Unless you have been living under a rock, you have already heard that Amazon is looking to buy Whole Foods and most everyone is wondering how this will affect them. For customers, they are thinking about the ability to buy cost effective groceries online and for the grocers themselves, they are wondering if this will encroach on their profits, even possibly wipe them out?
Living in a high growth market like Atlanta, GA, online grocery shopping is currently right around 5%. According to this graph, 17% of grocery shopping will move online and is projected to grow to $123 billion in 2023, a mere six years away. Mind you, this study was done in 2014 by Brick Meets Click Analysis a good three years before the Amazon – Whole Foods merger was announced.
Amazon buys Wholefoods: Is the Death of Retail Grocers Right around the Corner?
Raise your hand if you prefer to shop online. This past Holiday season, did you brave the traffic and crowds to buy your loved ones presents or did you sit at home (or work) and do all you’re shopping on the web? Last time I visited a store was this past fall because I forgot to pack dress socks for my college buddy’s wedding.
In 2017, retail giants such as J.C. Penny, Macys, Sears, Kmart, H.H. Gregg and many others are closing a significant amount (some even all) of their stores. A big reason for this is due to E-commerce growth in the digital age, where according to an article published by Emarketer on Aug 22nd of 2016, E-commerce sales will top $4 trillion by 2020.
The Amazon Shopping Experience
Who here has shopped at Amazon? At our house, we use Amazon Prime. Love their rewards points as well as the free, same, next or two day delivery services. Typically most of their products are cheaper than their competitors. We order enough (sometimes too much) to make our money back with the Amazon Prime membership fee.
Can this be replicated with perishable grocery items? We have used services such as Blue Apron and Hello Fresh with much success; however those are pre-packaged uncooked meals. The only online grocery shopping we have in our neighborhood is Kroger’s order online and curb-side pickup service.
Amazon’s –Whole Foods merger could have effects such as:
- Streamline costs and eliminate inefficiencies: We now know that many big name retail establishments are closing their doors. In this digital age, it becomes too cost prohibitive to have brick n mortar stores. Now customers don’t have to deal with the middleman and will be ordering their groceries online which will be shipped directly from warehouses or the food manufacturers themselves.
- Lower prices: Amazon does things on a grand scale. All these cost savings will lead to lower priced groceries. This strategy has already been proven to work well for them.
- Increase in grocery deliveries: Right now online grocery shopping is hovering around 5% and is projected to grow to 17% by 2023. Amazon’s entry into this market will cause other competitors to step up their game and give us consumers additional choices then are currently available.
- Better understanding of Whole Food customers using Machine Learning: The hardest part of running any Machine Learning platform is having good data. With this merger, Amazon already has data and can implement and act immediately. According to an article How Machine Learning Can Drive Retail Sales by Newco Shift on May 31st, 2017 , ‘Fifty-five percent of Amazon’s sales come from personal recommendations made by machine learning algorithms.’ Imagine the possibilities if/when they apply these protocols to online grocery shopping!
Can Machine Learning + Predictive Buyer Scoring Mitigate Amazon’s Dominance with Online Grocers?
What do you do if you are a local or regional online grocer? Do you put your head in the sand and give up after hearing this news?
Nowadays, online retailers have to be agile, smart, and look to other methods to help them not only survive, but thrive against intense completion. We all know that Amazon has used product recommendations via Machine Learning to dominate online sales.
What if, as a local/regional grocer, you could have a tool that not only gives you product recommendations but also a Predictive Buyer Score that is powered by Machine Learning to help boost your website conversions as mentioned in my 2nd article?
One thing for sure, the fact that Amazon buys Whole Foods will surely bring some changes in the way current grocers run their business. It’ll be interesting to see how everyone responds – will they fold, and shut their doors down like so many big name retailers or will they react/adjust accordingly with new technologies to stay in business and remain profitable?
Boxer Mike Tyson has been quoted as saying ‘Everyone has a plan till they get punched in the mouth.’ It looks like Amazon has thrown the proverbial ‘punch’ to these grocers; it’ll be interesting to see how they respond!
What are your thoughts on Amazon buying WholeFoods? What do you think it means for E-Commerce Grocery? Tell us below or tweet us!