Articles: Why Amazon Is Buying Whole Foods

A Food Channel Perspective

Food News

The minute the news hit, our editorial feeds starting beeping. It seems every food publication and pundit has a commentary on the Amazon purchase—for a reported $13.7 billion in cash—of Whole Foods.

Let’s back up a little and explore the experience of each. My first visit to a Whole Foods Market could be equated to a kid walking into a candy store. I immediately saw how different Whole Foods was, at the time, from traditional grocery stores. The abundance of fresh vegetables was only the start. There was the olive bar, the in-store dining, the specialty foods, the availability of organic and gluten-free . . . and all before any of these things hit mainstream.

Photo Credit: Whole Foods

Those traditional grocery stores have now reinvented themselves, with more fresh offerings and more “Whole Foods”-style experiences. In fact, whole new markets have sprung up that more closely resemble a Whole Foods than an up-one-aisle-down-the-other store.

This means grocery stores have begun to catch on that they have to add experience if they expect to attract people away from online shopping. They have to figure out what has to be done differently—and Amazon has just changed the rules. Stores can no longer say that it’s fresher to buy local, not when Amazon has the immediate delivery system figured out.

My first Amazon Prime Pantry experience was a lot more recent, but had some of the same “wow” factor. It was boxed goods, not fresh, but there was variety I couldn’t find locally; easy access to couponing and clearance items; and incentives earned through my book buying. Filling a box was a fun challenge, and made me willing to experiment with new products.

Put Amazon and Whole Foods together and what do you get?

1. The ability for Amazon to offer “fresh”
2. The ability for Amazon to experiment further with its brick & mortar stores, where human interaction is minimal and digital still reigns
3. The ability for Whole Foods to be a presence in the digital world

Yes, it’s a “buy or be bought” world right now, and the smart entrepreneurs are building their ideas just far enough to get them bought for big dollars. The smart companies with cash are buying rather than taking the time to build from scratch. The result for today’s consumer is a disruptive experience that may just take us to a more interesting place.

For the record, here are a few other things to be watching:

• Amazon has launched “My Mix,” which offers recommendations of products that might be of interest to a shopper. This follows the trend in personalization, which is a big deal to Millennials and those who want a curated experience to help them with decisions.
• Private label brands are huge, and the Amazon world of private labels is likely to be another game changer. Consumers trust the Amazon brand and will be more inclined to try an endorsed private label. This can lead to lower cost with high trust, something hard for a retailer to achieve.
• Remember the competition. Target and Walmart may have upped the ante for digital, but Amazon just played a great hand. We’re seeing the rise of the direct-to-consumer model that essentially cuts out the cost and time factor of a middle sales layer. The competition isn’t over; these are power players and the moves they make will be worth talking about.

So, yes, there’s a reason our news feeds are pinging repeatedly with the sale of Whole Foods—it’s because the industry and the consumer both see this as disruptive to business as usual. That’s exactly why Amazon is going down this path—they have the money, and it’s good business.

Now, let’s see if Amazon’s gain will also present a gain for the consumer. There’s every reason in the world to believe it will.

From our insights partner, CultureWaves® 

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