Amazon.com Inc. stands to increase its customer base by 5% when it acquires high-end grocery chain Whole Foods, according to a new report from data management platform 1010data.
Amazon in mid-June announced it plans to acquire Whole Foods for $13.7-billion, and the online retailer said the deal is expected to close in the second half of the year. According to 1010data’s analysis, which is based on tracking data about millions of consumers, 81% of Whole Foods Shoppers are already Amazon shoppers. The remaining 19% of shoppers will technically come under Amazon’s umbrella when the acquisition is complete, 1010data says.
“The 5% increase in the customer base is more icing on the cake. The cake is the physical locations,” says Jed Alpert, senior vice president of marketing at 1010data. With the acquisition, Amazon gains 460 Whole Foods stores that can double as fresh food distribution centers and online order pickup points. Amazon is No. 1 in the Internet Retailer 2017 Top 500.
The 5% increase in customers would be equal to roughly 6 million consumers, estimates P.K. Kannan, professor of marketing science at the University of Maryland’s Robert H. Smith School of Business. Kannan estimates Amazon has 120 million U.S. customers.
The 1010data study also found that Whole Foods shoppers are more likely to shop online for groceries than consumers who shop at other supermarket chains. In the past 12 months, 10% of Whole Foods customers have used an online grocery delivery service, versus 6% of those who shop at Albertsons Inc. (No. 157) and 5% of The Kroger Co. (No. 88) shoppers, according to the report.
In addition, 52% of Whole Foods shoppers already are members of Amazon’s loyalty program, Prime, the study finds. An annual Prime membership is $99 and comes with such perks as free two-day shipping and streaming video and music.
“It appears that there is already good synergy between the two businesses and that further integration could make Amazon even more of a one-stop-shop for customers,” 1010data’s Alpert says.
What’s more, Prime customers spend more at Whole Foods than non-Prime members, according to 1010data. Prime customers who are regular Whole Foods shoppers (defined as having shopped at Whole Foods at least six times in the past year) spent $1,371 at Whole Foods, which is $306 more than a loyal Whole Foods shopper who is not a Prime member, who spends on average $1,065, during the June 2016-May 2017 time period. This higher spend by Prime customers makes sense, Kannan says.
“Prime membership is suitable for those who buy more products online across different categories, and they also tend to be higher income individuals, and as a result, spend more money,” Kannan says. “This will also be reflected in their grocery shopping, so this is understandable.”
Amazon and Whole Foods have little geographic overlap in terms of grocery sales, 1010data finds, which will help Amazon significantly increase its footprint.
Amazon Fresh, which provides same-day or next-day delivery of groceries ordered online, including perishable and frozen foods, has a strong presence in New York City, Seattle and Los Angeles, while Whole Foods has broad coverage in the Chicago area, Miami, Washington, D.C., and in Texas, based on 1010data’s analysis of share of spend using credit and debit cards but excluding cash payments.Favorite