Amazon.com Inc. is wasting no time integrating Whole Foods Market with Amazon Prime.
Amazon this afternoon announced that when its $13.7 billion acquisition of the upscale grocery chain closes Monday, it will begin to intertwine its Amazon Prime program with Whole Foods and lower prices on select grocery staples. Prime customers, in the near future, also will receive special discounts and in-store perks at Whole Foods, Amazon said without detailing those discounts or benefits.
Prime is Amazon’s loyalty program, which charges shoppers a $99 annual fee or $10.99 per month for such benefits as streaming video and free expedited shipping on online orders.
Whole Foods also will sell more of its private-label products through Amazon, enabling the grocer to reach more online shoppers in a shorter period of time, as some of those products will be available through Amazon’s Prime Now two-hour-or-less delivery service.
“We will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we invent together,” says Jeff Wilke, CEO of Amazon’s worldwide consumer unit. “There is significant work and opportunity ahead, and we’re thrilled to get started.” Amazon did not give a date for Prime to become Whole Foods’ customer rewards program, saying technical integration between Amazon.com accounts and Whole Foods’ point-of-sale systems needs to be completed first.
Amazon, No. 1 in the Internet Retailer 2017 Top 500, in June said it would buy Whole Foods for $13.7 billion, by far the retailer’s most significant foray into grocery and bricks-and-mortal retailing to date. The Federal Trade Commission on Wednesday gave the deal the OK, finding no antitrust issues.
Lowering prices and incorporating Amazon Prime into Whole Foods’ loyalty program isn’t the only way Amazon will take advantage of Whole Foods’ stores, however.
Amazon also states it will install its self-serve Amazon Locker online-order pickup locations into some Whole Foods stores. A shopper can have her Amazon order shipped to a Whole Foods near her house and pick it up in that locker. In addition to being convenient for a shopper who may not want a package delivered to her residence, the pickup lockers drive foot traffic to a Whole Foods store and may result in additional sales.
Amazon’s quick move to integrate Prime with Whole Foods’ 465 stores comes as no surprise to some retail industry experts.
“The announcement shows how well Amazon is taking advantage of the physical stores to complement the online offering, and the net result will be greater value for customers who shop them both ways,” says Bill Bishop, co-founder and chief architect at retail consulting firm Brick Meets Click. “I believe that Amazon always saw this synergy and is now able to bring it to life.”
From Whole Foods’ perspective, this gives nearly half of all U.S. households even greater incentive to shop with them. A report released by financial services firm Cowen & Co. earlier this month estimates that 49.9% of all U.S. consumers live in a household where at least one person has an Amazon Prime membership. Cowen, which surveyed 2,500 U.S. shoppers in July, estimates that Amazon has 54.2 million Prime members, up 17.1% from 46.3 million as of July 2016.
“Under Amazon ownership, [Whole Foods] will be a much more accessible store from a price point of view,” Bishop says. “That will translate into significantly higher sales per store for Whole Foods, and if they generate higher sales per store, there’s a virtual loop that higher sales will allow them to sustain better prices.”
Prime members tend to spend nearly twice as much per year ($1,300) on Amazon.com as non-Prime members ($700), according to an estimate from Consumer Intelligence Research Partners (CIRP). Whether that trend carries over to Whole Foods remains to be seen.
Bishop says Amazon’s incorporation of Prime benefits is no guarantee that Prime customers will migrate their grocery business to Whole Foods.
“The challenge here is that Prime is a loyalty program, but Prime isn’t a loyalty program that incents you to spend more on groceries with Amazon,” he says, so Amazon likely will add benefits to Prime that reward shoppers who spend more with Whole Foods.