Amazon: Prime-Time For The Grocery Industry

The grocery industry is the most pedestrian of retail endeavors – customers drive to stores, pick and pack their shopping, pay and then drive home. Many have tried to e-commercialize the grocery industry, but the business model never really seemed to work. The consumers desire to touch and feel grocery products before purchasing has been a barrier to widespread adoption of online grocery.

The food industry has traditionally been based around trust and price, not technology – and Whole Foods is known for providing a high level of trust and product transparency to its consumers through detailed product information. After a short dip into e-commerce, Whole Foods has refocused on brick-and-mortar retail growing 35 fold over the last 15 years (Fortune 2017)

And now, with the acquisition of Whole Foods Amazon sends a clear message to grocers that it is ready to play and, at least partly e-commercialize the grocery game. They’ve already dipped their toes in food and grocery in the past through Amazon Fresh and Amazon Pantry, but this gives them more robust access to high-quality food and more power to delivery grocery products more immediately to customers. It is also a bold statement that Amazon is serious about brick-and-mortar and at the same time this step finally fully validates cross-channel commerce as the future of grocery.

As the lines between online and in store have blurred, Amazon has realized that location will be a key driver for commerce success. Having access to Whole Foods’ 431 existing stores, gives them valuable distribution centers to bring fresh, localized products directly to customers. Amazon was also likely motivated to reach Whole Foods’ millennial audience and develop loyalty with the younger, more quality-conscious consumer.

This generation is more particular about where they buy their food and the ingredients in it, so Amazon will be able to earn the trust of these buyers through Whole Foods’ reputation and its strong identity as a trustworthy source for organic, GMO-free, high-quality food – that consumer trust will now be transferred to Amazon.  

Consumers need to be met wherever they are, whether in store or on their smartphones, but the importance here is an integrated approach. No one channel is the clear answer, but companies that stay competitive will need to more tightly integrate all of their approaches, both physical and digital.

Consumers are the key winners here, as the bar for success in the grocery industry is going to be much higher in the future. Competitive pricing, upgraded digital experiences, and more innovation will directly benefit customers.

Companies that aren’t paying attention to larger trends will lose as consumers demand for more product content; the value of an omni-channel approach to grocery; and the importance of consistent experiences across every channel.

To summarize, consumers aren’t tolerant of brands that look different online than in-store, and this is more important in the grocery market, as missing or misleading product information has the potential for serious harm.

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