Sep 14, 2018

Whole Foods + Amazon: One Year In

Whole Foods storefront

One year ago, Amazon made headlines (yet again) when it announced its purchase of America’s best-known organic grocer, Whole Foods Market. While it may have seemed counterintuitive for the world’s biggest online retailer to purchase a brick-and-mortar retailer, when we compare the category conversion rates for Amazon with those of Whole Foods, we can clearly see the grocery gap that Amazon was aiming to fill.


Lower prices at a premium retailer

Right out of the gate, Amazon and Whole Foods announced price cuts to basic grocery items like bananas, avocados, brown eggs, salmon, and tilapia. And this strategy appears to have worked. According to Numerator's consumer panel data, 19.5% of Prime members shopped at Whole Foods during the 10-month period prior to the price drops. But in the 10-month period after these reductions, 20.4% of Prime members were now shopping in Whole Foods stores, translating to nearly 1 million new shoppers for the grocery chain.

Are other channels & retailers affected?

The ripples from this acquisition can be seen far beyond Amazon and Whole Foods. If we look at just Prime members who are new shoppers to Whole Foods, we can see how their percentage of total spend has changed in different channels and at different retailers since Amazon announced price drops in Whole Foods stores. Most negatively affected were Mass (-1.2%) and Drug (-0.3%) channels, with retailers like Walmart, Target, Walgreens, and CVS all seeing a decline in share of wallet among Prime members new to Whole Foods.


So what do Whole Foods shoppers think?

In addition to analyzing purchase data from Prime member shoppers, we fielded an InfoScout survey to understand how 1,006 long-time Whole Foods shoppers (people who had made Whole Foods purchases both pre- and post-Amazon acquisition) perceived the changes taking place in-store.

Of the surveyed shoppers, 11.2% claimed not to be Prime members, but 64.6% of those non-Prime members said they were considering Prime membership. The top reason for considering Prime? Access to in-store Whole Foods discounts (68.5%), followed by ease of shopping on Amazon (63%), and ability to get Prime shipping on Amazon (61.6%). The in-store discounts are clearly working toward Amazon’s ultimate goal – driving more Prime memberships.


Prime Deals in Whole Foods

Of the surveyed shoppers who indicated they were Prime members, a whopping 80.9% are making good use of their Prime memberships to get in-store discounts at Whole Foods, whether through the mobile app or by entering a phone number (tied to their Prime account) at check-out.

And it appears that Prime Deals are influencing shopping habits as well — causing people to shop Whole Foods more frequently (30.5%), buy more items (29.9%), and try new items (22.1%). Of the shoppers surveyed, 38.4% claimed that Prime Deals had not changed their Whole Foods shopping habits.


We then asked these shoppers to share their opinions of how Whole Foods had changed since the Amazon acquisition. Did they think prices were lower or higher? Was product selection worse or better?

For most attributes — price, product selection, customer service — the majority of shoppers had not noticed any change. But for sales/discounts, 53.5% of shoppers rated these as better under Amazon ownership, while 43.7% rated these as the same. Only 2.8% of shoppers thought the sales and discounts offered were worse.


Given Whole Foods’ reputation as an organic, high-end grocer, it might be expected that an Amazon acquisition would ruffle a few feathers. But surprisingly, when asked to describe their feelings toward Amazon’s ownership, shoppers were overwhelmingly positive, with 42.9% describing their feelings as Happy/Optimistic, and 16.2% as Energized/Excited. While 35.2% were neutral, only 3.8% indicated they felt Disappointed/Pessimistic, and 1.9% Angry/Frustrated.