2017, internet giant Amazon announced that it
would acquire organic grocery store Whole Foods for $13.7 billion (Turner, Wang, & Soper, 2017). Although
somewhat surprising, many consumers, myself included, saw this as a natural
extension of a rapidly growing company. Although originally an online shopping
platform for books, movies, and CD’s, Amazon’s reach has since stretched into
everything from food and clothing to music streaming and the production of its
own television shows and movies. Amazon’s multi-channel marketing and wide
range of products often allows them to lower prices while still making a
profit, as they will at Whole Foods (Levy, 2017). Consumers who are
primarily concerned with economic value will certainly appreciate this change (Babin
& Harris, 2016, p. 29).
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| [Avocados at Whole Foods]. (n.d.). Retrieved from
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However, the
most interesting part about Amazon’s acquisition of Whole Foods is the fact
that an exclusively online retailer has now merged with a retailer that
primarily operates in-store. This will inevitably change the consumer
experience for both Amazon and Whole Foods customers.
First, after lowering the prices of
many key items within Whole Foods stores, Amazon placed visible markers to
highlight the fact that the prices had been lowered specifically because of the
merger. For customers who were somehow unaware of Amazon or the merger, this
alters their perception by immediately connecting the presence of Amazon with
something positive: cost-savings (Babin & Harris, 2016, p. 53). Even if this connection is made through subliminal processing,
Amazon is still exposing the customer to this connection (Babin & Harris,
2016, p. 54).
The second most visible part of the acquisition
are Amazon lockers. Consumers can purchase items on Amazon, which are then
shipped to their nearest Whole Foods store and placed in a locker for the
consumer to pick up the item. In this way, Amazon is using its new physical
spaces to increase flexibility in how a consumer receives his or her Amazon
goods. Although it may seem more convenient to receive a package in the mail,
some consumers are concerned with their privacy or are unable to be present to
sign when a package is delivered. By giving their consumers more options through
the lockers, Amazon can increase customer satisfaction by tailoring the
shopping experience to individual customers’ needs. (Babin & Harris, 2016, p. 292).
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| Meldner, R. (2017, August 29). Amazon Lockers at Whole Foods Market [Photograph]. Retrieved from https://esellercafe.com/ first-trip-amazon-owned-whole-foods-market/ |
The lockers serve an additional
purpose to allowing Amazon customers to pick up their Amazon items. If an
Amazon customer who chooses to use the locker service has never visited a Whole
Foods, then Amazon is introducing the customer to the store. This is a critical
new marketing tactic employed by Whole Foods, and gives the grocery store access
to many new customers (Babin & Harris, 2016, p. 31). For customers who are familiar with Whole Foods but may not have
otherwise visited the store on that day, they may remember or create a need to
purchase an item while in the store for their locker pick-up. In either case,
Whole Foods has created a remarkable opportunity for unplanned shopping (Babin
& Harris, 2016, p. 236).
Beyond the lowered prices and
convenient shopping opportunities, Amazon can use its acquisition of Whole
Foods to learn much more about its customers. Before the acquisition, both Amazon
and Whole Foods used big data to analyze its customers, gathering information
through internet browsing, loyalty programs, and credit card purchases (Babin
& Harris, 2016, p. 21). However, by combining the companies’ data bases, Amazon can create
a much fuller picture of each consumers’ habits. The clearer idea of each
customer will allow Amazon to produce stronger predictive analytics and
therefore improve their marketing tactics (Babin & Harris, 2016, p. 21). If Amazon can continue to utilize Whole Foods to better position
and price its goods and consumer experience, you and I will gain the most from
this massive merger.
Hi Sabrina-thanks for this post! I remember when the merger was announced this past summer very well because everyone at my work talked about it for most of the day. These are two huge companies with intense brand and customer loyalty, so as you mentioned, it looks like they will be set up for success. I was personally excited about the news because of the roll out of lower prices at Whole Foods. I created a strict budget for myself this year and am much more concerned about economic value than I was in previous years of college, so the high prices at Whole Foods made it difficult for me to shop there. I enjoyed their selection and quality of produce though, so the fact that partnering with Amazon makes shopping there most cost-effective was something I was really excited about. Like me, I'm sure this merger makes Whole Foods a more affordable option for a variety of people and enables more consumers to become a part of this aspirational group (Angell 10-2-17). I also think the locker system adds another level of experiential value to a customers' grocery shopping trip. Now when going to Whole Foods, customers can get fresh groceries at a cheaper price while also picking up other items they have purchased and are excited about, increasing the overall experiential value they associate with these two companies. It's a win-win situation for everyone!
