A Millennial’s Amazon Primer: Whole Foods Acquisition
EDITOR’S INTRO: Besides picking up my dry cleaning and refilling my coffee, interns at Verde bring us a coveted value: perspective.
This piece by summer-semester intern Jordan Dake brings a point of view important to the fate of commerce in the future and how a young person wants and expects to buy, consume and be marketed to. All wrapped up in this story are questions of value perception, service, convenience, and delivery. There is a huge technology component attached to this merger and we expect it to become a hallmark Amazon disruptor.
It’s just one 20-year-old’s opinion but we can bet it’s one shared (at least in part) among his peer group. To bring this down to the local level, Jordan works from our Boulder office where–as you know–Whole Foods is a religion. Don’t let this bias color your reading.
— Craig Randall, Senior Director
Amazon and Whole Foods Market announced last month that Amazon will be bringing Whole Foods under its umbrella. The $13.7 billion agreement, which will expand Amazon’s surge into the $800 billion grocery market, is expected to close by the end of this year.
I enjoy shopping at Whole Foods because it provides an experience that other grocery chains have failed to replicate. Whether it’s walking down the aisles looking for new and exotic products, getting dinner at the exquisite food bar, or simply having a nice conversation with an employee, Whole Foods does it right.
I enjoy Amazon because it is fast and efficient. I can count on the fact that as a Prime member, I receive free two-day shipping right to my doorstep. It is because both parties provide an excellent service that I welcome the merger and believe that both Amazon and Whole Foods will benefit tremendously from this harmonious marriage. As a 20 something kid who has seen such advantages in technology over such a short amount of time, the Internet has become a great friend. I, as well as my peers have become spoiled by expectations surrounding convenience and turned off by hassle. Why deal with traveling to the store, walking the aisles, and then waiting in crowded lines, when I can yield the same result with much less effort and often at a cheaper price.
When I want something, most of the time I can get in on demand, when I want it: now. I need a ride to the airport, but a buddy can’t drive me, or better yet I don’t have a car because many people my age these days don’t? No worries, let me take an uber or lyft. Hmmm, a new song just came out, one click and I’ll hop on Spotify and stream it. Right now. Simply put, I am fortunate (or unfortunate depending on your perspective), in which I can access products and services at the click of a button. It is what many have come to know, to some expect, and to me appreciate. It is the current culture, so why not embrace it?
To anyone who reads up on Amazon regularly, the deal, while fairly massive, is not totally surprising. After all, Amazon has been trying to get into the grocery business for quite some time. Amazon currently operates AmazonFresh, a grocery delivery and pickup service available exclusively to Prime members in about 20 select cities. Prime members can reap the benefits of AmazonFresh for an additional monthly membership fee of $14.99. AmazonFresh is still in a trial phase, but the addition of Whole Foods adds a brick-and-mortar dimension to Amazon’s grocery e-commerce ambitions.
Joining forces with a physical, highly established grocery chain should greatly benefit AmazonFresh in the near term by providing Amazon with access to over 400 physical stores to help bolster their infrastructure and by improving both its distribution network and product offerings.
It isn’t just Amazon’s supply chain that will benefit from the merger. Whole Foods will also benefit from being acquired by such a massive company like Amazon. Over the past few months, big investors of Whole Foods had demanded a shake-up at the company due to declining sales. Whole Foods is expensive. Amazon could help bring down prices at the stores known for taking your “whole paycheck.” As a result, Whole Foods will have an opportunity to prove to both current customers and potential customers that it can provide its renowned clean and sustainably sourced food at a much lower price. The result? Increased sales.
The clean, credible service and products of Whole Foods combined with the cost effectiveness and convenience of Amazon is a consumer’s dream. While Whole Foods provides unparalleled in-person consumer experience, the demand for online grocery shopping is growing. About 12-percent of U.S. grocery shoppers bought their groceries online at some point in 2016, according to Cowen and Company. Euromonitor found that while the total grocery market is $781.5 billion, online sales last year only represented $9.7 billion, or about 1.2% of the market. Nonetheless, it is estimated that the compound annual growth rate for online grocery sales will be 8.5% between 2017 and 2020 compared to the broader industry’s slim 1.3%. In English, the growth rate of online grocery sales is vastly outstripping that of the grocery market overall. Just thinking about your own grocery shopping experience, this makes sense.
Mikey Vu, a partner at Bain & Company who is focused on retail, said, “[Amazon] is going to be within an hour or 30 minutes of as many people as possible.” Knowing that, and having experienced Amazon’s exceptional customer service and Whole Food’s exceptional products, why would you not try out grocery delivery?
— Jordan Dake, Intern
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