In Buying Whole Foods, Amazon Changes the Rules Once Again

Most people were blown away by the news that Amazon had put in an offer to buy Whole Foods. They seem incompatible. Like Jack Dorsey marrying Gwyneth Paltrow. At first, it looks like Amazon is just swallowing the high-end organic grocery retailer as it makes its way across the grocery landscape, devouring everything in its path. Another idea was that Amazon had finally conceded to the power of the brick-and-mortar store. But several writers, including this one from Forbes suggests another theory: this is Amazon’s way of tapping into several desirable brick-and-mortar locations and mining it for Data that foretells the future of grocery retail.

In the past, whenever a new technology came out, it was assumed that “everybody” was going to go that direction. All shopping would be online, for example. But that’s turned out to be false. Although online shopping and grocery delivery are increasing, so is the demand for community-oriented stores with an exceptional, and very human customer experience. The more digital we become, the more we start to yearn for “real life experiences.” Amazon knows this better than anyone and has been working on three formats for brick-and-mortar stores according to a January Wall Street Journal article. Amazon Go was only one of those formats, and I wouldn’t be surprised if they were working on a 4th or 5th.

These stores, Forbes poster Bruno Aziza wrote, are like laboratories where Amazon can collect tons of Data that will give them an unprecedented advantage in spotting and responding to changes in buying patterns and consumer habits. Amazon has the opportunity test all kinds of technology through a store with a high-touch brand. For example, Aziza said, they might use facial recognition software to measure customer experience without the customers even realizing it.

This Whole Foods acquisition, if it goes through, is a game changer for all industries, not just grocery.

“If your industry hasn’t been disrupted the way retail has, ask yourself how much time it will take,” Aziza writes. “It’s no longer a matter of ‘if,’ it’s a matter of ‘when.’  Over 58% of executives report that they have invested over $100M in Data in order to get ahead of the curve.”

Price Comparisons? Not in Amazon/Whole Food Stores

One unsavory aspect to this deal is around in-store pricing and comparisons. Historically, Whole Foods has been known as Whole Paycheck but over the past few months, Whole Foods has begun rebranding their image and providing more competitive prices. Although they offer lower prices leakage continues to be a big problem. Shoppers use their phones to compare prices and only purchase competitively priced/ unique items available at Whole Foods and get the rest of their items at other grocers, but Amazon has a plan to fix that and limit the leakage.

Almost simultaneous with announcing its purchase  of Whole Foods, Amazon was granted a patent for something called “Physical Store Online Shopping Control.” With this, anyone who logs onto the Amazon wifi while in the store can have their access to competitors’ websites limited so they can’t do the price comparisons, except possibly through Amazon. That’s a lot of price controlling power in one place.

The patent will also serve to boost Amazon’s data collection efforts on shoppers who are in the store, creating maps of how they use the store to help manage purchases and increase the likelihood of future store visits. Presumably, they’ll use this data to continually tweak the human customer in-store shopping experience.

Bottom line is, for stores that previously felt like investing in Data was too expensive, it’s time. Hemp sandals and organic macaroni aside, Data is about to become the most important asset a retailer has.

 

 

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Seth Nagle, Senior Marketing Manager at RW3 Technologies understands the power of innovation but also its limitations. Attending Salve Regina in New England, starting his career in Silicon Valley, and now living in Austin, Texas; Seth provides a unique tech perspective to a complex CPG and Retail Grocery Industry that is in constant disruption.