Whole Foods Acquisition Improves Amazon Position
While this might seem like a bland statement, consider that Amazon was well on its way to this mark on its own before the Whole Foods acquisition in August 2017. Q1 and Q2 saw 35% gains YoY for the Amazon’s consumables (basically things you can find in a grocery store).
Whole Foods, Turkeys, and Locations
Consumables were on a tear before Whole Foods was brought in, but afterwards, there were two large jumps: immediately after the acquisition and with the addition of the 365 Everyday Value brand. Not included in these sales are the record number of turkeys that Whole Foods sold to Prime members who were given exclusive access to a coupon that enabled them to purchase Turkeys for $1.99/pound, or the increase in sales at Whole Foods since price cuts have started rolling out.
The real question remains: do Whole Foods locations – of which there are over 300 – help Amazon compete with Walmart and their more than 4,000 locations? If the recent closure of 63 Sam’s Club locations and the plan to change 10 of those into ecommerce distribution centers is any indication, then Walmart is feeling some pressure from Amazon. Time will tell if this race for distribution centers pays off, but it looks like Amazon has a leg up in acquiring DCs instead of shuttering locations and converting them.
The Pantry is Improving
In a move that resembles the vertical integration of the Steel Barons, Amazon now is able to sell its own brands in yet one more category. And if it isn’t selling its own brands, it can sell products that are coming from its own stores. This could also mean that Amazon Fresh becomes available in more locations very quickly. That is one area that Walmart is currently not competing in: fresh produce and grocery delivery.
Even though Amazon let the patent on one click checkout lapse, their subscription services and Dash buttons have already integrated themselves into many Millennial households. Combined with Amazon’s focus on Millennials and the aversion that many of the generation feel to big box stores like Walmart, it is looking like Amazon has positioned itself extremely well.
Now, consider that Amazon Prime members are fairly consistent as returning customers. In 2016, 30% of all Prime members made at least one purchase every week. In 2017, that number increased to 46%. That is a healthy number of consistent customers, which is perfect for categories like Pantry, Grocery, and Consumables where customers make purchases at least once every two weeks or so.