ReplyDeleteDear Sabrina,
ReplyDeleteThank you for your post. With this acquisition, Amazon has certainly managed to tap into the industry they have not yet been able to: fresh food. Now, Amazon will have enough data to create a complete picture of their customers: who are they, what do they eat, how do they prepare food, what do they do in their free time? All these answers will open opportunities to provide even better solutions for the consumers. However, can this deal create a monopoly that will make smaller local producers and retailers suffer? Is our privacy in danger? Can restaurant suffer in a long term? Amazon's online convenience has worsened the situation of nearly all retail locations and this deal will certainly not help smaller, specialized stores. Meal-kit businesses will be affected as well as Whole Foods will now have the power to compete in this industry.
This video report from Business Insider shows why Amazon's transformation of whole foods should put the entire grocery industry on notice. https://www.youtube.com/watch?v=ICkoTUbor-U
Sources
Whitten, Sarah. »Amazon's acquisition of Whole Foods is 'a threat to everyone,' even restaurants«. CNBC. https://www.cnbc.com/2017/08/24/amazons-acquisition-of-whole-foods-is-a-threat-to-everyone-even-restaurants.html. 24 Aug 2017. Accessed on 11 Nov 2017.
I am interested to see how the Amazon's acquisition of Whole Foods goes. Before the acquisition, Whole Foods was struggling to compete in the market with their high prices and ever-growing competition. Other grocery stores were also able to deliver organic foods, but at lower prices than Whole Foods was able to. With Amazon slashing many of their prices it will be interesting to see who they grow (and if they grow) over time. There is an interesting article that is not as optimistic about the acquisition as other sources have been. The shed doubt on it due to a clash of cultures. Amazon has a largely impersonal culture, marked by efficiency while Whole Foods tends to give consumers an experience. Up to this point, they have differentiated themselves in the market by providing an experience to consumers through marketing, quality, and customer service (Angell 2017). I wonder how these two opposing cultures will either clash or merge over the next few months.
ReplyDeleteArticle link- https://www.cnbc.com/2017/06/16/heres-the-one-glaring-problem-with-the-amazon-whole-foods-deal-commentary.html
Angell, Amy. (2017). CB Chapter 2 Value. Lecture presented at the University of Michigan Ann Arbor
Hi Sabrina, I loved this final blog post. I believe the Amazon lockers are a genius tactic to attract customers to the store to both pick up their online Amazon items and be introduced to “Whole Foods” items in the process. One thing believe can be expanded on is the future predictions of this trade deal.
ReplyDeletehttps://www.youtube.com/watch?v=xiLNiqFJvxg
This CBS New contributor explains the impact of Amazon buying Whole Foods, and whether Jeff Bezos can transform a grocery industry the way he has done other aspects of retail and media. The news reporter speaks of Whole Foods potentially being completely different in two years in terms of inventory and the online process of shopping with Amazon’s acquisition. Other grocery stores like Walmart and Kroger have reason to be afraid from this serious competition.
https://www.youtube.com/watch?v=-8ZjZrVqqiw
CNBC’s Jim Cramer speaks of how German grocery entries such as Aldi were threatening Whole Foods, which may have been a reason they let the acquisition occur. He says that this is food “deflation” and we will be spending so much less on food from here on out.
I personally believe Amazon will now dominate food within the next few years, and this is a complete game-changer. The corporate strategy of Amazon, the way a firm is defined and its general goals, now have broadened immensely (Babin & Harris, 2016, p. 31). Bezos is on his way to owning the entire economy, and this is a revolutionary acquisition.
Sources:
Babin, B. J., & Harris, E. G. (2016). Value and the Consumer Behavior Value
Framework. In Consumer Behavior (7th ed., p. 31). Boston, MA: Cengage
Learning.
CBS This Morning. (2017, June 17). Retrieved November 20, 2017, from https://www.youtube.com/watch?v=xiLNiqFJvxg
CNBC. (2017, June 16). Retrieved November 20, 2017, from https://www.youtube.com/watch?v=-8ZjZrVqqiw