COMMENTARY

How Amazon's acquisition of Whole Foods will disrupt the retail landscape

Aug. 9, 2017

Photo: iStock.com

By Dr. Sethuraman Janardhanan, practice head & client partner , big data analytics, Happiest Minds Technologies

The strategic move of online retail giant Amazon to acquire grocery retailer Whole Foods for $13.7 billion is at the talking point of the global business world.

The U.S. grocery retail market is the world's second largest, after China, which is about $675 billion per year. This huge market with Walmart, Costco, The Kroger Co. and Publix taking a major share, brings in enormous opportunities to the retail industry players. The global retail industry views Amazon's move as a significant step to bring in larger changes in this landscape with enhanced customer experience, breakthrough technology implementations and competitive pricing strategies across omnichannel.

The increase in market capitalization of Amazon and the reduced market shares of the key competitors after the spreading of the acquisition news is a testimonial for the upcoming revolutions and trend changes in this sector. 

Let explore in detail regarding the multiple synergies that have made this acquisition the most notable one in the retail sector and which holds power to redefine many existing models.

The omnichannel angle

Amazon has been surprising the market for quite some time, with interesting moves like the introduction of Amazon Go stores, acquisition of AA battery and now the acquisition of Whole Foods. These moves are seen as tactical shifts from Amazon's online only business and with this new step they are going to utilize the 400-plus prime location physical stores that belong to Whole Foods across the U.S. This strategic acquisition reveals the significance of incorporating a synergy of both online and brick and mortar stores to provide seamless customer experience for the Generation Y customers. In short, the retailers realize that the value of physical stores is not faded away with the online revolution.

The technology empowerment

We can expect that the Whole Foods' distribution hubs will get a complete make over from Amazon. The combination of best-of-breed technologies along with the wide experience of Amazon is capable of bringing in all the latest technology trends in physical stores including 3D/ 4D experience, smart shelves, virtual reality, endless aisles and interactive kiosks — all which can offer a spectacular shopping experience for the digital savvy customers. We can also expect some of the Whole Foods stores to be converted into Amazon Go stores empowered by the most advanced shopping technologies including AR/ VR, IoT and cognitive chatbots. With advancements in machine learning, in Amazon-Whole Food stores, customers can identify when a product is added to the shopping cart and they can enable wallet-less payment too, which eases up the overall shopping activity.

More immersive and personalized customer experience

The in-depth market knowledge and customer understanding Amazon possesses are at par which helps them deliver more personalized and immersive customer experience. They can integrate Alexa to call out customer grocery orders which can be picked up from the Whole Foods stores. The customer experience can be taken to the next level by implementing advanced features like auto replenishment based on weekly consumption, personalized customer suggestions after analyzing the organic consumption patterns and personalized grocery suggestions using IoT enabled devices and so on.

The potential war between the brands

The Amazon acquisition has created larger ripples in the competitor space including the biggies like Walmart and Costco. When a retailer stalwart like Amazon acquires Whole Foods, they can come up with favored placement for their top selling items in Whole Food including macaroni and cheese or lime sparkling water, which can be a blow to many of the existing brands offered by their competitors. The organic element of Whole Foods can possibly affect the packaged food makers like Pepsico and Kraft Heinz as well. Amazon can reduce the price of organic foods and provide more value for money for the customers compared to the existing brands and conquer the market in a short time. Another angle is that the Whole Foods physical stores can give additional warehouse space to add more value to the existing amazon supply chain. This will bring in more competitive advantage on costs and last mile connectivity compared to the Amazon's competitors in the grocery retail space.

Eyeing the much affluent millennial Prime customers

With the acquisition, Amazon is getting an upper hand on the much affluent customer base of the U.S. The Whole Foods' organic element can act as a key differentiator for Amazon to create a firm foot hold in the grocery retail space, especially in this age of increasing considerations for fresher and healthier foods among the consumers. Amazon with its efficient logistical capabilities and ‘Prime Now' features available for Prime customers, can address the delivery challenges in the grocery space to a major extent.

With technology, rich customer data and compelling price, Amazon is going to bring in irresistible experiences to the grocery retail space. It is high time for the competitors of Amazon to brainstorm and invest heavily in technology and experience The potential war that breaks out is not only between the retailers and Amazon but all the CPG brands that eyes for an apt shelf space in the store.

 


Topics: Assisted Selling, Augmented Reality, Customer Experience, Customer Service, eCommerce, Internet of Things, Marketing, Merchandising, Omnichannel / Multichannel, Online Retailing, Self-Checkout, Shopper Marketing, Supermarkets & Grocery Stores, Technology, Top 100 Retail, Trends / Statistics

Companies: Amazon, Whole Foods


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