When Amazon.com bought Whole Foods last hear it sent shock waves through the industry. Investors panicked and dumped shares in Kroger, Sprouts Farmers Market and even Walmart. The fear was that the e-commerce giant would disrupt yet another industry.
But the concerns have subsided as investors and analysts came to see that it will be years before Amazon becomes a major player in the $800 billion industry. Traditional grocers have more than managed to hold their own.
Still, there are already signs that the “Amazon effect” is boosting Whole Foods. In more than 100 places around the U.S., the upscale grocer gained foot traffic at the expense of Trader Joe’s, Walgreen and Dollar Tree Stores in the past year, according to Sense360, a Los Angeles company that tracks location data from millions of smartphone users.
The data, which covers Whole Foods locations within one mile of competing stores, demonstrates that Amazon can lure loyal Prime members to physical stores through discounts. Whole Foods just needs a lot more stores to be close to more people. Sense360 Chief Executive Officer Eli Portnoy says national grocers aren’t hurting yet but says Amazon is getting traction at the “micro” level. “We’re at the very beginning stages, and these things take time,” he says. “These findings show there will be an impact.”
Whole Foods this month announced store pickup of online orders in Sacramento, California, and Virginia Beach, Virginia, with more locations to come this year.
In February, Amazon began offering Prime members 5 percent back on all Whole Foods purchases made with an Amazon-branded Visa card. And in June, Amazon introduced Whole Foods deals exclusively for Prime members that included 25 percent off bulk purchases of nuts and dried fruit and discounts on wild-caught salmon, organic cherries and hundreds of other products. “There’s a big segment of the population that loves deals,” says Tabs CEO Kurt Jetta. “Offer them a deal and they’re coming.”
Amazon CEO Jeff Bezos is famously patient. Amazon will use Whole Foods as a lab to reinvent grocery shopping before expanding what works, says Neil Ackerman, a former Amazon executive who now works for Johnson & Johnson. “They are willing to experiment and be totally misunderstood for long periods of time,” he says. “Walmart is built to deliver pallets to 4,000 stores and Amazon is built to deliver packages to millions of homes. Who do you want to bet on: the pallet people or the package people?”
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