When Amazon announced its takeover of Whole Foods last year, there was a lot of speculation about how the e-tail giant would overhaul the grocery chain’s operations. One year in, we take a look at what’s changed so far — and how it could spell the beginning of a new era for the food and beverage industry.
With steady growth fueled by mergers and acquisitions, Whole Foods — the American supermarket beloved by niche shoppers — has made a name for itself over the years. Since 1980 the company has grown from 19 employees in its small Austin location to almost 500 sites across North America and the UK. Since 2007 it faced its share of challenges, including losing out to Walmart as the biggest seller of organic food in the U.S. Last year Amazon bought the chain for $13.7B, causing stocks to soar and prompting both reservations and excitement from Whole Foods regulars. Would the market maintain its commitment to stocking natural products? More importantly, how big would savings be for Prime members?
How Amazon is Changing the Face of Whole Foods
It didn’t take long for these questions to be answered. Here’s a snapshot of how Whole Foods has changed in the short time since its acquisition.
Amazon has made an immense effort to create cohesion between the two brands and welcome Whole Foods shoppers into its well-established loyalty program. Amazon merchandise, like the Echo, can now be found in-store. Whole Foods locations also feature signs for special discounts for Prime members, who now have access to a ton of perks and deals. Shoppers can even pick up Amazon orders at certain Whole Foods locations.
Amazon once disrupted the ecommerce industry by completely altering consumer expectations in terms of speed and customer service. It could now be doing the same for the food industry. The company is in the process of expanding a Whole Foods delivery service, which allows Prime members to choose free delivery with a purchase of $35 or more. This isn’t the first time Amazon has tried providing food deliveries — but with Whole Foods’ built-in fresh food inventory system, they could finally provide a truly disruptive service to consumers.
Supply Chain Operations
Shortly after the acquisition, stories started circulating about stockouts and inventory issues. Amazon wasn’t really the cause of Whole Foods’ inventory issues — rather, the store’s pre-existing order-to-shelf inventory management system was to blame. Still, it was evident that Amazon would have to solve the problem if it wanted to satisfy Whole Foods’ loyal customer base. So what measures has the company taken to uplift the grocer’s inventory strategy?
Under Amazon, Whole Foods is moving from a regional to a national sourcing strategy to save on costs and streamline its supply chain. Whole Foods was always known for stocking niche and regional products, including smaller brands, by sourcing through regional representatives. But Amazon has begun to centralize purchasing for its suppliers to a single location in Whole Foods’ Texas headquarters. This move could be great for brands that can afford to scale, but it might also edge out some of the smaller brands that Whole Foods is known — and loved — for carrying.
Late last year Amazon unveiled Relay, a logistics app that allows drivers to check in before picking up or dropping off a delivery. The app allows Amazon to track where shipments are at any time. The overall result is much faster processing times, which should ideally lead to faster inventory replenishment. Currently only used for warehouse deliveries, the app is slated for eventual use in all of Amazon’s operations.
Amazon is working hard to bring the best of two worlds — ecommerce and brick and mortar — together. For example, Dash, an app that’s currently under development, will help consumers monitor when items are running low and create lists that they can then send to their nearest Whole Foods store for fulfilment. Dash promises to make grocery shopping easier than ever by doing much of the brain work for busy customers.
Amazon first disrupted the way people shop by providing unprecedented levels of service and speed. As it moves into other industries, the company will also gain a competitive edge from its ability to combine online and physical shopping spaces, using IoT to create a cohesive experience for customers. The deal with Whole Foods could thus mean a new era not just for Amazon, but for every food company that wants to remain relevant as consumer expectations evolve once again.
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