It’s been a year since Amazon acquired Whole Foods Market, triggering a grocery industry innovation war and a stampede online. While there has been increasing activity since then, the actual impact of Amazon’s entry into brick-and-mortar retail has been unknown … until now. The integration of Amazon’s Prime loyalty program to Whole Foods has accelerated changing shopping behavior, and a recent study by Sense360 brings to light powerful insights about just what’s going on.
And traditional supermarket retailers have good reason to be concerned. With an estimated 80 million Prime members in the U.S. and an estimated 20 million of them shopping at Whole Foods Market, the potential impact Amazon can have through this integration is massive.
Here are the top 5 insights shared by CART and the Sense360 research team in the recent webinar:
Amazon’s integration of its Prime loyalty program at Whole Foods is designed to create an everyday benefit for Prime Members, and it appears to be working. From the behavioral data gathered by Sense360, Amazon shoppers are 27% more likely to visit Whole Foods than non-Amazon shoppers. Both Whole Foods and Amazon shoppers appreciate value, with both groups indicating “value for money” and “good everyday prices” as top motivators.
Through its Prime integration at Whole Foods, Amazon is creating a powerful, self-reinforcing value proposition—a flywheel—that’s driving business. By offering new discounts and savings at Whole Foods only for Prime members, Amazon is acquiring new Prime users, who not only continue to shop at Whole Foods but are in turn drawn into Amazon’s greater ecosystem. At the same time, Amazon is attracting a growing number of existing Prime members into the Whole Foods stores because of the new savings, all of which creates a powerful competitive advantage that other retailers are challenged to address.
The impact of this strategy is driving significant lift in traffic for Whole Foods, especially from Amazon Prime members. According to the Sense360 research, 90% of Prime members who participated in Whole Foods deals planned to take advantage of them again on future shopping trips. Research data also showed that Whole Foods increased its conversion rate; the percentage of all grocery shoppers that visited Whole Foods grew from 4.8% to 5.8%.
Amazon’s strategy is affecting almost every retailer—and the pain has just begun. The impact of Prime at Whole Foods is still early, and yet it is already helping Whole Foods gain share of customer and share of market. Factor in Amazon taking Whole Foods’ private label products online, making shelf-stable products available to any shopper across the U.S., and the opportunity for growth explodes. Amazon is now a direct competitor to every retailer and, increasingly, to well-known consumer product goods manufacturers.
By extending Prime into Whole Foods, Amazon is now collecting shopper-identified grocery purchase data. Put together with the 20 years worth of data collected across Amazon’s platform, Amazon most likely has the largest trove of shopper data of any company in the U.S. Data-decisioning is at the heart of how Amazon operates, and retailers attempting to compete without rich shopper data are increasingly disadvantaged.
Amazon is well known for personalizing each interaction with online shoppers, presenting products it believes you are interested in from past browsing, searches and purchases. It is only a matter of time until this personalization begins to make its way into Whole Foods’ marketing now that Amazon is gathering shopper-identified transaction data via the Prime integration.
And Amazon will not stop at just marketing relevancy; they will focus on what I think of as strategic personalization, tailoring the information, products, and even pricing, to the individual shopper with a goal of maximizing spending, shopping frequency and retention over time. Very few retailers have the data and systems capabilities to go to market this way; Kroger is perhaps the most attuned to this approach, having focused on precision targeted, personalized promotions for the past decade. But Amazon’s entry onto the grocery field of battle will give Kroger a fight as both companies look to leverage shopper data.
By integrating its Prime loyalty program into Whole Foods, Amazon has fundamentally changed grocery competition. And the battle is just getting started.
(Published in Winsight Grocery Business; Real-Time Insights on Amazon Prime and Whole Foods Integration)