Amazon has announced that its acquisition of Whole Foods Market will close on Monday 28th August after competition authority approval for the merger was granted. The two companies will together pursue the vision of making high-quality, natural and organic food affordable for everyone. Starting immediately, Whole Foods will begin lowering prices on a selection of best-selling grocery staples across its stores, with more to come.
In addition, Amazon said that it plans to integrate Amazon Prime into the Whole Foods point-of-sale system, allowing Prime members to receive special savings and in-store benefits. Over time the two companies will invest in additional areas, including making Amazon Prime the new customer rewards programme for Whole Foods Market and making Whole Foods groceries to purchase through Amazon.com, AmazonFresh, Prime Pantry and Prime Now. Amazon lockers will be available in Whole Foods Market stores.
Sometimes developments happen in the grocery world that are truly exciting. Amazon said that the initiatives announced today are “just the beginning” of significant work and improvement ahead as the two companies work on their future integration.
By making significant and immediate changes, Amazon has given us some insight into both its commitment to investing in Whole Foods and the likely disruption ahead. The synergies between Amazon and Whole Foods are evident. Whole Foods has been a victim of its high prices in recent years. Starting immediately the company says it will invest to lower prices on best-selling groceries including bananas, salmon, eggs, beef and more. This is a bold yet sensible move and will certainly generate much-needed additional footfall at the stores, even if it threatens margins and profits in the short term.
At the same time, by beginning to sell Whole Foods items online across Amazon’s platforms the retailer can increase volume, which will help to lower costs and therefore prices. Also it solves an immediate problem for Amazon – in order to be a credible grocery retailer Amazon needed to develop its own private label grocery line rather than relying on teaming up with partner retailers in each of its markets. Now it has a highly credible quality, natural, organic line that it can leverage. The company says it will continue to expand its efforts to support and promote local products and suppliers as it moves forward.
As expected, Amazon continues to put Prime members at the heart of everything that it does, in order to bolster loyalty and make its flywheel go faster. It is unclear exactly how the Prime integration will work, but with discounts and rewards on offer at Whole Foods it will certainly contribute to loyalty and spend across its multichannel operations.
The synergies in the US are obvious, but what about Europe? What will be interesting to follow will be to see how these new synergies evolves across just nine UK stores and whether Amazon also looks to sell Whole Foods products online or open new Whole Foods stores. In Europe, in the mid term, it is our opinion that markets such as Germany could be ripe for this format.
Amazon has it all to play for, but what is clear is that there is so much future potential for the two retailers. It is exciting for Amazon, although could also be distracting. And it is certainly worrying for competitors. All eyes will now be on the online giant as it steps in to disrupt bricks & mortar and grocery in a big way.