June 16, 2017

Amazon purchasing Whole Foods is a game changer for grocery store industry

WEST LAFAYETTE, Ind. — Amazon’s purchase of Whole Foods is a wakeup call for all grocery stores, says a Purdue University retail management expert.

“It is difficult to overstate the impact that this is going to have in the grocery industry,” says Richard Feinberg, professor of consumer science. “It is a tsunami that will shake up and change grocery retailing. Amazon brings a technology and distribution ability that no grocery retailer has. This will allow Whole Foods to do what it does but better and more profitable. Grocery chains like Kroger, Target and Wal-Mart are not ready for what Amazon brings to the table with the new and improved Whole Foods.”

Whole Foods currently has 430 stories, but after the acquisition, they will have 350 million stores because they will be on every desktop, Feinberg says.

Other ways that the Whole Foods purchase will make a difference, according to Feinberg:

* Whole Foods, with Amazon backing, will expand brick and mortar much more quickly because of the financial power of Amazon.

* Amazon understands same day – in major cities –  and two-day delivery. This will help Whole Foods have an online delivery presence.

* Amazon understands data mining and has the expertise to do it. This will help Whole Foods understand its customer better and have the right products at the right price at the right time.

* Omni channel is winning in retailing. Amazon is going to lead the grocery pack in delivering an Omni channel experience to customers far quicker than the traditional grocery store.

* This suggests that Amazon will continue to buy and develop new areas of retailing for its customer base … why not drug stores next? The same benefits that Amazon can deliver for shoes, such as Zappos, they can deliver for … fill in the blank.

* Whole Foods becomes a convenient place for Amazon customers to pick up items they ordered so they do not have to wait for delivery.

Feinberg also says that Amazon has a test store called Amazon Go in Seattle that is displaying how Amazon does groceries. Two features are significant:

* Customers swipe their Amazon Prime Card when they enter. When they take something off the shelf and put it in their cart, it registers in their account. If they put the item back it takes it off their account. When they walk out of the store, the payment is instantaneous; no more waiting to checkout, which is the biggest complaint that consumers have of grocery stores.

* About 50 percent of U.S. households have an Amazon Prime membership. Prime membership for groceries cements a relationship with a grocery store, and it encourages members who have not shopped there to shop in Whole Foods. 

Purdue News Service contact: Amy Patterson Neubert, 765-494-9723, apatterson@purdue.edu 

Source: Richard Feinberg, xdj1@purdue.edu

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