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Amazon + Whole Foods

Our Take on the $13.4 Billion Deal

The Amazon and Whole Foods acquisition unites Amazon, Whole Foods and Instacart in a landscape shift dramatically reshaping our industry moving forward. Amazon bought 431 prime-location distribution centers to launch its eCommerce grocery offering and wipe out nearly $40 billion in market value from other companies.

Amazon has Been Building it's Grocery Footprint for the Last 10 Years

Since introducing AmazonFresh in 2007, Amazon has launched multiple initiatives aimed at penetrating the grocery sector. Amazon currently has 5 grocery-related offerings:

  1. AmazonFresh offers grocery delivery for over 500k items in Seattle, Northern California, Southern California, New York, and Philadelphia. AmazonFresh membership costs $14.99/month and is only available to existing Prime members.
  2. Prime Now has more of a CPG vs. grocery emphasis. It is available in more than 30 US cities with unlimited free two-hour delivery on over 25k items. In some cities such as Denver, Amazon partners with some third-party grocers like Sprouts Farmers Market to provide their selection on Prime Now.
  3. Prime Pantry, which offers groceries and household products shipped for a flat $5.99 delivery fee per box.
  4. AmazonFresh Pickup, which offers Prime members free grocery pick-up with its first 2 locations opened in Seattle this year.
  5. Amazon Go, which offers grocery essentials and a checkout-free experience. Amazon Go is still in beta, with one store open to Amazon employees in Seattle.

While each of these initiatives experienced only partial success, acquiring Whole Foods is Amazon’s next strategic move to enter the fresh foods industry.

Rosie's Plan: The Store of the Future

For independent retailers and their wholesales, it has become more critical than ever to define and implement a comprehensive digital strategy. Rosie is catalyzing and enabling independent grocers to transform into "The Store of the Future" by executing on the following six important areas:

  1. Pricing Strategy - Independent grocers need access, tools, and the expertise to implement the next generation pricing strategies employed by Amazon, Walmart, Jet.com, and Kroger.

  2. Own the Last Mile - The independent grocer must become the preferred eCommerce solution for their community working closely with their wholesaler to leverage every possible order fulfillment route to bring their store to the customer's door.

  3. Hyperlocal - Leverage eCommerce as the digital place where customers can experience the same local charm, quality, and service they would normally have as part of the in-store experience.

  4. Innovation - Harness technology to create a culture of continuous improvement driving business growth and providing an attractive, sustainable employment path for Millennials.

  5. Next-Gen Multi-Format - Use technology to support and advance next generation multi-format retailers including but not limited to those emphasizing smaller footprints, with a greater orientation of fresh/perishables than the traditional in-store mix.

  6. Private Label - Where there is a quality gap, a price gap or an innovation gap, independent retailers should fill it through private brands. Independent grocers should place a major emphasis on further developing their private label offering which yields better margins, differentiation, and erects competitive barriers shielding themselves against moves from the national CPGs (who are cooperating with Amazon and Walmart; while also going straight to consumers). eCommerce and omni-channel marketing provide distinct opportunities to launch/build brand awareness and loyalty around unique private label offerings.

To learn more about how to remain competitive against Amazon + Whole Foods, please contact sales@rosieapp.com or call us today at 1-855-ROSIENOW (767-4366).

References:

Anmuth, Doug, Cory A. Carpenter, Ken Goldman, and Thomas Palmer. "Amazon-Whole Foods Initial Thoughts; Highly Strategic & Potentially Transformative to Physical Retail Over Time - ALERT." Mailing List. J.P. Morgan North America Equity Research. J.P. Morgan North America Equity Research, 16 June 2017. Web. 16 June 2017.

Goldman, Ken, Thomas Palmer, and Joshua A. Levine. "Food Producers and Retailers Initial Thoughts on the Impact of Amazon/WFM Across Our Space." Mailing List. J.P. Morgan North America Equity Research. J.P. Morgan North America Equity Research, 06 June 2017. Web. 16 June 2017.

Del Rey, Jason. "Whole Foods to Invent in Instacart, Signs New Multi-Year Delivery Deal." 23 February 2016. Web.

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