Photo: RetailWire
Will lessons learned at Amazon Books translate to Whole Foods?
A Wall Street Journal article last week explored whether the learning Amazon has picked up running its Amazon Books stores will be applied to reinvent Whole Foods.
One facet already translating is Prime-membership benefits. At Amazon Books, Prime members pay the same price in store as they would online while non-members pay list price.
In announcing its acquisition of the grocery chain, Amazon said the two companies “will begin to integrate Amazon Prime into the Whole Foods Market point-of-sale system, and when this work is complete, Prime members will receive special savings and in-store benefits.”
With the closing of the deal, the grocer’s store brands — 365 Everyday Value, Whole Foods Market, Whole Paws and Whole Catch — became available through Prime Pantry and Prime Now. Amazon Lockers are also being installed in select stores to enable Amazon customers to pick up or return items.
More consistent pricing online and offline as well as sales of Amazon devices such as Echo are also expected at both concepts.
Seen less likely but possible is bringing dynamic pricing to Whole Foods.
Amazon Books doesn’t display prices. Shoppers scan books with smartphones to see Prime versus list prices. Amazon hopes scanning encourages in-store shoppers to read descriptions and other reviews as well as view personalized suggestions based on their shopping history. The lack of price tags also enables Amazon to change prices based on consumer demand, competitor actions or even the time of day and weather conditions.
Amazon Books’ selections are driven by data, making use of sources such as Goodreads as well as internal selling information. The stores only stock books that have been rated four stars or more on its website. Based on localized data, stores feature a section of books popular online with shoppers in the area surrounding each bookstore. One popular section, “If You Like,” pairs a best-selling book with a suggestion for a similar reading experience.
Amazon is already gleaning data from online sales of Whole Foods’ brands as well as its own online grocery data, but is expected to particularly benefit both offline and online from data gleaned by Whole Foods’ in-store shoppers.
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Amazon bookstores offer peek into Whole Foods’ future – The Wall Street Journal
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Amazon and Whole Foods Market Announce Acquisition to Close This Monday, Will Work Together to Make High-Quality, Natural and Organic Food Affordable for Everyone – Amazon.com
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Amazon Prime members can expect these perks at Whole Foods – USA Today
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Will Amazon’s use of data transform how retailers operate stores? – RetailWire
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Amazon buying Whole Foods comes with a bonus: Data on how brick-and-mortar shoppers behave – CNBC
Discussion Questions
DISCUSSION QUESTIONS: Would Whole Foods benefit from dynamic pricing, user reviews, personalized suggestions and other hallmarks of Amazon’s online experience? What lessons from Amazon Books may be useful in reimagining Whole Foods?
Poll
BrainTrust
Cate Trotter
Head of Trends, Insider Trends
Roy White
Editor-at-large, RetailWire
The Amazon Books model is very much in its infancy, however it’s clear that these strategic locations have quickly evolved to be the physical manifestations of Amazon’s online marketplace.
As it pertains to Whole Foods, the personalization and curated assortments, as well as dynamic pricing are the expectations of both the loyal Amazon Prime members and the Whole Foods customers who are seeking a better value-added grocery shopping experience. The goal of the modern, healthy, organic-first grocery store is to engage and personalize the grocery shopping experience, all the while removing all the friction from the shopping journey. I am not so confident that engaging with your Amazon app as you go up and down the Whole Foods aisles is the right strategy.
However, once Amazon matures their model, Whole Foods would benefit significantly from electronic signage, user reviews on key products, a clear distinction between Amazon Prime members-only pricing and non-member pricing and other exclusive offerings. We are all very interested in seeing how this plays out.
There is no doubt that Amazon continues to change the in-store experience with its Amazon Books and now with their takeover of Whole Foods. However, selling books and selling food is entirely different. I can see a consumer spending several minutes deciding on purchasing a book, reading the review and scanning for its purchase prices. But I don’t know if customers shopping for food will have the same amount of patience. Consumers are programmed to shop for food a certain way, looking at items, prices and what’s on sale. If we take that away and put the onus on them to use their smartphones to scan for information, it may not be successful because they may get frustrated. Furthermore, not posting prices will only make the customers suspicious about what they’re paying versus someone else. So whereas I commend Amazon for being innovative and attempting to create the in-store shopping experience of the future, some of their ideas may not be successful.
Books are not the same as groceries. However, there are certain aspects of retailing that can benefit both segments. Amazon has mastered book retailing (and other segments as well), however just about all of that has been online. The question isn’t whether lessons from Amazon Books will be useful in reimagining Whole Foods. The question is whether the online retail rock star can bring some of its strategies (in all areas) to the retail grocery store. And you know they will!
I have been touting the convergence of online and brick-and-mortar retailing for a number of years now, all the while Amazon keeps building the pieces necessary for this, and the acquisition of Whole Foods looks like we are finally getting the whole enchilada. But then, I was writing about the coming of online retail back in the ’80s before the internet was invented. Studying the past, not to be anchored, but to understand the future. The past is a springboard, not an anchor!
In a sense, Whole Foods for Amazon is more than an important business acquisition with sales and profits; it can also be looked at as a living laboratory to see what digital retailing strategies and technologies might transform brick-and-mortar retailing into something different. Prime is a prime example. Perhaps it’s how a loyalty program should work for a supermarket. While dynamic pricing seems implausible in a physical store setting, that’s exactly it: Amazon has the intellectual resources to change the very core of the way retailing operates today, and maybe dynamic pricing is one way that will happen.
