Why can’t Amazon convert Prime shoppers into Whole Foods shoppers?
Through a special arrangement, presented here for discussion is a summary of a current article from the blog of LoyaltyOne. The article first appeared on Forbes.com.
Since acquiring Whole Foods in 2017, Amazon.com’s push to expand into grocery has in large part relied on converting Prime Members into Whole Foods shoppers.
Along with price cuts overall, Prime pickups have been added within Whole Foods stores and members have been offered two-hour Whole Foods delivery (free on orders over $35) and an additional 10 percent off sale items.
Yet 70 percent of Prime members rarely or never shop at Whole Foods, according to a recent survey by Wolfe Research. Just 18 percent shop at Whole Foods at least once per month. In contrast, 65 percent of Prime members shop Amazon’s website at least several times a month.
On April 3, Amazon announced another round of price cuts at Whole Foods along with “double the number of exclusive weekly Prime member deals and deeper discounts.”
Yet price reductions won’t be enough to convince Amazon Prime shoppers to venture into a Whole Foods for a few reasons:
- What once set Whole Foods apart is now commonplace and cheaper. In 2015, Costco surpassed Whole Foods as the leading seller of organics. Kroger’s Simple Truth private label is now a $2.3 billion brand. Aldi plans to expand its fresh food selection by 40 percent. Organic foods are now mainstream.
- The bananas could brown on the drive home. Whole Foods operates 477 stores in the U.S. versus approximately 2,800 for Kroger. In many markets, Prime members might not have the time to drive to their nearest Whole Foods.
- Amazon’s selection is devouring some of its opportunities. Controlling 18 percent of the U.S. market from 2017 to 2018, according to One Click Retail, Amazon had the largest online grocery share by any single retailer, double Walmart’s share. While the addition of Whole Foods likely contributed to the growth, however, a lot of those sales were generated by brands not sold at Whole Foods.
- Quality counts as much as price, and more merchants are delivering it. Some retailers, including Costco, have been pinged for selling factory-farmed organics, and a focus on food origin and quality is differentiating some competitors in the space, such as Thrive Market.
- Why Can’t Amazon Convert Prime Shoppers Into Whole Foods Shoppers? – Forbes
- One Click Retail’s 2017 Grocery Report Reveals Amazon Captured 18% of the US Online Grocery Market – One Click Retail/PRNewswire
- Amazon and Whole Foods Market Make Biggest Investment in Lowering Prices and Expanding Prime Member Deals to Date – Whole Foods Market
- Amazon Cuts More Prices at Whole Foods – The Wall Street Journal
- Again, Amazon attempts to shed Whole Foods’ high price image – RetailWire
DISCUSSION QUESTIONS: Are the needs of Amazon Prime members and traditional Whole Foods shoppers significantly misaligned? What do you see holding back more Prime members from becoming Whole Foods customers?