From our Prescott Valley, AZ Corredspondent
Online grocery deliveries through retailers like Walmart, Costco, Target, Kroger and others will more than likely feel the crunch of Amazon’s recent purchase of Whole Food Markets. Even though Amazon already offers grocery-delivery services in a number of markets, the Whole Foods acquisition will allow the online giant to further expand those services and with the actual ownership of brick and mortar Whole Foods Markets, Amazon will have access to perishable foods and other consumables for distribution within its present and expanded market areas.
Whole Foods was floundering in its capacity to maintain its customer base of organic and natural food shoppers as those customers found stores similar to Whole Foods in other locations. The same kinds of products at competitive or lower prices were found elsewhere and Whole Foods was quickly losing ground as well as receiving pressure from its investors because of falling sales and rivalry through other organic stores. With the promotion of Whole Foods products through Amazon and actual distribution of those foods to customers, there is a physical grocery store connection with Amazon. This connection establishes a source of stability and calmness that dispels customer fears with online buying.
Delivery of groceries has been difficult for any company to accomplish mostly due to the reaction of customers concerning the quality of perishable items like meat, poultry, dairy products and produce, but if those customers believe and know that the perishable grocery items they are receiving are comparable to what they would get through a local grocery store or Whole Foods Market, they are more likely to use the service.
Current Amazon Prime customers, which number in the millions, now pay for free or discounted shipping through their memberships and if those same customers are willing to chip in an extra $15 a month for AmazonFresh grocery delivery service, that’s an enormous amount of revenue not going to local or chain grocery stores in varying locations. These same Amazon customer members are probably purchasing more expensive brands as well as quality produce and cuts of meat, so even more local purchases would be shifted from a regular store to Amazon.
The whole concept of a physical store connection for goods sold and delivered by Amazon is definitely a threat that conventional grocery stores will have difficulty counteracting. When customers can buy foods and bulk items like paper towels, napkins, toilet paper, and other staples through a single entity like Amazon, even discount retailers such as Walmart, Costco and others will feel the threat of lost business and declining sales in bulk and nonperishable items. So, both the little grocer and the grocery giants lose.
Amazon’s acquisition of Whole Foods is a game-changer and a wake-up call to almost any store that sells groceries and other items. They are now on notice to change or lose business permanently or be shut out completely. Local grocery stores and grocery chains will be forced to implement changes and new technologies if they are going to compete on an in store and online basis, and food prices will have to be more than competitive with the Whole Foods /Amazon partnership of pricing. Without those refinements, they will be unable to maintain a stable presence in the marketplace.
Lower performing grocery stores and even discount giants will suffer and likely experience reorganization or worse. Some have already caught on to the changes, like Walmart, which now offers grocery selection for customers and delivery. Other stores have similar programs. Kroger has Home Shop for online grocery selection and home delivery and Safeway offers similar options. Customers will still question the perishable aspects of certain foods, so that aspect will keep most stores in operation, but when an online delivery system is available, a good many people will forego the trip to the grocery store and fighting crowds to get a week’s worth of groceries.
Nowadays, almost any business is in competition with Amazon and now grocery stores and discounters are more a part of that competition than they ever realized. Without the necessary innovations and modifications on their own, the Amazon/Whole Foods connection train will pass them by. This purchase will definitely affect those stores that are currently competitors of Amazon but with the right game plan, those stores and even independents can survive and thrive in the grocery delivery business through adapting to marketplace ideas and utilizing a few Amazon strategies.