Amazon+Whole Foods: Customer Win or Disaster?

Posted Friday, June 23, 2017 in Customer Experience by Patricia Seybold

My initial reaction to Amazon's planned acquisition of Whole Foods grocery store chain was "of course." Amazon wants to be a player in our everyday lives. What better way to cement our reliance on Amazon.com for everything we need than to hook up with the top of the line grocery chain.

Personally, I might have preferred Trader Joe's, which has equally appetizing fare at more reasonable prices. But, I'm relieved, for Trader Joe's sake, that it has escaped being Amazonized, and saddened that Whole Foods has succumbed.

Automating Our Grocery Shopping

Long ago, I studied the various services designed to enable customers to order groceries from their phones or online and have them delivered to their homes. At the time, the winning player was the U.K.'s Tesco. That's because Tesco combined the efficiencies of automated pick and pack with the detailed knowledge of customers' in-store shopping behaviors and preferences in each micro-geography. Tesco's databases knew, not only what each customer normally picked when they shopped in-store, but also what alternatives they would select if their preferred size/brand wasn't available that day. Tesco also pioneered by designing pick/pack solutions that were done in store by employees who would shop the store for several customers simultaneously, armed with designated lists that not only optimized their route to enable them to pick up groceries in each aisle for multiple customers, but also steered clear of areas of the store that would be busy at specific times of day. Now ten years later, I'm sure that Amazon has/will think through the automated pick/packing and personalization in an even more automated manner.

AntiTrust & Amazon

Grocery Stocks, including Tesco's, fell dramatically with the announcement of the Amazon/Whole Foods deal. Investors and retail execs obviously fear the hollowing out of the grocery store industry, akin to what has happened in book retailing. Gone are all the major bookstore chains and most independent bookstores. Replaced by one-click impulse buying. Why, asks, Pioneer Pat Kerpan, has there been no AntiTrust action to block this merger?

Supply Chain Expertise Dominates

The grocery business runs on slim margins. Whole Foods' shoppers think they are buying premium organic, locally sourced food. But the sad truth is that, like most grocers, Whole Foods has perfected a mass-market supply chain model that favors mass-market foods over locally-grown produce, meat and fish.

Customer Experience Implications

Is convenient access to mass-market foods what customers really want for their grocery buying experience?

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