When Amazon.com Inc. bought Whole Foods last year, investors panicked and placed Kroger, Sprouts Farmers Market and even Walmart. The fear was that the e-commerce leviathan would disrupt another industry. Since then, worries have evaporated as investors and analysts realized it would be years before Amazon became a major player in the $ 800 billion industry. Meanwhile, traditional grocers have more than managed to keep their own.
However, there are already indications that the mythical Amazon effect is spurring Whole Foods, which lost ground to rivals when organic foods became mainstream. At more than 100 locations in the US, the upscale grocer has gained a foothold at the expense of Trader Joe's, Walgreen and Dollar Tree Stores, Sense360, a Los Angeles-based company, reports the location data of millions of smartphone users detected.
The data covering Whole Foods locations within a mile of competing deals shows that Amazon can lure loyal Prime members to discounts on physical stores. Whole Foods just needs a lot more business to be close to more people. Eli Portnoy, Sense360's chief executive officer, says US food retailers have not yet been hurt, but says that Amazon is gaining ground at the "micro" level. "We are at the beginning, and these things take time," he says. "These results show that there will be an impact."
Amazon usually waives wholesale changes immediately after acquisition and has previously worked only with Whole Foods. The Seattle-based company has added Amazon lockers to stores for buyers to pick up supplies. Whole Foods now sells Echo voice-activated speakers and other Amazon devices. Amazon offers delivery in 24 cities through the Prime Now service and replicates mainly what Whole Foods previously offered through Instacart.
Whole Foods announced this month picking up online orders in Sacramento, California, and Virginia Beach, Virginia, with more locations coming this year. That's still far behind Walmart Inc. and Kroger Co., both of which offer service to thousands of locations. Kröger has recently upgraded the ante with a food delivery pilot in Arizona using autonomous cars.
Amazon is still making progress. The number of customers who visited Whole Foods at least six times last year rose to 1
In February, Amazon Prime members are offering 5 percent to the whole thing back grocery shopping with an Amazon Visa card. And in June, Amazon introduced the Whole Foods offer exclusively to Prime members, which included a 25 percent discount on bulk purchases of nuts and dried fruits as well as discounts on wild salmon, organic cherries and hundreds of other products. "There's a lot of the population that loves business," says Tab's CEO Kurt Jetta. "Offer them a deal and they come." Nevertheless, overcoming the grocery retailer's "Whole Paycheck" image will require time and patience.
Initially, industry observers believed that Amazon would force other grocers to lower prices and profit margins; In fact, the opposite has happened, with rising food prices and rising profits, says William Kirk, an analyst at RBC Capital Markets. Whole Foods is a niche chain with only about 470 stores and little overlap with Walmart's more than 4,000 stores and Krogers nearly 2,800 locations, which are mostly located in suburban markets.
Both companies have fully recovered from the initial Amazon panic Strong grocery sales are fueling investor optimism in Walmart, the largest US grocer with 25 percent market share compared to Amazon's less than 2 percent. The Amazon threat is much more pronounced for Trader Joes Co. and other regional urban supermarkets. Trader Joe & # 39; s declined to comment.
Of course, Amazon CEO Jeff Bezos is patient. Amazon will use Whole Foods as a lab to reinvent grocery shopping before expanding what works, says Neil Ackerman, a former Amazon manager who now works for Johnson & Johnson. "They are experimental and will be completely misunderstood for a long time," he says. "Walmart is built to deliver pallets to 4,000 stores, and Amazon is built to deliver packages to millions of homes, to whom do you want to bet: the pallet people or the parcel people?"