Recently, online retail giant Amazon announced that they were buying Whole Foods, a business which is completely reliant on physical stores, for a whopping $13 billion. The news sent the stocks of other food chains plummeting, which was no surprise as competing against a business with a radical model like Amazon’s is terrifying…suicidal really.
The scariest realisation for competitors is that Amazon probably do not have any interest in actually making a profit off avocados and wholegrains, their main goal is collecting more data. It’s natural to think of Amazon as retailer but their focus always has been and will continue to be data, technology and innovation, with sales being a by-product.
Although reports suggest that the online grocery market is expected to hit £11.1bn in the UK this year, the online market only accounted for about 6% of all grocery retail sales in 2016. So there’s obviously a long way to go for retailers to encourage consumers who have done most or some of their shopping online to do more. Which is why Amazon are best suited to dominate in this sector, users are already familiar with and trust the brand’s method of operation. If you’re already about to buy some festival glitter, why not add in that pint of milk you’ve been meaning to get for the last two days? And it’ll all be delivered the very next day via Prime.
Recent efforts by the retailer to create an omnichannel experience, a perfect blend of online and physical interactions (through Amazon Prime, Echo and Dash), have made the shopping experience for users easier than ever. In the eyes of most consumers online and offline shopping should work together seamlessly, rather than as two different brands that happen to have the same name. Being able to collate and identify offline and online user shopping trends will allow Amazon for the first time to gain an understanding of how their consumers operate in store, what shoppers buy on a week-to-week basis, and what they prefer buying online. Amazon will not only be able to connect those dots to get a fuller picture of a person’s behaviours, but also piece it together with data collected through their other products: Kindle (reading habits), Prime, Fire Stick (viewing habits) and Echo (natural language processing)…creating a very accurate picture.
In 2016, Amazon’s physical grocery store concept, Amazon Go, gave the public a peak into the future of retail. Amazon Go requires shoppers to scan their phone upon entry and allows them to simple ‘walk out’ when done. All purchases are automatically detected and charges are made to a user’s Amazon account. Now as they acquire over 400 Whole Foods stores, their vision looks likely to become a reality. There is no guarantee whatsoever that Amazon’s new project will be successful, but there is a need for physical stores to combine with online in the grocery market. It’ll be interesting to see how the brand manages to integrate the two in the next few years.
Either way the acquisition solidifies the brand’s reputation as an ecosystem for convenience, value and content. With the success of one category Amazon ventures into supporting and strengthening the rest of the brand. As cheif executive Jeff Bezos once commented: “When we win a Golden Globe, it helps us sell more shoes.”
Pam Odumusi is an account executive at Navigate Digital.