The recent announcement that Amazon is acquiring upscale grocery chain Whole Foods has rocked the retail world. As one analyst told Chain Store Age, “The ramifications for all of retail are seismic.”
This isn’t Amazon's first foray into the world of bricks-and-mortar. The e-commerce giant already has eight Amazon bookstores across the country, and more coming soon. It also recently launched a grocery store, Amazon Go, in Seattle, that's experimenting with a new way of shopping. Shoppers with smartphones and the Amazon Go app can browse the aisles and then walk out without ever interacting with a checkout clerk — everything they've put in their cart is automatically paid for with the app.
Now, with more than 430 Whole Foods locations, Amazon will be on the fast track to expanding even further into the grocery business. So far, Amazon has said that Whole Foods will continue to operate under its existing brand. What does Amazon have in mind?
Most Whole Foods are located in upscale areas — home to the types of customers who are also likely to be Amazon Prime customers and more willing to experiment with things like online grocery shopping. Industry analysts are speculating that Amazon will use the physical stores as click-and-collect pickup points, or to speed deliveries to customers who order groceries from Amazon online.
Having access to Whole Foods' fresh and specialty food suppliers will also help Amazon expand the range of groceries it's able to offer online. Delivering fresh food, in particular, has been a problem for the e-commerce company—one that having nearby Whole Foods markets to use as warehouses could solve.
It's also possible Amazon could use Whole Foods locations as pickup points or return centers for other Amazon purchases — not just grocery items. This would enable Amazon to reduce its shipping costs, while also reducing hassles for customers who want to return products. Instead of packaging and mailing items for return, customers could just take them back to Whole Foods and hand them over to a clerk to package and ship back. Easier returns could make Amazon an even tougher competitor for brick-and-mortar stores.
What does the move mean for small retailers or e-commerce businesses? Here are three key takeaways:
Customers' expectations for shopping both online and off are rising. If you hope to succeed, your business needs to keep pace.