Amazon’s Acquisition of Whole Foods is a Huge Endorsement of Brick and Mortar

These days I have a bad habit when watching movies. I tend to watch through the lens of a screenwriter, constantly trying to predict where the story is going to go. We’ve all seen enough movies to know that a gun shown in act one will eventually be fired by act three.

It’s tempting to look at the acquisition of Whole Foods by Amazon as some sort of Chekhovian gun that will lead us down an inevitable storyline. However, in the best movies, no one can really predict what direction the story will go.  Personally, I think this is the most fascinating and compelling story to happen in retail, maybe ever. But in trying to predict the future, I think we may be overlooking an important plot twist: Amazon has just made a huge endorsement of Brick and Mortar retail. While we’ve all seen retail hurtling down some unknown virtual reality, Amazon has stepped up and said: “I want to be more like you, Kroger.”

So, no predictions, but it seems there are many different directions this story can go:

The Synergy Angle

Whole Foods could become the upscale Walmart, with electronics (Kindles and such), books (of course), HBA (Whole Foods only does this in a specialized way), and even Amazon lockers in the stores. Amazon Prime is one of the world’s most effective customer loyalty programs, something Whole Foods doesn’t have.  Could we see reduced-priced grocery merchandise for Prime members?

The Jetsons Angle

Will a high-tech, in-store, experience become part of the story?  A no-check-out, check-out, like AmazonGo?  In store “you might also like” recommendations?  A real-time link between your Amazon virtual “shopping cart” and the real thing at Whole Foods?  If they don’t have something in stock at the store, perhaps it can even be delivered from the warehouse to the loading dock of the store by drone, all while you shop, or placed in your Amazon locker.

While we’ve all seen retail hurtling down some unknown virtual reality, Amazon has stepped up and said: “I want to be more like you, Kroger.”

The Grocery Initiative Angle

Whole Foods buys credibility for Amazon’s grocery initiatives.  Before it was hard to take them seriously for anything other than delivering detergent.  Amazon-branded supermarkets (and AmazonGo) may still happen.  With Whole Foods as a starting point, it jump-starts economy of scale in grocery. Also, Whole Foods gives Amazon an initial geographic reach for warehouses, distribution, and supply chain.

The Secondary Impact Angle

Big brands like Kellogg, Kraft, General Mills are not generally sold at Whole Foods.  People are turning more toward specialty and private label brands.  Amazon is better suited to operate in a consumer environment moving away from the CPG/Grocery marriage of the past. Also, is there a possibility for deeper mining of consumer behavior with the tighter connection between online and in-store shopping data?

Ultimately, home delivery will be part of the story, but it feels like a small part. People still want stores, and so does Amazon. The best way to innovate the retail experience is to include the brick and mortar store. The retail grocery industry is like some long-form TV series, with unexpected twists, and no end in sight (Game of Thrones, anybody?) I just can’t stop watching and no longer try to predict what will happen next.

 

Author
Hartwell Hooper
Vice President of Client Success