I’d be interested to see if Amazon Books will learn anything from Whole Foods. While the dynamic pricing idea is an interesting one the Whole Foods experience is more about the staff and expertise and selling to a specific niche – it’s not some mass online audience. I think they need to keep the human element at Whole Foods alongside any data-driven insights or risk losing what makes it interesting.
I’ve always been intrigued with dynamic pricing and how the shopper would react. One major question is the frequency of price changes and the role data would play. Imagine going to the grocery store and buying the last box of Whole Berry Cranberry Sauce on Thanksgiving morning for $24 … I’m not sure we are there but we are definitely closer today than yesterday.
I think it’s important to define the Whole Foods shopper as an Amazon Prime shopper/non-Prime member. I think marketing tactics will vary and shopper expectations will as well.
Expect everything that Amazon has perfected online to be translated into their stores … and then some. Frictionless transactions, personalized recommendations and seamless unified commerce experiences will be the norm in-store.
Amazon Books is particularly interesting to me because Amazon got its start in books. Nobody can forget the slow death of Borders and Barnes & Noble at the hand of Amazon. Who would have thought that was just the beginning of their disruption?
I think that their ability to collect and leverage data will assist them in implementing similar strategies for their Whole Foods efforts. They’re already collecting data on people’s food consumption, and there’s no way they got into this market without a clear strategy in place.
Part of the success of Amazon Prime is price comparison. Having to scan products, while in-store, is a poor idea. Pricing alternatives, especially for store branded products, is critical. Having to stop and then scan them first before getting the price will frustrate customers, lower sales and eventually lower performance. Just put a price on every product so that people who are interested can then scan it if they want.
Also, one of the great opportunities that Prime offers is easy returns. When was the last time you returned your bananas, steak or cereal?
Finally, ordering from the convenience of your armchair and having it delivered in a few hours or the next day is a great advantage of Prime. Whole Foods is about the in-store customer experience. It is Amazon that needs to take lessons here. They purchased Whole Foods because it wasn’t like Amazon. Now Amazon needs to keep the good things about the customer experience and the people training and leverage this along with the opportunities that Prime can give online customers.
Amazon needs to understand this if they truly want Whole Foods to be successful. Oh yeah, and they should look out for Lidl and Aldi!
Amazon will, of course, apply lessons it’s learned at its bookstores to Whole Foods. And let’s hope they apply Whole Foods’ lessons at the bookstore. And lessons from both to their online business.
But I’m quite skeptical of their PR suggestions that they’re transferring tremendous learning from online to the bookstore. That’s the story that Amazon must tell investors regardless of how true it is. Yet the net out of what they’re claiming turns out to be putting the same books on the shelves at Barnes & Noble. And a far more interesting mix of books is found at independents — making them better places to shop.
My yardstick is this: We need to hear stories that surprise us before we can know Amazon is sharing real learned truths. So far, it’s all been quite expected, so I don’t think we’re hearing much of significance.
With Amazon selling Whole Foods products online, the potential for reviews on those items has skyrocketed due to Amazon’s massive reach. I agree with the others here saying that books and groceries are very different products and I think Amazon is learning valuable lessons in their bookstores. What they’re learning will play a vital role in the rollout of Prime membership benefits within Whole Foods stores. There is already massive overlap when it comes to Prime members and Whole Foods shoppers, but if dynamic pricing displays popped up in stores with a slightly lower price for Prime subscribers, that would serve as a massive incentive for the non-members to pony up already.
Bezos previously stated, “Our goal with Amazon Prime, make no mistake, is to make sure that if you are not a Prime member, you are being irresponsible.” This is already at play in Amazon’s bookstores, thanks to the displays telling shoppers they will overpay unless they have a membership. It’s clear that the eventual rollout at Whole Foods will add to this goal.
There is certainly tremendous potential for Amazon to combine and apply everything that makes their online and Amazon Books experience to Whole Foods, and vice versa.
Amazon isn’t just successful because they apply one technique learned in one scenario to another to disrupt it — they are successful because they know how to adapt from what they’ve learned in each innovation they experiment with. And that’s their secret — treat everything like an experiment, always be innovating and adapt quickly to each unique environment. Just because something works online doesn’t mean it will work exactly the same in a book store or grocery store, but the concept may be a good one when adapted to the environment.
In grocery, there isn’t much value reading reviews while trying to choose the right avocado, while reading someone else’s comments about a book can be very valuable.
Books are not replenishment purchases, in the sense that milk, eggs and produce are. The potential transfer of knowledge from Amazon Books to Whole Foods seems not so great to me for that reason.
Grocery shopping remains a highly utilitarian and often time-pressured experience, and I’m not convinced that shoppers will have the patience for a trip-lengthening digital negotiation over every item they select in the store. Personalized deals and user reviews will be better communicated prior to the visit for those shoppers who like pre-planning, but they are non-starters in the aisles.
Diverting shopper focus toward the tiny screen and away from the physical merchandising seems counter to the intended store experience as well. Why should brands invest in packaging and promotion if the shoppers never look up at the displays?
Connecting Amazon Prime benefits to the Whole Foods shopping experience does have some interesting potential. Could frequent grocery shoppers lower their Prime membership fees, for example? Could Prime’s uber-brain remember store and online purchases to populate online shopping lists and item suggestions?