With one mighty $13.7 billion whack of its checkbook, Amazon 's planned purchase of Whole Foods has turned the grocery industry on its head.
As the dust has settled, several theories have been borne out of the analysis from the purchase, but there is one major conclusion that most have agreed on—that the customer will be the biggest winner of this acquisition, particularly given the power the deal gives to loyalty programs.
Most importantly, the real question will come from how Amazon will integrate their premium loyalty program, Amazon Prime, into the Whole Foods shopping ecosystem.
With nearly 50% of all U.S. households locked in to the service, Amazon has the chance to convert loyal Prime members into super grocery shoppers, with an expansion of AmazonFresh, their online grocery delivery program, and by integrating further benefits for Prime-only members, Amazon would be set up to creating stronger brand loyalty around the Whole Foods brand. Amazon already knows that Prime members spend nearly five times more than non-Prime members, so getting them to devote a larger share of their grocery budget with them would be a huge coup.
While Amazon might reap the benefits from building Whole Foods into an empire that rivals any in the grocery industry, Amazon itself will make sure that Whole Foods will first and foremost remove the “whole paycheck” nickname it has earned from customers over the years.
That process will start by wielding the combined purchase power that both organizations hold. While Whole Foods might not have had leverage in the past, Amazon and Whole Foods combined will have the strength to renegotiate food prices, as there will be synergies now between the customers that Whole Foods currently has and the 300 million customers that Amazon boasts.
But the real savings will only be realized through the gradual elimination of overhead costs. Some rumors say that Amazon could reduce the headcount of the 90,000 employees that work for Whole Foods, but Amazon denies those reports. But, don’t count Amazon out when it comes to optimization.
With the integration of Amazon-Go “Checkout-Free” shopping, Whole Foods could completely automate the process of grocery shopping. No long lines, no need to scan your items and, most importantly, no need to pull out your wallet and wait for your miles-long receipt.
We still know very little about Amazon’s plans though, as they have remained very tight-lipped, and will probably remain silent until the deal officially closes later this year. But what we do know is that Amazon doesn’t make a significant investment in something unless every small detail has been worked out beforehand. Furthermore, “The Everything Store” has been captivating us with its innovation for a good amount of time now. That means that groceries, and the way we shop for food in general, may never be the same again.