- slide 2 of 3
How will things shake out with the Whole Foods merger and push into the grocery space? Here are the key factors:
- The Whole Foods network is well distributed – With over 400 stores spread widely, mostly over the United States, Amazon is positioned well with delivery points to urban consumers. Whole Foods located its stores strategically – and that positioning poises Amazon to reach the largest populations and strong demographics.
- Focus is urban, upscale – Whole Foods caters to an upscale, urban demographic – the demographics that is most likely to want to use and be able to afford grocery home delivery or pickup services.
- Gap is non-urban or rural – This is probably not a critical gap. Delivery services are likely to be more costly and difficult, and the market concentration will be smaller. Profitability will be lower.
- slide 3 of 3
Several key factors with the grocery market make it unique from a distribution perspective:
- Food has a shelf life – Food needs to be fresh and preserved. Delivered food will need to be kept fresh during delivery and after drop-off.
- Delivery costs need to be low – Distance from stores needs to be minimal, and Whole Foods does come with a strong existing network in urban areas.
- Delivery time needs to be fast – This is also, in part, a function of proximity, but it also a function of responsiveness. Being responsive with the shortest delivery cycles will be a competitive advantage.
- Re-ordering happens often – Customer loyalty will be likely enhanced with good delivery service. While consumers have become accustomed to shopping at multiple stores, delivery cost and convenience may become a greater factor with grocery delivery.
Amazon will have a powerful delivery network in Whole Foods. This will help meet consumer requirements to satisfy needs in terms of freshness, delivery cost, delivery time and delivery customer loyalty.
Amazon - Whole Foods Merger: Whole Foods Stores as Delivery Points
This is a series of four articles on disruptive strategic projects from the Amazon-Whole Foods merger.