Amazon acts fast to tackle barriers to online grocery sales with help from newly acquired Whole Foods

By Elizabeth Crawford contact

- Last updated on GMT

Amazon tackles barriers to online grocery sales with Whole Foods

Related tags: Amazon, Foods market, Whole foods market, Whole foods

Amazon is wasting no time in leveraging Whole Foods Market’s reputation and physical locations to tackle two of the largest barriers for online grocery sales: consumer concerns about product freshness and delivery costs.

At the same time, the new owner of the organic-focused retail chain is addressing head-on one of Whole Foods most formidable challenges: price.

As of Monday morning, when the ink on Amazon’s acquisition of Whole Foods Market had barely dried, the combined giant offered savings upwards of 40% on best-selling grocery staples, including organic bananas, responsibly-farmed salmon, brown eggs, lean ground beef and more.

The new partners also will chip away at Whole Foods negative moniker Whole Paycheck by promising more price reductions in the future, likely in the form of special savings and in-store benefits offered to Amazon Prime members once the service is fully integrated into Whole Foods’ point-of-sale system as the company’s customer rewards program.

While these price reductions aim at creating a positive first impression, experts suggest the greater impact of the merger likely will come from longer term plans to make Amazon Lockers available at select Whole Foods Markets and selling Whole Foods Market private label products, including 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch, online through Amazon.com, AmazonFresh, Prime Pantry and Prime Now.

Seamless shopping across channels could reduce delivery fees

The addition of Amazon Lockers in some Whole Foods locations would remove the need for consumers to pay for grocery delivery, which according to the 2017 Walker Sands Future of Retail study was cited by 44% of consumers as their top concern about buying groceries online.

The conveniently located lockers also would encourage other Amazon purchases as customers could have the products shipped to their local Whole Foods Market for pick up or send returns back to Amazon during trips to the store, the newly merged companies add in a release.

The lockers combined with Amazon’s use of Prime Loyalty also could help close the gap between digital and brick-and-mortar in the broader supply chain, adds Greg Ng, vice president of digital engagement at PointSource.

He explains: “With the Amazon acquisition, Whole Foods has become an omni-channel business overnight. The Whole Foods digital experience will be transformed by Amazon’s technology, enabling customers to shop and receive their favorite products in entirely new ways. Everything from quick mobile purchases to restocking items through Alexa capabilities will create a more seamless and complete user experience.”

Deal ups the quality perception of online shopping

Similarly, Amazon’s decision to carry 365-branded products will help it capitalize on Whole Food’s fresh and high quality brand reputation, according to the 2017 Walker Sands Future of Retail study, which found distrust of product freshness was the number 2 top concern about buying food online cited by 42% of consumers it surveyed.

“The move is a clear step forward by Amazon in recognizing that trust has been and will be the key driver for sales in grocery,”​ said Dan Wilkinson, chief commercial officer of 1WorldSync. “Whole Foods has built a brand around trust through its organic-only offerings and transparent product content, and Amazon is now taking advantage of this loyal customer base.”

In addition, he said, “these new initiatives further validate cross-channel commerce as the future of grocery. Companies have been competing with Amazon and Whole Foods independently until now, but never as a combined solution. This powerhouse suite of online and offline capabilities is totally unmatched in the grocery space, so the level of competition has definitely been raised.”

Communication will be key to long term success

But in order to maintain this edge, the company will need to carefully and continually listen to consumers, said Brennan Wilkie, senior vice president of CX strategy at InMoment.

Wilkie explained that Whole Foods consumers are concerned about the changes the merger will bring and Amazon customers who have never shopped at Whole Foods will be prime acquisition targets. As such, Wilkie said, “understanding the concerns and opportunities of both groups early and ongoing will allow Amazon to evolve their communications, staff training and offerings to be as effective as possible. And this deliberate attention to customers at a tenuous moment in the relationship will go a long way toward building value over the longer term.”

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