As we all already know, on June 16, 2017, Amazon bought the upscale grocery chain Whole Foods for $13.7 billion in its biggest acquisition ever.
But what are the main reasons behind this decision?
The first aspect to dictate such a gigantic acquisition is data. Whole Foods has at its disposal extremely valuable \consumer data about their habits and patterns, such as preferences and correlations between purchases. Groceries as a whole is a more habitual and frequent purchase than any other e-commerce purchase, this data represents a gold mine for Amazon. After having implemented AmazonFresh as well as Amazon Pickup, now the firm will be able to provide to its customers the ultimate personalized shopping experience, outpacing its competitors not only in prices, and speed of delivery, but also in customization. Whole Foods customer data also provides Amazon a never experienced agility in understanding its consumers’ needs, wants, and, therefore, adaptability in responding.
Second, the acquisition of Whole Foods represents the possibility of creating an exclusive private brand for Amazon (adding its above mentioned unique customer understanding ability). This kind of vertical integration will yield higher margins for the e-commerce giant, compared to third party branded products.
Lastly, compared to other large grocery chains, Whole Food has a more affluent customer base who are used to paying their “Whole Paycheck” pricing. Their average customer has a $1000 in disposable income per month making them even more appealing to Amazon to bring in this customer base.
The question now is: what does this mean from a supplier point of view?
Amazon has always been disrupting in its strategy and business approaches. And once again we can expect for it to disrupt this sector as well.
This acquisition will forever change the traditional retail business.
- Bring down prices in order to provide a greater value to its customers
- Change the in-store experience, either eliminating it or replacing with some augmented reality options
- Dictate a new level of agility, and therefore effectiveness, in responding to consumers buying habits
- Further expand its world of echo devices, as for example with the newly released “Dash Wand” (a fridge echo dot to place orders through barcodes or by talking)
Therefore, from a distributor point of view now is the time to be innovative, to really start implementing technology in the entire business process and to better respond to this complex changing environment. We, of course, are not talking about growing enough to reach the giant e-commerce brand (which might anyway be almost impossible at this point). We are instead talking about leveraging technology to provide better and faster services to your clients, maximizing effectiveness and efficiency, to not only increase customer understanding and customer lifetime value but also to improve time-management.
Ready to take the next step?
Nix86: Because the product you sell matters.