Amazon and Whole Foods – a cautionary note (and not the end of the world as we know it)

2017 Retail Exec Summit.jpg

(Original publication by JJ Kallergis on LinkedIn)

Last week’s announcement of Amazon’s acquisition of Whole Foods has sparked a wave of shock and awe-inspired commentary concluding, largely, that grocery shopping will never be the same and that Amazon has taken a major step forward in its plan to take over the world.

But while the deal is obviously a major development for the industry, as well as a massive opportunity, the move also carries some risk for the new Amazon/Whole Foods entity.

First off, consider the traditional Whole Foods shopper – fiercely loyal, committed to the store’s ethos and its unique shopping experience. Staff are friendly and helpful, generous samples of products from single owner vendors are readily available, and often handed out by the proprietors themselves. Health-conscious shoppers rely on Whole Foods for ideas and inspiration for new recipes. And while upscale and affluent, customers tend to harbor an anti-corporate sensibility.

Now, how might that traditional shopper react to a stripped down center aisle that eliminates specialty soaps, candles, t-shirts and other slow-moving items in the interest of logistical efficiency? Or to the squeezing out of niche single owner products in favor of the 365 Everyday brand, which could mimic the dominance that Amazon’s private label Basics brand has enjoyed in its online marketplace?

The point is, amidst the talk of the reinvention of the grocery experience, Amazon must be careful about changing things to the point of alienating core Whole Foods customers and undermining the fundamental reasons those customers shop at the store. Initiatives that might seem justified from a logistical, efficiency or bottom-line perspective could threaten the emotional connections that have taken years to nurture and strengthen. And once severed, of course, those connections won’t be easily recovered.  

A corollary for Whole Foods’ competitors, meanwhile, is that while they will not be able to match the new entity’s data analysis, digital and online capabilities, from their perspective that should be OK. Publix, Wegman’s, Trader Joe’s and other established grocers have built their brands and loyal customer bases on a foundation of superior service and quality products – and they should continue to play to those strengths. After all, with the consolidation that has occurred over the years and strength of the large national grocers, the industry is still highly fragmented and will not be winner-takes-all.

Ultimately, digital strategies in the grocery space need to be conceived, implemented and managed as a complement to the deeply personal experience of selecting and buying food. For many shoppers, grocery buying is still a pleasurable experience that elicits emotion and sparks inspiration for the home chef. Once the technology component of the strategy supplants the experiential, risks abound – even for Amazon.